February 28, 2008, 12:00 AM

Projecting success

Retailers must learn how to develop online video that helps shoppers buy, and presents content when and where shoppers want it.

Watching the development of online video as a merchandising, marketing, branding and customer relationship-building tool is like watching a fast-paced movie that mixes fast-forwards to new technology with flashes from the past in the basic rules of marketing.

Tools and strategies are more readily available today than just a year ago for creating and distributing videos on retail e-commerce sites as well as through video-sharing sites like YouTube and a growing number of specialty content portals, where video content can coincide with Buy buttons to drive direct sales as well as support brand marketing campaigns.

“We’re seeing exciting things with video,” says Sarah Gallagher, senior manager of interactive marketing at outdoor sports gear and apparel retailer The North Face. “With more power to use rich media we’re seeing the next phase of how shoppers use the Internet. They have more control over what they view, and video keeps exploding with new uses.”

But turning the latest video technology into an effective way to connect with customers and prospective customers still requires retailers to take a hard look at old-fashioned rules of merchandising and marketing-developing video content that’s useful in helping consumers decide on purchases, for example, and presenting it when and where they’re most likely to want to interact with it.

“We have to make sure this is easy for our customers to use,” says Rich Lesperance, director of web sales and operations at Circuit City Stores Inc. “This is definitely about building repeat visitors and loyalty, and our entire emerging media and company marketing strategy is designed toward that.”

Engaging shoppers

Retailers who have taken careful steps to build out an online video strategy are beginning to better engage shoppers, says Sucharita Mulpuru, principal analyst, retail, at Forrester Research Inc. “When applied properly, online video can be incredibly valuable,” she says.

Phil Schoonover, president and chairman of Circuit City, agrees. “Video is the way people want to receive content,” he says. “Millennials (Americans born between 1980 and 1995) especially want to see videos of what they’re buying.” Video content on CircuitCity.com helped to grow the retailer’s web sales 40%, to $1.4 billion, for the fiscal year ended last month, he says.

Indeed, U.S. Internet users watched more than 10 billion online videos in December alone, according to comScore Inc.’s Video Metrix service. “We’re seeing a surge in people moving away from traditional media to spend more time watching online video,” Lesperance says.

Retailers reacting to that consumer interest by exploring online video’s capabilities are showing some notable successes. Ice.com, a web-only jewelry retailer, has experienced a 40% rise in conversion rates on products highlighted in online videos, says co-founder and president Mayer Gniwisch. And by showing its products on models in videos, which puts the size and appearance of jewelry in a better context for viewers, Ice.com has reduced the return rate on some products by 24%, Gniwisch says.

Strategies for building and deploying online video differ according to the goals of individual retailers. But one thing they have in common is finding a practical way to make online video work within a merchant’s particular retail environment.

Circuit City, for instance, has identified a two-part mission for CircuitCity.com: to serve as an engaging online store to build on its sharp growth in online sales and as a source of consumer education to support multi-channel sales, Lesperance says.

Product tours and demos

It is working with three video program vendors-WebCollage Inc., Easy2 Technologies, and SellPoint Inc.-to present product tours and demos from manufacturers. And it’s developing how-to videos using its own high-definition camcorder to shoot videos of tech staff and salespeople showing, for example, how to add memory to a laptop.

“One of our goals is to bring the customer as close as possible to having an in-store experience without having to leave the house,” says Rob Roy, a video content specialist at Circuit City.

A successful online video program, Lesperance adds, needs to work in an environment that considers information from several teams within a retail organization, including merchandising, marketing and online content management, combined with input from customers about which products could benefit most from video content.

One of the more popular online videos measured by customer usage that Circuit City has deployed, “Installing laptop memory,” features an employee demonstrating how to determine the correct memory card for a laptop, then opening the memory compartment and inserting the card. The idea for producing that video, Lesperance says, came from a customer’s comment in an online forum on CircuitCity.com.

Spending time

The North Face learned about consumer interaction with online video in its stores, where web-based kiosks showing sports lifestyle videos have engaged shoppers for extended periods. “We saw people interacting with kiosks between 20 and 30 minutes,” Gallagher says. “That proved that people want this kind of content.”

Now with more video content on its web site, The North Face has measured a general uptick in traffic, Gallagher says. The company is planning to launch its first e-commerce site this August, and video will play an important role in engaging shoppers, she adds.

Engaging online shoppers with video doesn’t always pan out as expected, however. The launch over a year ago of consumer-generated video at sports gear retailer Evogear.com has resulted in lower than expected participation by customers, who may not want to spend the time and effort to upload their own content, says head of e-commerce Nathan Decker.

But Evogear has followed up with other online video strategies that have been more effective, he says. Last year it realized incremental sales after running a pre-product launch video from ski brand Rossignol, which let viewers pre-order the new models before they hit the market, and it engaged online customers last summer in a weekly videotaped sweepstakes to which shoppers were entered with each web purchase, Decker explains.

And to produce a new twist to video content in customer reviews, it’s planning to videotape customers at its headquarters store talking about their favorite skis and other products.

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