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As manufacturers impose minimum price policies on retailers, eHobbies invests more in search marketing instead of price promotions to rise above the crowd.
Search engine marketing has taken on a new importance for online retailers like eHobbies because of the growing imposition of minimum price policies by manufacturers. Those policies prevent e-retailers from posting on their sites prices below those set by manufacturers, and that forces e-retailers to find other ways to stand out besides cutting prices.
The number of suppliers to eHobbies imposing minimum price policies has jumped from under 20% to nearly 75% in the past year, says Brian Carlevato, senior buyer at eHobbies, No. 364 in the Internet Retailer Top 500 Guide. Those manufacturers are taking advantage of a June 2007 Supreme Court ruling that gave manufacturers greater leeway to set minimum prices.
“It makes the marketing department work a lot harder in terms of either offering a value-added service with the sale of an item or having to implement search engine marketing tactics to get us to the top of search results,” Carlevato says. “If consumers are searching on Google or Yahoo for a specific radio-controlled car and they come across eHobbies.com among the top results, they’re inclined to make the purchase through us, even if prices are the same.”
The e-retailer has increased its search marketing spend by 50-60% in the past four months, and increased sales by 10-15%. Those increased sales more than pay for the increased search marketing spending, Carlevato says.
Other e-retailers take into account manufacturers’ policies when making decisions on which products to prioritize in search marketing campaigns. Paintball Online Inc., operator of the xtremez.com e-commerce site, has responded to suppliers’ minimum price policies by sometimes offering another item free or at a discount when a customer buys an item that can’t be discounted. Some manufacturers object, and those that do may find Paintball Online doing less to promote their products, including through pay-per-click search marketing, says Adam Stites, president.
“If we’re not allowed to merchandise or market their product, we’re not going to see the sell-through, and we’re not going to put their product in our newsletter or into our PPC campaigns,” Stites says. “They’re going to be left behind if they don’t give us any flexibility to market their product.”