Comparison Shopping Engine Strategies

ChannelAdvisor announces RichFX acquisition!

Today we're excited to announce that ChannelAdvisor has acquired RichFX.   RichFX provides over 200 brand-name retailers (50 in the IR500!) with rich media solutions.  RichFX's solutions have shown they consistently increase a retailer's conversion rate 10%+.

Here are some great examples of what the RichFX solutions are capable of:

• Saks - jewelry example (zoom/pan/multi-image view)
• Saks - shoe example
• Men's Warehouse - Build your own Tux.
• Lillian Vernon - Rich  catalog
• Disney - Custom rich catalog
• Wal-mart - Rich circular

This is just a sampling of the solutions we now will be able to offer.

Why are conversion rates so important?
RichFX marks ChannelAdvisor's first foray into a segment of the market that I call 'conversion enhancers'.  Here's our thinking.  We have litterally hundreds of case studies of improving the GMV via ecommerce channels (search, cse, marketplaces) for retailers.  In every single channel the math is effectively the same for return on spend (ROS):

ROS = revenue/cost

if you want to express this as a 'take rate', it's the inverse:  cost/revenue

Expanding ROS out a bit for pay-per-click (CPC) models you get:

• ROS = rev / cost
• rev = (clicks*CR*AOV) {note: AOV is average order value, or on eBay, ASP as there is no cart.  CR is conversion rate}
• cost = (clicks*cpc)
• OR: ROS = (clicks*CR*AOV) / (clicks*CPC)

The clicks effectively cancel out and you are left with: (CR*AOV)/CPC.

Thus for your average CPC ecommerce channel in addition to the channel optimization that you do (CPC, etc.) the most strategic datapoints you can look at are your CR (conversion rate) and your AOV (average order value).

What happens when conversion rates increase?
In our experience, when a retailer enjoys an increase in conversion rates it dramatically improves not only their ecommerce channel ROI, but it also gives them a competitive advantage.  They have several ways to leverage that advantage.  They can use the improved CR to keep their channel spend the same and increase sales or they can drop the savings to the bottom line.  Most retails use CR improvements to double down on their ecommerce channel spend.

What's this mean for Comparison Shopping Engines?
One of the intriguing things to us about the RichFX acquisition is previously this technology was limited to only the websites of retailers.  Retailers spend tons of time and $ in their digital assets, and then when they put their products on CSEs, they are many time stuck with a flat stock-image that is usually teeny tiny.  Here's an example of a boot search on shopzilla.

Imagine you are a boot retailer and you have implemented some really nice rich media on your website. What if you could syndicate that to the CSE and have that same rich experience happen at the CSE? Your clicks would naturally convert better and you'll effectively leverage the merchandising experience throughout your channels vs. limiting it to just your website.

Of course its going to take a while for us to realize this vision, but thanks to RichFX, we are pretty close to having the pieces needed to make this happen.

Closing it out with a conversion rate example

Let's say there's a retailer - RetailerX that is doing some  CPC via CSE.  Their conversion rate is 3.5% and their AOV is $100. RetailerX is paying $.50/click and they get 5000 clicks/month for a particular product.

Their ROS is: revenue /cost

• Revenue = clicks*CR*aov = 5000*3.5%*$100 = $17,500
• cost = clicks*CPC = $2,500
• ROS = rev/cost = 17500/2500 = 7
• Or take rate is = cost/rev = 14.29%

Now the retailer works on improving their CR via some rich media (Note: Rich Media  can also improve your AOV - see the tux builder, but for this example let's just focus on CR).  The retailers is able to improve their CR 10% (from 3.5% to 3.85%)

• Revenue = 5000*3.85%*$100 = $19,250
• cost = $2,500
• ROS = 7.7
• or take rate is = 12.98%

With this example you can see that the retailer is now able to effectively get 10% more out of that $2500 spend.  If the retailer is managing their ecommerce channel via an effective take rate and their margins support 15%, then the 13% take rate for this product now gives the retailer the ability to either pocket that 2% as extra margin, or to increase their CPC, which would give them more clicks and thus more volume of sales for the same effective take rate.

Want to learn more?
If you have any questions about how Rich Media can improve your sales, we're hosting a webinar next week, July 23 at 3pm ET, you can register here.  Alternatively feel free to leave a comment or contact your rep at ChannelAdvisor for more details.

Is there a method to Microsoft's cashback madness?

Microsoft acquired the Jellyfish CSE and has used it as the core of their rebate program.  Pundits have dismissed this as futile, but over at eBay Strategies, we have some new information and thoughts that could change your opinion.

More m-commerce ramblings

Our friends over at ReadWriteWeb attending Internet Retailer today caught a relevant talk by Nic Covey, Director of Insights for Nielsen Mobile detailing trends in "m-commerce" and outlining some good data points.

To me, there are two distinct version of mobile commerce:

1. SMS purchasing
2. Purchasing through the mobile browser

SMS purchasing is meant to capture the impulse buy in all of us, and surely we've all seen those late-night low-budget commercials to buy ringtones via SMS.  But this innovation has made its way to places like Papa John's, Tim McGraw concerts, CosmoGirl and Stuff (which printed shortcodes next to products), and even Amazon and American Eagle.

But there's also another use case, and that's to cement brand recognition and tie-in.

In Amazon's particular case, TextBuyIt allows one to send keywords to Amazon's shortcode (262966), reply with "1" or "2" to buy an item from returned results, and answer a call confirming details.  Amazon then associates your phone number with your 1-Click settings or your email address and shipping information.

One thing that Amazon's particular case serves is comparison shopping on the road without massive graphical overhead.  It's simple and direct and cements Amazon as the "go-to" for price checks.

American Eagle is doing this to drive in-store traffic, which lets you text yourself items from their e-commerce storefront to find the physical item in your local store.

As for mobile browsing, Nielsen says that 9 million people have used their phone to browse the Web and purchase things (RWW indicates that this is only 3.6 percent of mobile phone subscribers) -- which is paltry in comparison to the ~150mm+ online shoppers.

But it's a growing segment, which increased by 73 percent alone since last April. 

So I'm curious, if you're reading this far, have you ever bought something using your phone?  If so, tell everyone what it is you bought and why you used mobile in the comments.

written by Scott Hurff -- scott.hurff at channeladvisor

Live blogging from Internet Retailer Conference

Here at IRCE, I'm in a workshop around affiliates and along with 80% of the attendees, I'm sitting here with my jaw open because instead of offering ways to maximize your affiliate business, this workshop has essentially been a 90 minute rant about what scum-bags affiliates are and tons of data that are essentially telling retailers to scale back or do extreme policing of their affiliate programs.

Why the anti-affiliate sentiment?
I decided to cover this topic on CSE strategies, because with ChannelAdvisor's ShoppingAdvisor product, we've seen more and more retailers going direct with their top affiliates, and keeping the bottom-tier affiliates in affiliate networks for closer management.  Retailers seem to be separating the wheat from the chaff.

Barbara Hurd from Harry and David talked about how they are fighting affiliates that are doing bad things like saying they have a H+D coupon code, but then send people to competitor's sites.

Vickie Updike from Miles Kimball - pointed to some research they did that showed affiliate drove only 17% NEW orders for them.  In other words, 83% of the affiliate orders were essentially coming to MK were intercepted and MK had to effectively pay for orders they would have gotten anyway.

George Michie went on a rampage and talked about the bad guys and their tricks such as:

• PPC fiends - these guys violate your affiliate rules and do things like buy your keywords at night (night pirates), or use geo targeting to avoid your corp HQ and buy in other regions.  You can catch these, but it's tough.
• Coupon sites - these guys are trained by the consumer press (today show mentioned twice - evidently Matt Lauer is big on coupons)
• Domain squaters - they buy things like plasmatvs.com and do lots of SEO and then charge for traffic to a bunch of affiliates.
• Loyalty programs - eBates kind of programs essentially want to take an affiliate % from traffic you should be getting - avoid them.

What's a retailer to do?
At the end of the day, the panel seemed to be saying that it's time to drop the hammer on affiliate programs, cull out the bad guys and focus more on Web 2 kinds of activities like blogs, user-generated-content, etc.

On the culling side, one of the panelists likened finding your 'good affiliates' like trying to find the good guys in prison.

Ouch - nuff said.

Stylefeeder: one million Facebook installs

Has Stylefeeder just proven that e-commerce can live inside Facebook?

Stylefeeder, a Boston-based social shopping site centered around a recommendation and rating algorithm dubbed the Maximum Margin Matrix Factorization, just passed the million-member mark with its Facebook app.

The gist of the app is this: it connects to your Stylefeeder account and syncs your "shopping finds" between the two properties.  Your picks then display on your profile box while incoming product recommendations stream to you from within the app.

In effect, it replicates the experience you'd find on the main property within Facebook. 

It appears that the application has had a positive effect on Stylefeeder's main property, as well, shooting up past ThisNext and 200,000 monthly uniques in February to ~1 million uniques in April, according to Compete.

Stylefeeder's also ahead of Mark Cuban's RadicalBuy (3,000 installs), Amazon's Giver (1,300 installs) and Grapevine (1,000 installs).

written by Scott Hurff -- scott.hurff at channeladvisor

Comparison Shopping Engines @ ChannelAdvisor Catalyst UK

Scot Wingo here.  I'm over in the UK (London) for our ChannelAdvisor Catalyst UK event and we held an interesting panel on CSEs.

In my keynote, I pointed out that based on Comscore data, about 35% of buyers in the EU go through a CSE on a monthly basis.  In the UK, this is quite a bit higher at over 50%.

The panel was hosted by our UK CSE expert, Dan Burnham and featured:

• Adam Patterson, Shopzilla
• Laurent Gibb, Shopping.com
• Thomas Sevege, Twenga

Shopzilla

Shopzilla is active in UK, FR, DE.  They reviewed a timeline of the company that most are familiar with.  In EU, they have 6m visitors/m and in the UK approx 3m uniques/m.

The Shopzilla differences are:

• Speed - 10-50x faster than competitors
  • No ads
• Relevance
  • ShopRank determines most relevant results, not just based on price.
• Ratings (consumer ratings)

They highlighted non-compacted products and how shopzilla does on these items.  Specifically they pull out a variety of attributes.  Used the example of women's jeans.

Shopzilla has a bid-driven interface (merchants love this - we can attest to this).  He also highlighted their account management function.

Shopping.com
Highlighted their distribution network.  Their Catalogue is part of their key differentiator.  They have over 100 people in Isreal actively building the catalog.  He also talked about ratings.

Twenga
Twenga is a new CSE in the UK market.  They have gotten some pretty good traction.  They are only 18 months old.

They are in 11 countries with 30k active members.  Tehy have 60m offers and 90,000 product catalogs.  They claim 12m visits.

They have a mixed crawler/feed model (all inclusive vs. pay only).  It's indexed with TwengaBOC (smart cataloguing).  These products are displayed with Twenga's Clustering algorithm.

Thus their value proposition is:

• For buyers:
  • All merchants - largest selection
  • Finds the right product, at the right price.
• For merchants:
  • CPA model - pay only when something sells
  • Traffic

Here's an example of a search on Twenga.

Comparison Shopping Engines in the UK and Europe

In the EU and specifically the UK, CSEs are even more prevalent, fragmented and strategic than the US.  Here is some data I reviewed in my keynote:

First, here is some Comscore trends and data on CSEs in all of Europe:

Note that 34.7% of internet users visit a CSE in Europe.  Also note that Twenga (CSE 2.0) came on the market with 4m uniques placing them into the top 10 very quickly.  Also, one thing to note as they are coming to the US is that Ciao enjoys the number one spot ahead of many of the CSE 1.0 players like shopping.com and shopzilla.

Second, here is the same Comscore data, but from a UK perspective:

In the UK, note that Shopping.com holds the top spot, but Ciao is right on its heels.  Also of particular interest is that 51.4% of the internet audience (online shoppers) in the UK  visit a CSE on a monthly basis.  So UK buyers are much stronger users of CSEs than both the rest of EU and the US.

E-consultancy's CSE Buyer's Guide 2008

The fine team at E-consultancy just published one heck of a comprehensive guide to CSEs for sellers who want to know more about the market, who the players are (profiles of 16 leading engines included) and investigates how new players are trying to differentiate themselves just as the old guard seeks to prevent stagnant growth.

E-Consultancy also predicts that the growth of new social shopping sites will be "significant."

And, despite the specter of a complex and difficult global economic situation, a poll of players in the CSE space reveals that there is little worry of an online purchasing slowdown.

Weighted towards the UK market but relevant for everyone selling or playing in the CSE space, I'd recommend you download and read it.

Bonus: James Scott from ChannelAdvisor's UK office is quoted (pp. 14-17, 29-32).

Go get yourself a read.

by Scott Hurff -- scott.hurff at channeladvisor

HealthPricer wants to own the health space

As more health-related information and access to products moves to online channels, the space will continue to consolidate around existing leaders.

But in one health-related space, there's no clear competition for HealthPricer, a CSE that specializes in offering everything from drugs to vitamins to beauty products and supplements.

The CSE just announced a partnership with Healthline, a health content site, to power an embedded marketplace for health products.  This should drive some welcome traffic -- Healthline's reach is about 2.5mm uniques / month, whereas HealthPricer drives about 50k  /month 150,000 uniques / month (based on HealthPricer company data), based on Compete data.

Versus mainstream CSEs, HealthPricer stacks up well in offering rich health data, relating ingredients across products, and figuring out volume pricing deals to tell you what the best deal is if you buy in bulk.

Overall, I'm impressed with HealthPricer's UI and logic in separating out relevant data to make informed purchasing decisions.  If you're a merchant who sells health products, check them out here.

Watch their DEMO 2008 presentation below:

Written by Scott Hurff -- scott.hurff at channeladvisor

Amazon Product Ads begins rollout

Back in July, I mentioned a job posting over at Amazon about Product Ads, a previously-unknown program having something to do with "a new cost-per-click advertising channel."  Now it looks like this program has rolled out based upon email marketing performed by Amazon, as well as some early examples in Consumer Electronics, Home & Garden, Tools Toys and Kids & Babies categories.

Here's how the flow works:

• Merchant uploads product catalog
• Customers perform searches on Amazon.com, where the merchant's products appear in search results next to Amazon products (also known as "the product ad")
• Customers may click on the product ad, which takes the user to Amazon's product page presentation, which links directly to the merchant's OWN product page
• The merchant is charged on a CPC basis
• The merchant keeps all transaction revenue from the referral, minus CPC costs

Check out an example search here. Notice the "Available at external website" footer label on each "product ad."

So, what does this accomplish? It brings visibility to third-party merchants up one layer into the search results themselves.  Previously, as we all know, merchants could only be seen once a user clicked onto a product page. Now, third-party merchants can compete directly within Amazon's search results, depending on the product and category.

This will probably benefit merchants who sell more unique items, but the data will always tell the truth.

Anyone out there enrolled as a beta in the program?  Talk to me! scott.hurff at channeladvisor dot com

Thanks to Max & Brian for some information.

More social shopping

This article from the La Crosse Tribune sums up the social shopping segment well.  I'd recommend a quick read.

Many users find it utterly addicting, logging on at least daily to see products that other people are looking for or have discovered. These members say the shopping lists their fellow users post are often funky, personal elements of self-expression, as much as that may sound like an overly exalted way of describing what is, after all, consumption.

"We want to create a million mini Oprah Winfreys," said ThisNext CEO Gordon Gould. "Why is she powerful? Because people think she's genuine, she's authentic. She's giving recommendations from the heart. We're (doing that and) scaling that across every product category across the Web."

Scott Hurff