In its second-largest acquisition, Amazon buys the company for $970 million.
Online demos are picking up appeal, and manufacturers are picking up the tab. The results so far: One test increased browse-to-buy ratios by 24%.
Online shoppers love to talk up the convenience of shopping at home or work-and avoiding annoying crowds, especially during the holiday season. But ask them what they would most like to change about the online shopping experience and their answer is usually: “To be able to examine the product in hand before I make the decision to buy.”
In other words, a digital image of the product and a few lines of descriptive text are not enough to excite their senses. That is particularly true for high-touch items, such as apparel, jewelry and cutting edge technologies such as personal digital assistants-product that require a much higher level of sales support than books and CDs to satisfy consumers’ questions about the product and their desire to try them on for size.
After all, how a product looks, feels and performs is central to consumer buying decisions. One of the ways brick-and-mortar retailers cater to these criteria is through product demonstrations-paid for by the manufacturer-that allow customers to kick the tires. But replicating this level of presentation in the online world has eluded most Internet retailers.
That’s because flat screen images are two-dimensional and typically accompanied by limited information about the product and its performance characteristics. At the same time, manufacturers, which besides underwriting the cost of product demonstrations in the physical world also pay retailers to host such presentations, have been slow to push the concept of high-gloss, three-dimensional product demonstrations to Internet retailers.
Online retailers have been frustrated by the product manufacturers’ inertia, which many attribute to manufacturers’ desire to build meaningful web sites of their own and stock them with interactive product demonstrations. At the same time, most e-retailers lack resources to implement high-gloss product presentations en masse. To create and implement a single interactive product demonstration can cost more than $2,000. For Internet retailers dealing in low-margin items, such as electronics, recouping a return on investment for such an endeavor can be a losing proposition-especially if they want to stock their sites with many such demos.
“There are several online retailers, such as Value America, that tried high-gloss product presentations, but could not afford to support them and subsequently went out of business,” explains Scott Reedy, vice president of advertising sales and vendor marketing for Menlo Park, Calif.-based Egghead.com, a computer products retailer. “Supporting that kind of infrastructure is expensive and incredibly labor intensive. For an online retailer such as ourselves, it does not make sense.”
To help bridge the gap, a handful of companies are emerging that distribute to Internet retailers interactive product demonstrations created by manufacturers. Three such companies are San Francisco-based ProductPOP Inc., New York-based Impressia and Seattle-based Vendaria Inc. Each company serves as a content distributor that arranges for and pays Internet retailers to include interactive product demonstrations on their web sites. Interactive ad agencies usually create the demonstrations.
Retailers-and the interactive ad agencies-argue that having vendors foot the bill for interactive demonstrations for multiple products is more cost-effective because manufacturers can spread the cost of doing so across dozens of Internet retailers.
They argue that that strategy can significantly increase vendor brand recognition and retail sales. But retailers themselves benefit because the demos provide them with a distinct marketing tool capable of generating a sales lift that does not include a link back to the vendor’s site. “I don’t have to worry that customers who seek a higher level of information about a specific product than what appears on my site will link to the vendor, get the information they want, then be directed by the vendor to another retailer’s site,” Reedy says.
Interactive product demonstrations use pop-up windows accessed through point-and-click icons to provide richer product descriptions, three-dimensional views and, sometimes, actual demonstrations of how the product works. ProductPOP and Impressia claim the demonstrations can deliver a substantial boost in sales. ProductPOP says a pilot it conducted beginning last June produced a 24% increase in browse-to-buy rates for Internet retailers carrying technology products. Participating retailers included PCmall.com, Egghead.com, and Macmall.com. Thirty-two technology vendors supplied the displays.
The pilot was comprised of 250,000 shoppers who randomly connected to the sites of the participating retailers. Seventy-five percent were shown pages featuring icons for ProductPOP displays and 25% were not. Between 5% and 19% of consumers who saw the icons clicked on them. ProductPOP was pleased with the results because consumers typically click through to three or four pages or icons to find the product data they desire before initiating a purchase. If consumers have to spend longer searching for data, they are apt to abandon the site. ProductPOP believes the demos help save many sales.
Up the browse-to-buy
ProductPOP also ran a pilot with CarSmart, a subsidiary of Autobytel.com. Eight automobile manufacturers, including Ford Motor Co. and Volvo North America, supplied content. More than 25,000 random customers were separated into control groups. Shoppers that were shown a ProductPOP icon and who clicked on the icon to view a product demo were eight times more likely to request a quote from a dealer than those who were not shown an icon.
Impressia also claims to deliver higher browse-to-buy rates, without being more specific. Impressia did not respond to requests for an interview.
Vendaria Inc. is another newcomer to the online product demonstration business. The company, which launched in November 2000, is primarily focused on creating and distributing product demos for toy and game manufacturers, such as Hasbro Inc.
Vendaria has deals with 10 Internet retailers including eToys.com, KBkids.com, Macys.com, ZainyBrainy.com and Starbucks.com. Vendaria expects product demos to be running on all those sites this year. Starbucks uses demos for housewares. Vendaria is also talking to sporting goods vendors about creating demos that highlight performance features of outdoor wear.
Vendaria is focusing on the toy market because toys tend to be contextually challenged when displayed on the Internet. “It is hard to understand the size, action features and scale of a toy or game with a flat screen image,” explains Vendaria President and CEO Scott Ferris. “Toys require more feature-rich presentation when displayed online.”