E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Search marketing, especially optimization, is a buoy in the economic storm.
Since September when all hell broke loose in the U.S. economy, retailers have been looking for any competitive edge they can find to grow sales-or in some cases maintain sales at a level that keeps the company afloat.
During this highly volatile period, paid search and natural search optimization are two strategies that have been helping retailers achieve their goals, according to Internet Retailer’s new search engine marketing survey of 211 web-only retailers, chain retailers, catalogers and consumer brand manufacturers.
Since it became clear in the fall that the country was in a severe economic recession, 41.9% of retailers say paid search advertising has been outperforming all other forms of marketing, the survey finds. 35.6% say it is performing at least as well as it had been prior to September, while 22.5% say it is performing worse.
“This recession has forced many retailers to be more efficient with search and its integration with other online activities. This provides a partial explanation of why 42% say they’re getting better results with paid search,” says Daniel Yonts, president of PayingAttention.net, an Internet marketing consulting firm that specializes in search engine marketing and optimization. “For those that stayed the same, this could rightfully be called a victory in a down economy, which required making major strides to keep up.”
Another reason paid search is serving retailers well in the sour economy is because it’s highly flexible and scalable, says George Michie, principal, search marketing, at Rimm-Kaufman Group LLC, an e-commerce consulting firm.
“The fact that day to day you can scale your paid search efforts more, less, whatever, means you can respond to sudden changes in the marketplace very rapidly,” Michie says. “Paid search is very quick and responsive, and that’s in its favor in a volatile market.”
Looking to optimization
But the survey reveals something some search experts find surprising: More retailers are investing in search engine optimization as the economy worsens.
Moving forward through the severe recession, 55.3% plan to increase spending on search engine optimization to achieve better natural search results. 35.9% will keep this spending about the same, and a scant 8.8% plan to decrease spending. Only 24.2% plan to increase spend on paid search; 45.9% plan to keep it about the same while 30% plan to decrease spending.
These numbers clearly show that retailers are turning their attention more to optimization to improve natural search results than focusing on getting the best keyword mix in paid search.
The reason in part is because natural search is reaping rewards for retailers: In the past year, 46.3% of retailers say their natural search conversion rate went up, according to the Internet Retailer survey of IRNewsLink e-newsletter readers conducted last month with e-mail marketing and survey firm Knowledge Marketing. 43.8% said natural search conversion stayed the same while a mere 9.9% said it went down.
But the emphasis by retailers on natural search during a period of economic volatility confounds search experts. This is because paid search enables retailers to change search strategies at the drop of a hat while search engine optimization is a process that takes time to build and hone.
“In paid search, you get that sense of what the next dollar is doing for you both very quickly and through experience,” Michie says. “With natural search, it’s a little more smoke and mirrors. But there is this feeling: ‘If we got ranked very high on all these keywords and got that traffic for free, that could be huge for us. We know that spending money now will not result in immediate return on investment, but the return can be gigantic, so let’s do it.’”
So what’s better?
One way or the other, retailers view search engine marketing as a key strategy during the hard times ahead. At the same time, though, some have greater faith in other forms of marketing to boost sales-some of which astonish the experts.
55.2% of retailers who responded to the survey say e-mail marketing will perform better than search during the severe recession. In a down economy, turning more to existing customers, such as those on opt-in e-mail lists, is a reaction to uncertainty, says Yonts of PayingAttention.net.
“Most retailers counting on e-mail to outperform search are probably right,” he says. “They are marketing to an existing customer base that’s already had an experience with their brand and who volunteered to receive the messaging.”
On another front, 24.3% say affiliate marketing will outperform search in the year ahead. But success in affiliate marketing these days might be a double-edged sword, some experts say.
“The reason affiliates perform well in a bad economy is people are searching for coupons,” contends Michie of Rimm-Kaufman Group. “Before many consumers go to an e-commerce site to make a purchase, they’re going to look for coupons. Is this driving incremental traffic or just taking margin off of an order you were going to get anyway?”
Social networking? Really?
When it comes to outperforming search, though, one of the survey results astounds the experts: 30.5% of retailers say social network presences will perform better as a marketing vehicle than paid search or search engine optimization. Social networking is very new to retailing and remains an unproven method. But something about this new style of marketing is inspiring great expectations among merchants.
“These folks are smoking some funny stuff,” Michie says. “It’s aspirational of them. Most folks at this point in paid search have gotten to the point of diminishing marginal returns. They know they can’t double their paid search program anymore. It’s getting really expensive to generate more top-line sales out of search. So what’s out there? Well, they haven’t done much with social networks, so perhaps they think that’s the answer.”
Yonts agrees that retailers saying social networking will outperform search is stunning, but he says social networking is not a pipe dream.
“People listen to trends and the big news recently was that social networking sites surpassed personal e-mail sites in online use,” he explains. “Now, more Internet marketers are beginning look at e-mail and social media as similar marketing channels.”
Mobile versus search