May 2, 2008, 12:00 AM

Raising the Stakes

(Page 3 of 4)

Retailers can create their own pages on MySpace and Facebook, and both sites have in the past year made it possible for retailers to distribute shopping applications that consumers can add to their own profile pages. But retailers do not seem to have struck gold.

Newegg created pages on both MySpace and Facebook because “we heard from our customers that’s an area where they live on a daily basis,” Luthi says. Sales from those sites remain small, though growing, and the conversion rate of clicks from MySpace and Facebook is slightly higher than average, he says.

Zazzle, an online retailer that lets consumers create customized items such as t-shirts, tote bags and mugs, launched applications last fall designed to drive traffic from MySpace and Facebook pages to Zazzle. But that approach is not effective because consumers have little incentive to interrupt their socializing to shop, says James Heckman, chief strategy officer at Zazzle.

The real opportunity is to micro-target social networkers, taking advantage of the information they provide themselves, such as their favorite bands, sports teams and movies, says Heckman, who came to Zazzle from MySpace parent company Fox Interactive Media where he helped craft a $900 million search and advertising deal between MySpace and Google.

“If you’ve got a 16-year-old girl whose favorite band is the Beatles, you can advertise a woman’s shirt that’s stylish for a teenager with a Beatles logo,” says Heckman. “How great is that?”

That opportunity is especially inviting for Zazzle, which Heckman says has created merchandising relationships with over 15,000 music groups that would allow consumers to customize items with images and logos of those bands on the Zazzle site. Zazzle has begun testing such ads targeted to MySpace and Facebook users based on their profiles, and click-through rates are more than 10 times higher than on conventional ads, Heckman says. If the test proves successful, Zazzle will expand the micro-targeting program by the third quarter, he says.

By moving beyond static ads, Zazzle is thinking about social networks in the right way, says Donna Hoffman, co-director of the Sloan Center for Internet Retailing at the University of California-Riverside. “You have a community of like-minded people that have self-identified as interested in certain things and you have an opportunity to be in front of them in ways that have meaning for them,” Hoffman says.

Boomers and beyond

While users of MySpace and Facebook skew toward the young, there are also growing opportunities for online retailers among older consumers. Among Baby Boomers, born between 1946 and 1964, 42 million shop online; among consumers born before 1946, 12 million shop online, according to Focalyst LLC, a joint venture of AARP Services Inc. and Kantar, a group of research and consulting firms.

And, at least among older consumers with above-average incomes, online shopping is growing. 65.6% of those over 50 with income of $50,000 or more said they had made at least one Internet purchase in the past year in a 2007 survey by research firm The Media Audit, up from 50.2% in a 2004 survey.

Aiming to make online shopping easier for those consumers, last year added icons that enable visitors to increase the font size of text on product pages., which caters to wealthier older consumers, has moved much of the detail about each item to the main product page so visitors “don’t have to work to get to it,” says Patrick Conboy, founder and president.

While many consumers worry about the privacy of data they provide to web sites-even those who shop online-older shoppers are more worried than most. 82% of those 65 and older agree or strongly agree that they don’t like to give their credit card or personal information to web sites, compared with 79% in the 50-64 age range, 74% of those 30-49 and 71% of consumers 18-29, according to the Pew survey.

FirstStreetOnline puts the HackerSafe and VeriSign security certification symbols on every page and provides easy access to the company’s privacy policy, mission statement and management profiles. “That shows we’re a real company with real people and they can trust us,” says CEO Gordon. Elderluxe also displays HackerSafe and Better Business Bureau logos-and still about 25% of customers 65 and older call to place orders, rather than entering credit card information online, Conboy says.

While especially troubling to older consumers, 75% of all Internet users have some concern about providing personal or payment information online. Eliminating that concern could increase the percentage of online adults who shop via the web from 66% to 73%, the Pew report projects, suggesting that any retailer can boost sales by inspiring trust in visitors.

A world of opportunity

Another way U.S. online retailers can increase sales is by reaching out to the growing number of online consumers outside of North America. The global Internet user population grew 265% from 2000 to 2007 to 1.3 billion consumers, more than 1 billion of them outside of North America, according to Internet market research firm Miniwatts Marketing Group.

Many of those consumers are savvy enough to find online-only U.S. toy retailer Ty’s Toy Box, whose selection includes a number of exclusive or hard-to-find items based on such popular cartoon shows as Doodlebops and Caillou. Without a major marketing push, international orders have grown from 2% of Ty’s sales in 2003 to 13% last year, says Ty Simpson, CEO.

Using carrier DHL he delivers products abroad within three days, and believes that reliable delivery has led to more sales. “They’re confident they’ll get their product,” Simpson says. “That’s a big part of why it grows. Consumers are coming back.”

Even with the proliferation of comparison shopping sites, search engines and new online competitors, e-retailers that meet consumers’ expectations can keep them coming back. 48% of traffic to e-commerce sites in March and 67% of sales came from consumers who typed in a retailer’s URL or clicked on a bookmark, says web analytics firm Coremetrics Inc.

Consumer loyalty is not dead, it’s just that online retailers have to do more today to earn it.

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