Lots of Choices

Not so long ago, any e-retailer forward-looking enough to include then-new MP3 players in the listings it submitted to comparison shopping engines fed them into a category representing the closest match—say, audio systems. Today, however, that same forward thinker would be missing a lot of traffic from qualified would-be buyers if it never updated its data feed to reflect the fact that at comparison shopping engines, MP3 players are now a healthy category of their own.

The expansion of product categories is just one illustration of a larger evolution in comparison shopping sites. Much has changed since comparison shopping engines emerged as a way to let shoppers find and compare prices for the same product across multiple online merchants.

One of the biggest changes is that retailers are now finding themselves on the wooing end as shopping engines vie for their attention in an increasingly crowded field. Online channel management services vendor ChannelAdvisor Corp., for example, supported merchants’ feeds to 24 comparison shopping engines in 2005—today, that number has grown to 60 and includes both domestic and ex-U.S. engines.

The growth imperative

Comparison shopping engines, whether dedicated destinations or attached to portals, are search tools specific to retail. They populate their shopping-only indices largely by way of direct feeds from merchants’ product databases, though they also send out web crawlers. The engines charge retailers a fee whenever a visitor clicks on the retailer’s listing in search results; a few have models that charge per sale rather than per click. One indication of the new competition among comparison shopping engines is that some are incorporating information other than price as a way to provide more decision points to consumers and attract more comparison shoppers. For instance, several engines incorporate quality scores that affect rankings and some offer other indications that highlight a retailer’s listings.

The first generation of comparison shopping sites retain the largest share of shopper traffic. But if they are to keep growing at a healthy rate—particularly critical for comparison engine Shopzilla if it is to justify its $525 million acquisition by E. W. Scripps Co. in 2005 and for Shopping.com in light of its $620 million acquisition the same year by eBay Inc.—they must address retailers’ concerns about rising costs and ROI.

Retailers talk of the rising cost of clicks on comparison engines in much the same way they began to complain about rising cost of clicks in paid search two years ago, a function of more competing merchants using the channel and jockeying for position on the engines. In response, comparison engines have added choices for merchants; for instance, advanced bidding strategies that more closely match a merchant’s cost per click with the desired ROI.

And merchants looking for ROI on click costs aren’t limited to looking at the same established engines. There are new engines to consider, with new features designed to lure shoppers and targeted audiences that can deliver highly qualified traffic.

More opportunities

The new alternatives add up to more opportunities for merchants using comparison shopping as a marketing channel—and potentially, more opportunities for their program to go south if they make the wrong decisions. For merchants, getting the most out of comparison shopping engines now means understanding that when it comes to managing their program, one size does not fit all.

For example, retailer eBags.com, a ChannelAdvisor client, now structures its data feeds to suit the parameters of each engine and it’s getting better performance out of its program as a result. “By breaking out feeds for individual engines as opposed to sending out a master feed, we were able to measure the lift that occurred in particular engines within a month of making the changes,” says Jon Mellen, senior marketing manager.

As eBags’ experience suggests, one theme behind new developments at comparison shopping engines is that the engines offer more ways to individualize programs and more levers for merchants to pull so as to affect results.

Whatever the new approaches, though, one thing remains unchanged: Consumers who use comparison shopping sites are still looking primarily for the best price.

While the default order in which each site presents results to shoppers is generally a combination of relevancy and bid price that varies from engine to engine, shoppers can search and sort results by their own criteria. And price is still the most popular way to sort. “Over 80% of consumers hit the price sort button, so price and brand outweigh the initial default sort,” says Scot Wingo, CEO of ChannelAdvisor.

With today’s wide array of options, making sense of the comparison shopping sites is harder than ever. Here, retailers, consultants and comparison shopping engines offer a roundup of what merchants need to know about what’s new—or remember about what works—to leverage the opportunity.

1. Measure, measure

Before sampling any of the virtual smorgasbord of new merchandising options on established engines and the new venue of emerging engines, experts say retailers should have a mechanism to calculate traffic and return on every expenditure at those engines. “The most important piece of advice I can give any merchant is to use an analytics program to track results,” says Brian Smith, founder and CEO of SingleFeed, an online, self-service data feed management and optimization provider.

2.Scale expectations to category

As a marketing channel, comparison shopping engines have driven better performance in some product categories than others because of how the automated process of matching products works, according to Wingo of ChannelAdvisor. He points out that attributes describing some types of products, such as consumer electronics, are readily comparable, point to point. Attributes of other types of products are described in terms that are less standardized, making the effective use of comparison engines more challenging for categories such as jewelry and apparel.

3. Stay ahead of out of stocks

Experts say the most wasteful money a merchant will ever spend on a shopping engine is to advertise products that are out of stock. Merchants must take an item off the comparison engine instantly when it runs out of stock because the chance of conversion is zero at that point. Ditto promotions that have ended. If a merchant’s feed is still advertising iPods at $149 but shoppers who click through see the price is $199 when they reach the site, it adds up to unhappy customers. The best advice is to check with the engine on exactly how many times a day it processes feeds from merchants so merchants can adjust their own feed update schedule accordingly.

4. Feed security seals

With concerns over the security of online transactions an issue with many consumers, e-retailers have long posted seals indicating compliance with security programs on their sites. Now, for an additional fee, they can put that assurance of security into their product feed to shopping engines. Engines PriceGrabber.com, Yahoo Shopping and Pronto.com, for example, have integrated ScanAlert Inc.’s Hacker Safe logo into their product listings. According to ScanAlert, the combination of a higher average click-through rate and a higher average conversion rate amounts to a 15.7% higher overall sales rate when the seal is displayed on both the shopping engine results pages and the merchant’s site on click-through.

The seal, says Michael Wilson, vice president of business development at PriceGrabber, further differentiates merchants’ listings to give consumers an additional data point in their purchase decisions. In fact, the first three months of adding the HackerSafe seal to product listings on PriceGrabber.com has produced a significant boost in sales for online retailers such as PlumberSurplus.com.

Since the seal began appearing next to its product listings on PriceGrabber, daily average sales through that engine have increased 112% and order volume has risen 36%, according to Ryan Douglas, the retailer’s online marketing team leader. Douglas says PlumberSurplus.com is looking to expand the use of the vendor’s seal to his feeds to other shopping engines. The cost to a small retailer of including the image in all of ScanAlert’s shopping partners’ sites starts at $840 per year and rises based on site traffic, according to ScanAlert.

5. Explore new pricing models

Typically, comparison shopping engines charge listing merchants a cost per click by category. That meant a merchant might pay the same fee whether a consumer clicked on a listing for an expensive digital camera or on one for a connector cable. And that made it unprofitable for merchants to list lower-priced products on comparison engines, in the knowledge that if they paid $2 per click, for example, they’d never reach an acceptable ROI on a $10 product.

Merchants thus have refused to list entire sub-categories of products on comparison shopping engines. However, that’s bad for the engines, whose value proposition to consumers is to have the broadest product selection possible. To address that, comparison shopping engines are introducing features that either let merchants secure lower costs per click on products whose prices justify them, or lets them do so more easily than in the past.

Shopzilla in October rolled out an overhaul of its bidding tool. It gives merchants the ability to bid on the cost per click they are willing to pay on any product. They can also group products across unrelated categories based on how well they are performing on the engine and the return they are generating and bid for a cost-per-click price on those products as a group.

Shopzilla since 2001 has allowed merchants to bid for cost-per-click price on individual products by segmenting them out at the level of the data feed. But Bobby Benfield, vice president of merchant sales and operations at Shopzilla, says merchant adoption of this option was limited due to the requirements of the data feed manipulation. “This makes it significantly easier,” he says. In the new tool, merchants can isolate products for different bids at the time they are actually placing the bid rather than when they are feeding data to the engine. The new tool also integrates the product listing with data on a product’s sales performance on the engine to inform merchants’ bids.

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6. Pay less than rate card

Responding to the same marketplace demands on the part of merchants, comparison engine Shopping.com in October introduced a number of features including one called value-based pricing. Shopping.com powers the shopping function at a number of publisher sites, but not all of those publisher sites send high quality traffic to the merchants. Value-based pricing recognizes that reality with a dedicated algorithm that measures the conversion rate of each referring publisher to determine the cost the merchant pays on that click.

“If a publisher is sending low quality traffic the cost per click that we are charging the merchant is going to be lower than the minimum,” explains Tomer Shoval, head of merchant services at Shopping.com. “Merchants have cost-of-sale objectives to meet and this will help them reach their goals and sell more items with us than they do today.”

Shopping.com also in October introduced a beta test of SKU-level bidding, which will allow the largest of its listing merchants to bid for a per-click cost on a specific product rather than, as has been the case until now, a single cost per click for an entire category.

7. Get into the referral business

And in something entirely new—at least for retailers on Shopping.com—the engine is debuting a distributed commerce program. Basically, it turns merchants into referral sources able to collect a fee on traffic they send to other retailers.

When there are no relevant results returned from a search of a merchant site, the distributed commerce program will show relevant results from the other 6,000 merchants on Shopping.com. Under the program, Shopping.com shares the fee paid on click-through to any other merchant with the merchant where the consumer’s search originated. “On average, the vast majority of traffic coming to any merchant does not convert,” says Alisa Weiner, general manager of online comparison shopping. “Our goal in partnering with our merchants is to help improve their profitability and this is another way we can leverage our network.”

8. Don’t ignore new feed options

Comparison engines depend on product data feeds from the listing merchants and the technical requirements of the data feed remain challenging for most merchants. “Data feed management and data feed submission are not just problems for small businesses. Major brand name manufacturers have difficulty normalizing their data for the shopping engines,” says Smith of SingleFeed. That is a function of the fact that the engines have different feed specifications.

While platforms such as ChannelAdvisor’s provide one answer, merchants who have their hands full keeping on top of feeds with or without outside help might easily be tempted to ignore new feed specs that an engine labels as “optional.” But they do so at their own risk. “Any new thing the engines do, they call optional because they want everything to be backwards-compatible,” Wingo says. But, imagine that a new option is showing shoppers shipping costs by ZIP code. If a consumer enters a ZIP code and wants to see shipping costs, but the retailer has opted out of providing that information, the retailer won’t show up in those results.

In Wingo’s estimation, “optional” features mean that the engine will accept the merchant’s data feed without them—but they really aren’t optional if the merchant is interested in selling. “Your competitors are going to do these things, such as adding new attributes,” he says. “For example, Google product search is aggressively using attributes to make it easier for people to find things. For iPods, you can submit attributes such as ‘30 gigabytes’ and ‘black’ in addition to the product title. If you don’t submit those attributes, you are going to fall out if someone is searching on the attributes.”

9. Shadow the shopping engines

Retailers find it a challenge to work closely with the shopping engines and understand their different models and how they prioritize products. “Every shopping engine has unique data feed specifications, a unique taxonomy and dozens of quirks that aren’t properly documented,” Smith says. As a result, he says, only the most technically advanced merchants or savviest marketers submit data feeds frequently, while many merchants submit a feed and then forget it because it’s too difficult to deal with.

But those who are most successful make understanding feed specs, including changes and updates, a mission. “Getting that information is a top priority,” says Mellen of eBags.com. “We recognize the shopping engines are continuing to refine their models and to develop systems that provide a better customer experience.”

Mellen and his team constantly read up on any published changes, follow blogs that discuss the topic and stay in touch with engine account reps. “When the engines make a significant update they will send out newsletters or other material to keep us informed. But we need to work to stay on top of it,” he says.

10. Try the second tier

Smith notes that shopping engines generally are categorized by traffic, with first-tier engines defined as those that are highly trafficked and second-tier engines, less so. But the volume of traffic isn’t the only thing that matters to a merchant—the quality of the traffic matters, too. “If a merchant is properly tracking clicks, costs, and sales, that merchant might find that some of the second-tier engines perform better than the first-tier engines,” he adds.

As an example, Wingo says one of the shopping engines producing the highest conversion rates for merchants using ChannelAdvisor’s services is a very small comparison engine for hand tools on BobVila.com. “It is such a great match between audience and product set that the conversion rates are huge,” he says. “It’s not a top-25 shopping engine, but it drives more qualified leads and sales than you would on a PriceGrabber or one of the others.”

11. Make shopping social

Targeting a specific audience with a niche assortment is one way to drive sales at shopping engines. Some say adding a social element is another.

A large part of what sets Jellyfish.com apart from other comparison sites is its social component. Jellyfish.com this year introduced a social shopping feature called Smack Shopping auctions, in which the price of the auctioned product drops continually, and shoppers buy when they like the price. The application also allows shoppers to chat with each other about the product and the auction as it is happening.

“Jellyfish shopping search is for people who know what they want to buy. But if it’s more of a QVC-type impulse purchase, it certainly helps when you have an entertainment component,” says CEO Brian Wiegand. “With Smack Shopping, we extended that to a Web 2.0 model that lets people talk to each other to create content and entertainment oriented around the products.”

At Jellyfish.com, merchants bid for position according to how much commission they are willing to pay on a product. Merchants are charged per sale, not on click-through, and the shopping site shares a percentage of the fee it receives from merchants with shoppers in the form of cash back.

In October, Microsoft Corp. paid undisclosed millions to acquire Jellyfish as part of an ongoing initiative to bolster its shopping and e-commerce business. Wiegand says his business model and other new models in the space reflect efforts to compete with the search arbitrage that built the traditional shopping engines by changing the game.

In the arbitrage model, shopping engines acquire traffic from general search engines and then sell it back to merchants as qualified traffic at a higher rate. However, as the new engine in the space “you can’t keep re-buying customers from a search engine and survive. So you have to find new ways to make customers think of coming to you first,” Wiegand says. “One way to do that is social shopping. Our thought was, create something fun that makes people hang out at Jellyfish and think of going there first. Our sales quadrupled when we added Smack Shopping.”

12. Don’t set and forget

It’s just one of the many options that merchants need to keep in view in understanding that comparison shopping engines aren’t a set-it-and-forget-it proposition, and in seeking to keep their programs matched up with the fast-changing environment. “Without changing your strategy, if you look at it on the surface, comparison shopping engines are getting more expensive, just like paid search,” says Wingo. “We work with retailers to tweak their strategy and find ways to fight that inflation. There is a lot you can do now with optimization.”

mary@verticalwebmedia.com