Online retail and search are two industries that work in unison with the main objective to fulfill the consumers’ need. Paired together, they help consumers research, locate, and eventually purchase products and services, whether online or cross-channel. The dynamic nature of the retail industry is almost as fluid as search.
Each industry has its short-term highs and lows, but looking at the big picture, both are experiencing steady growth. To ensure that online retailers keep stride with Search, they must be aware of the factors affecting their industry and capitalize on opportunities when they arise.
This is the first in a series of articles that discussed retail and search Marketing; the highs and lows, ins and outs, and general rules of engagement for executing effective search strategies to help connect and engage with consumers online.
With immediate sales as the foremost goal for 90% of online retailers, JupiterResearch estimates this year online retail sales will reach $95 billion, comprising only 5% of the $2.1 trillion U.S. retail market, which represents an 18% increase since 2005. The marketing dollars that retailers are investing online exemplify the success these companies are achieving on the Web. On average, retail marketers spend $148,900 on search marketing, 22% more than overall online marketers do (JupiterResearch, Retail Marketing, 2006). These marketers also buy 63% more keywords in attempt to dominant the paid listings, which is a favored strategy of retail marketers.
Unlike many online marketers with large budgets, retailers are more likely to use an agency to manage their search efforts instead of relying on free tools offered by the search engines. The complexities and dynamics of managing a search campaign for a retailer requires not only proprietary tools and technologies to scale the campaign, but also breadth, depth, and knowledge on how to maneuver through the landscape to maximize efficiencies through other forms of search, such as Search Engine Optimization.
Despite this ideal match up of search and online retail, there are extraneous forces that have the potential to hinder the effectiveness of Search for these marketers. For example, the amount of internet users and online shoppers entering the e-commerce space are both experiencing single digit growth, while online retail sales growth is in the double digits (eMarketer, 2006).
This uneven growth rate represents a steady maturation of the online retail market, and is something that current players must deal with now to ensure success, both present and in the future. As competition increases, many retailers will be forced to compete for an audience that is experienced with online shopping, knowledgeable about researching online and finding the best deals, and who may have higher expectations for service and support.
Much of the concern of today’s online retailers is that the strategies employed are evident of a “here and now” philosophy, as opposed to a proactive, forward-thinking mentality. Retailers currently focus on increasing bid prices and adding keywords to their campaigns to increase clicks, rather than optimizing landing pages, ad copy, or integrating SEO into their site (JupiterResearch, Retail Marketing, 2006).
With this type of approach, the entire industry is coming close to hitting a wall with keyword bid prices, and we’re now seeing an inverted pattern on the cost of acquiring a new visitor to the ROI received on the back end. This is a challenge across the entire industry, and manifests itself in the unsophisticated approach and lack of solid technology to manage campaigns of this size and scope.
With a majority of retailers adopting this “spend more, buy more attitude,” we’re seeing many retailers seeking to find alternative ways to appear in the search results with a more cost-effective approach, a la SEO.