April 1, 2005, 12:00 AM

Searchandizing

Site search as the new retail display window

By Paul Demery

When Fingerhut re-emerged in November 2002 following its breakup under former owner Federated Department Stores Inc., its new owners inherited a known brand and inventory, but none of the old Fingerhut`s web technology infrastructure or customer lists. With much to develop in its two-channel strategy of selling through the web and catalogs, but with limited capital to make it happen, the company faced tough choices on how to re-launch its web site, Fingerhut.com.

"We realized we wouldn`t be able to drive a Cadillac right away," says Mike Sidders, director of e-commerce at Minnetonka, Minn.-based Fingerhut Direct Marketing Inc., a unit of Petters Group Worldwide. "We`d have to start with a Yugo."

Cool technology

But one area where it knew it had to invest: Site search. In fact, a new site search-and-navigation tool deployed last October led to $1 million in incremental sales through the last four months of Fingerhut`s fiscal year ended Jan. 31. "It salvaged our holiday shopping season," Sidders says.

Fingerhut is a general merchandiser with more than 25 catalogs selling everything from apparel to sporting goods to consumer electronics. Web sales are expected to account for more than 20% of Fingerhut`s sales this year. In the past year, Fingerhut has been stepping into more sophisticated e-commerce, leading to a shopping experience that has proven to be more productive for both its customers and its own efforts to grow revenue, Sidders says.

Fingerhut`s move to more productive site search is supported by an underlying technology trend that is turning site search engines into combined search-and- merchandising tools. "It`s pretty cool technology-it`s `searchandising,`" says Eric Peterson, web site operations and technology analyst at Jupiter Research.

Retailers like Fingerhut, eToys Direct Inc. and Bloomingdales.com are using site search tools from vendors like EasyAsk, Mercado Software, Endeca Technologies Inc., Fast Search and Transfer, iPhrase Technologies Inc. and Atomz to exert more control over site-search results presented to shoppers. The tools serve three purposes:

l identifying and fixing failed searches, where shoppers search on a term that produces zero useful results;

l producing search results and navigation options that are most likely to lead to sales;

l pushing products according to a retailer`s other business objectives, like reducing inventory of overstocked items or increasing sales of high-margin products.

More products, more sales

While site search technology vendors have been addressing those issues for some time, they are beefing up their offerings even more today, with some focusing on ways to personalize search results based on previous purchases, behavior on a site and even on which Internet search engine referred the shopper. "Personalization is the next logical direction for site search," Peterson says.

At eToys, more organized and broader shopping options presented through site search results have led to a 25% increase in the average number of pages viewed per search, from 8 to 10, says CIO Chris Cummings. "That means guided navigation is bringing people through more products and helping them find what they`re looking for," he says. "The more we interact with the customer, the more likely we`ll convert that customer to a sale."

Web shoppers, meanwhile, are beginning to demand better site search experiences as they`ve become more accustomed to the ease of beginning their shopping excursions through Internet search engines, experts say. And as more web shoppers use Internet search to find products, the number that go on to use site search also rises, increasing the demand on retailers to offer effective search features. "The big thing now will be to develop dynamic landing pages," says John Squire, vice president of product management for Coremetrics Inc., whose web analytics technology can be used to improve site search results. "People expect to have as good a site search experience as they had on Google and other Internet search engines."

Searching to buy

Of the approximately 150 million web users in the U.S., 100 million or more frequent web portals to begin shopping efforts, and about 70-80 million use web search monthly, according to a recent report by Safa Rashtchy, analyst who follows e-commerce stocks at investment firm Piper Jaffray & Co. And site search users are more likely than non-users to go on to make a purchase and to produce higher average order values, Squire says.

"We have a client where 10% of their visitors use site search but account for 37% of sales, and another client where 25% of visitors use site search and make up 40% of buyers," Squire says. "In each case, the average order value of site searchers is higher than the AOV across a whole site."

At Fingerhut, the EasyAsk tool, combined with reports on web site analytics from a Coremetrics application, produced results soon after first use, Sidders says. "Getting senior management to sign off on this was easy," he says.

But he and others add that producing better business results through new site search-and-navigation tools requires ongoing learning. And the more time and personnel dedicated to using the tools, the more that can be gained from them. The early benefits Fingerhut has gained, Sidders says, have been the relatively easy pickings. "We`ve gobbled up the low-hanging fruit so far, gotten most of the `ah-hahs,`" he says. "But we don`t have a good handle yet on what more we can gain."

Taking full advantage of Fingerhut`s new search-and-navigation technology would require the attention of several dedicated analysts and managers. "We could have teams of people doing nothing but optimizing search, because there`s always something more that could be done, but it gets to the point of what resources a company is able to dedicate," Sidders says.

The search-and-navigation tools are also designed to monitor on an ongoing basis the impact of a web site operator`s strategies, giving managers the insight and ability to modify them as necessary. "We`re constantly monitoring performance, so we can modify search results to produce a better customer experience and achieve our business objectives," Sidders says.

Start with the failures

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