E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
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One of the key selling points Vendaria uses to pitch Internet retailers is that its demos can be viewed by consumers using at least a 35K modem, which significantly broadens the base of personal computers that can use its technology. “This gets our product demos to 96 million desktop units,” Ferris says. Consumers using modems with speeds slower than 35K see a slide show with streaming audio to explain product features.
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Like other distributors of product demos Vendaria charges manufacturers to create the demo, then distributes it free to Internet retailers. Tests have shown that Internet retailers using demos get 26.9% of customers to watch the demos. Of that group 7.2% click to buy, adds Ferris.
“Interactive displays get people who are actually shopping online to examine a product, which is more likely to lead to a buying decision,” says Bill Brown, CEO and co-founder of ProductPOP. By contrast, he notes: “Banner ads usually attract people to a product in a different context. For example, they might be searching for investment information when they see the banner ad, so they are not necessarily in a shopping mode.”
A cut of the deal
Currently, only a few Internet retailers are using interactive product demonstrations. Egghead rolled out
ProductPOP’s service in December; CarSmart rolled it out in January. Brown says ProductPOP, which is focusing initial efforts on the technology market, expects to finalize deals with about six other online retailers, most likely in the technology sector, early this year.
In addition, the company had signed deals as of last December with two technology vendors, Palo Alto-Calif.-based Hewlett-Packard Co. and Melville, N.Y.-based NEC U.S.A. Inc., to supply product demonstrations to Internet technology retailers.
To entice Internet retailers to include interactive product demonstrations on their web sites, ProductPOP pays them a percentage of the revenue it earns from vendors to distribute the material in the retail channel. The percentage paid varies by retailer, according to Brown, who declines to discuss in detail retailer payouts and what the company charges vendors. “This is similar to the promotional money manufacturers pay to retailers to do in-store product demonstrations,” he adds.
Paying Internet retailers promotional money to run interactive product demonstrations is a key selling point, since online retailers see no reason to incur the cost of creating brand recognition campaigns for manufacturers. “Retailers in the physical world do not pay to demonstrate a product in their store, so why should we?” Reedy asks. “Any model that says we pay to present information from the manufacturer will not work.”
To keep Internet retailers from focusing exclusively on the opportunity to earn promotional fees, ProductPOP pitches its ability to capture data that shows how effective online product demonstrations are in delivering a sales boost. Once a consumer clicks onto the product demonstration, ProductPOP tracks what information is viewed and how soon after viewing the information the customer makes a purchase or moves to another page. The data also help identify what types of information and visual content resonate with customers, data vendors can use to build more effective product demonstrations.
Eventually, Internet marketing experts believe that interactive product demonstrations will spread beyond the technology and auto industries. Three markets with a need for such technology are apparel, home decor and beauty.
The difficulty facing online retailers in these markets is that they sell high-touch items that customers want to try out before buying. “Fashion sellers struggle online to compensate for lack of touch and feel,” Evie Black Dykema, analyst with Cambridge, Mass.-based Forrester Research Inc., says in a report about online apparel, furniture and beauty product retailing. “Today’s online retail selling process does not meet fashion consumers’ needs.”
It’s a safe bet that product demos will work when selling high-tech products, not only because the subject lends itself to such demos but also because buyers of those products are likely to have the technology to run the demos on their computers. But it’s not such a safe bet when it comes to mass-market products like apparel, home decor or beauty.
The sticking point is that many consumers lack high-speed modems or broadband Internet connections neccessary to accommodate graphically rich product demonstrations.
“Lots of consumers lack a fast Internet connection and only about 70% of PC owners have a 56k modem,” declares Egghead.com’s Reedy. “These demonstrations do not work in an environment with slow Internet access, because people get too frustrated.”
A survey by Forrester Research of 40 Internet retailers carrying fashion-related products shows that 13% cite bandwidth constraints as a limitation in their ability to deliver high-gloss product presentations. That issue ties back to their inability to create product displays that provide consumers with the same sense of touch and interaction with a product they get when shopping in the physical world. The inability to create such an environment was cited by 38% of respondents as the number one challenge facing their business.
Online fashion retailers are “pessimistic about the value of interactive tools in a narrow bandwidth world and reluctant to incorporate them into their sites,” Dykema says in her report. “More than half offer zoom and/or pan technologies and 25% use swatch substitution, but bandwidth-intensive features-animation, video and virtual models-are far less popular.”
To compensate for lack of high bandwidth Internet access among consumers, ProductPOP and Impressia are initially distributing product demonstrations that feature zoom and three-dimensional views, capabilities that can be quickly downloaded by consumers with low bandwidth Internet access.
Zoom lets consumers more closely inspect the appearance of the product and three-dimensional views create the sense of actually holding it in hand. The demonstrations also include detailed text about features and functionality and even streaming video with narratives that provide an overview of the product, much like a television commercial.