2/04/13

Beyond daily deals

There are more ways for the store next door to reach shoppers via the web.

Thad Rueter , Senior Editor

Visitors to MyRecipes.com, a site for cooking enthusiasts operated by magazine publisher Time Inc., can look up recipes that range from "low country shrimp pilaf" to "beef tagine with butternut squash." Red dollar signs appear before ingredients that are available from local grocers, as determined by the computer's location.

A recent search from Chicago for the ingredients needed to make the latter recipe, for instance, showed that Garden Fresh Market, a regional chain with five locations in the Chicago area, carried Kitchen Basics chicken stock, priced at $2.50 a carton until Jan. 22. Visitors can then add the items to their shopping lists before visiting the store.

The service, powered by Grocery Server, shows how online retailers are using the web to reach nearby shoppers and consumers interested in regional and local goods. With more than 20% of searches on Google relating to location, according to the search engine, local retailers striving to compete with behemoths like Wal-Mart Stores Inc. and Amazon.com Inc. can hardly ignore the power of the web to make their sales pitches to shoppers who are inclined to shop near home. "Internet marketing is a great equalizer for retailers," says Candace Corlett, president of WSL Strategic Retail, a marketing consultancy.

To reach such consumers, many local retailers are looking beyond the daily-deal programs that in recent years have inspired consumers to buy their wares but which also produced complaints from local merchants about high costs and scant repeat business. A report late last year suggests growth rates for daily-deal programs are cooling off. While the amount consumers spent in 2012 on daily deals, flash sales and other online discounts was set to increase nearly 87% compared with 2011, consultancy BIA/Kelsey says, the year-over-year growth rate will start to slow after this year.

"After astronomical growth in 2012, the online deals marketplace is showing signs of maturity," says Peter Krasilovsky, the company's vice president and program director. "There has been consolidation in the space, deal conversion rates may be suffering due to overfamiliarity and the market may be near saturation."

Some national chains already use the power of the web to reach consumers near their stores, including Wal-Mart, Sears Holdings Corp. and Walgreen Co. Wal-Mart and Sears both run online localized advertising—Wal-Mart's is through Facebook and Sears' is through digital circulars—and pharmacy chain Walgreens lets consumers check Walgreens.com to see what products are in stock at local stores. The drug store chain says roughly 50% of consumers who shop Walgreens.com say their next action is to visit a Walgreens store location.

That's just one example of how online influences local shopping. Indeed, while local online marketing remains in its infancy, among the main demands from local shoppers is accessing inventory and store-location information for nearby merchants, says Steven Roth, vice president of digital strategy for e-commerce marketing firm Channel Intelligence Inc.

Wal-Mart stands out for its effort to use Facebook to strengthen the bonds between consumers and their local Wal-Mart stores. Summer 2012 brought a marketing push that enabled teachers to digitally submit classroom supply lists, and online shoppers to buy those items via the classrooms.walmart.com site. Around the same time, the chain gave consumers who Like local stores' Facebook pages early access to the chain's holiday-only layaway program.

Social jeweler

Local retailers also are using social media in similar ways. Take Calvin's Fine Jewelry, a 15-year-old store and web retailer with one location in the Northwest Hills section of Austin, Texas. Owner Calvin Smith says that even with the spread of online jewelry retailing, many consumers prefer to visit local stores to see rings, bracelets and necklaces close up, and to develop a personal relationship with a jeweler.

That's one reason behind the retailer's "Bling Blog," which offers information on diamonds, colored gems, jewelry designers, current jewelry styles and related topics. The blog takes advantage of what Smith considers the nimbleness of small local retailers. "National chain competitors are not currently able to track quick changes in customer preferences and trends, and lack the flexibility to quickly reach out to customers in a non-commercial way," Smith says.

He adds that engaging consumers with content other consumers create—Calvin's e-commerce site highlights the stories and videos of local consumers who have purchased its jewelry—helps him reach younger consumers. That can be especially useful for those Austin shoppers who, holding true to the city's "Keep Austin Weird" values, would rather support neighborhood businesses than larger out-of-towners.

"Once local leads are converted to customers they are extremely loyal, and often consider more than just price when making a purchase," he says. "National shoppers tend to be more specifically price-oriented, and are more difficult to convert to long-term customers."

Local technology

The image of the independent merchant anchored to the neighborhood may pull at the heartstrings of some consumers, but retailers need more than sentiment to attract shoppers to their stores. Among the most recent tools for local online marketing is a feature released last year by Google for its AdWords paid search program. The feature enables marketers to customize their paid search ads by ZIP code and insert locations and phone numbers into ad text—leaving out such information is among the most common failings of small, local retailers when they market online, experts say. That means a chain could show a paid search ad with the address and phone number of one store for a shopper in a particular ZIP code and information about another store to a consumer who lives a couple of ZIP codes away.

"Location targeting within AdWords helped us double our lead volume and cut the cost to acquire new customers in half," says Lois Erbay, marketing director for California Closet Co., a storage-products merchant that operates an e-commerce site and 77 stores. "We plan on building on that success by using ZIP code targeting to create even more locally relevant campaigns for our customers."

E-commerce technology providers are also offering new tools for localized online marketing, including software that helps merchants without experience marketing on the web. For instance, about a quarter of the 1,300 gyms that operate under the Snap Fitness banner use software from Balihoo Inc. to manage online marketing, says Brant Schmitz, the chain's online marketing manager.

The service costs each location about $200 per month—franchise owners decide how much of their marketing budgets to allocate to the program—and the technology enables them to set up pay-per-click search campaigns with minimal fuss. Schmitz says the national chain provides some guidance, for instance, highlighting about 700 keywords that gym owners can profitably bid on. Local managers, however, can come up with other search terms that reflect their areas, such as "3rd street gym" or "gym and uptown."

For chains, says Balihoo chief marketing officer Shane Vaughan, the ideal mix of content on web sites is 60% national and 40% local. Some of that local content can come from blogs on the e-commerce site or via social networks; in the case of a gym, that might include putting a call out for a local run on a sunny day, he says. In fact, the local Snap Fitness managers set their social media strategies. But, Schmitz says, that's less important than Google, which accounts for 85% of the chain's overall site traffic.

New tools

Local and small retailers seeking to reach more online consumers and strengthen their brands also can take advantage of new online marketing services. At the end of 2012 the mass merchant e-retailer and marketplace Rakuten Buy.com launched BuyTV Services. Based in Aliso Viejo, CA, BuyTV Services operates a recording studio where video professionals produce promotional messages. BuyTV Services employees also can travel throughout North America to record on location, says Sheree Martin, BuyTV's executive producer. "BuyTV Services is available to any businesses that are looking to improve their online presence, as well as existing Rakuten Buy.com merchants," Martin says. A spokeswoman for the company says some 5,500 merchants sell on the e-commerce site, which recently changed its name to Rakuten Shopping.

She says BuyTV works with clients to determine pricing, with costs depending on such variables as length, location and general complexity. "On average, a 30-second to 1-minute video can cost approximately $1,500 and a 3- to 5-minute video shoot can cost approximately $5,500," she says. Merchants that make videos through BuyTV can link to those presentations via the production arm's platform on video-sharing site Vimeo, embed videos on their own web sites, or receive videos on CDs or USB drives.

Web-only retailer ZoeOrganics.com, a high-end beauty and health products founded in 2010, is among the initial merchants to post on its site a video produced by BuyTV. In the video, Heather Hamilton, the retailer's founder and CEO, explains why the company was founded and its mission, complementing the written "Our Story" feature on the site. "We wanted to give people a peek of what we are and what we do," Hamilton says. ZoeOrganics.com mainly relies on word of mouth and product reviews in magazines, not paid search, to attract customers. Hamilton hopes the video will catch the eye of more shoppers and press reviewers—and help to produce enough business to one day justify a local store in California.

Another example of a national e-commerce player helping to match local retailers with potential customers—in this case, online shoppers looking for groceries—is Grocery Server. For about a year and a half, its technology has enabled grocers that range in size from local mom-and-pops to national chains to embed offers within online recipes available on MyRecipes.com, Recipe.com, DashRecipes.com and elsewhere.

Grocery Server CEO Corbin de Rubertis says the offers reach about 1 million consumers per day. Retailers pay $1 to advertise one item per day. A further cost-per-click model applies to grocers that sell products online, with costs ranging from about 25 cents to 50 cents per item. Grocery Server aims to sign up more local farmers' markets in 2013, de Rubertis says. That would give, for instance, the maker of organic honey or spinach produced on a farm just outside a specific city a broader potential audience for its goods, he says.

Local still matters to consumers, and the web is helping to make neighborhood merchants more neighborly.

thad@verticalwebmedia.com

@ThadRueterIR

Selling a local connection on the web

In late 2012, a consumer in Australia ordered a campfire poker from a local merchant that sells via ShopMyNorth.com. The Michigan-based e-commerce operation, located along the shores of Lake Michigan, southwest of where it seems to kiss Lake Huron at the Straits of Mackinac, uses emotive photography and other branding tactics to appeal to the tourists who flock to an area that boasts natural beauty, art shows, recreation and quaint towns.

The purchase stands as an example of how local merchants, some of whom don't have their own e-commerce sites, can band together to sell their wares to consumers who are from out-of-town but who feel a connection to a specific region.

The 15 or so small local retailers that sell their wares via ShopMyNorth.com were enjoying a strong end to 2012, bringing in at least 134% more revenue in November than in November 2011.

The e-commerce site, operated by MyNorth Media—which publishes local tourism guides and operates a web site—generally charges retailer clients 25% of a product's sale price. In exchange, MyNorth handles order processing and payment and promotes retailers' products on the web site, which is built with technology from eBay Inc.-owned Magento, says Deborah Fellows, MyNorth president.

MyNorth also helps to market those retailers via Facebook, Twitter and Pinterest; an e-mail newsletter with about 50,000 subscribers; and a small paid search drive via Google Inc.'s AdWords program. Spending on paid search likely doesn't exceed $7 per day, or just more than $2,500 per year, she says, which means the site must focus on terms specific to Northern Michigan. Such terms include "michigan store" and "northern michigan shopping," Fellow says.

"We're never going to win on consumers searching for fleece jackets," Fellows says.

ShopMyNorth.com's online marketing effort is aimed at a very specific kind of consumer. "You can buy a candle anywhere, you can buy a cutting board anywhere," Fellows says. "Our shoppers are buying those products because they feel like they are buying a piece of Northern Michigan."

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