Demandware says 30 of its clients booked more than $100 million in online sales in 2015, up from 22 a year earlier.
Shopping sites are about much more than just comparing price these days. Retailers that keep up with the new rules of the game can prosper.
Traffic from comparison shopping site Shopping.com to e-retailer eBags.com is down 40% in recent months. But eBags isn't complaining, because the conversion rate from those clicks has gone up from 1.5% to 1.8%. Since eBags pays for each click, regardless of whether the shopper buys, a 20% increase in conversion rate means traffic from Shopping.com is more profitable than ever.
There's a direct connection between the lower traffic and higher conversion rate: Shopping.com now collects more detailed product information from retailers, so consumers know more about products before they click and are less likely to click several times before finding what they want. Now, for instance, Shopping.com shows the size and material of a bag in its search results, so a shopper looking for a small fabric purse will not click on an eBags handbag only to find that it's large and made of leather. When that happens, the shopper quickly clicks off eBags.com, and the retailer pays a fee without getting a sale.
"A lot of shopping engines are making pretty major shifts to add information," says Brad Kopitz, a marketing analyst at eBags.com Inc. "Even though their traffic has gone down their conversion rates have improved because of a shift to higher-quality traffic."
The shopping sites are adapting out of necessity. Most comparison shopping sites charge per click, and the recession led many retailers to cut marketing budgets and demand better return on ad spend. Meanwhile, more consumers turned to e-retail sites known for low prices, like Amazon.com and Walmart.com, skipping the comparison engines.
And Amazon Product Ads, a program introduced in 2008 that lets retailers advertise on Amazon but process orders on their own sites, has further shifted traffic to Amazon from shopping sites.
But the biggest pressure comes from Google Inc. upgrading its shopping portal, now called Google Product Search. Data fed to Google Product Search now shows up on Google.com where consumers searching for a product often see high on the first page a row of boxes known as the OneBox with product images, prices and other information. When a consumer clicks from those search results to a retailer's site the retailer pays a price that's tough to beat—zero.
"If you're an online retailer and you're not participating in feeds to Google Product Search, you're crazy," says Eoin Comerford, vice president of marketing at multichannel retailer Moosejaw Mountaineering, which gets far more traffic from Google Product Search than any other online shopping site.
Google's growing role has led many retailers to adopt a two-pronged strategy: optimize product feeds to Google in order to capture every free click possible, then decide which of the 20 or so other comparison shopping sites are worth participating in. Both Google and the other shopping sites are innovating rapidly, and retailers that keep up are generating higher profits.
The big story
The rise of Google Product Search has been the big story of late in online comparison shopping. And Google's rise, the data suggest, has been at the expense at the four major comparison shopping engines: NexTag, PriceGrabber, Shopping.com and Shopzilla.
Those four accounted for 59% of the revenue from comparison shopping sites in the first quarter of 2007 for retailer clients of ChannelAdvisor Corp., which helps retailers sell through shopping sites and online marketplaces. But by 2009 they accounted for only 49.2% of revenue for the year.
That 10% share went almost entirely to Google, which went from 21% of shopping site revenue for ChannelAdvisor clients in early 2007 to 30.1% in 2009.
Google contributed to the pressure on the comparison shopping sites by changing how it ranks paid search ads in the fall of 2008. Ads linked to pages heavy on advertising and light on content were downgraded, meaning advertisers—read comparison shopping engines—have to pay more for good positions. "Turning the dial made it prohibitively expensive for comparison shopping engines to participate in search," says Scot Wingo, CEO of ChannelAdvisor. "That's why their traffic is down."
Advertisers whose ad quality scores went down were forced to pay 30% to 75% more to maintain ad positions on Google search results pages, says Kevin Lee, CEO of online marketing firm Didit. He says it's likely some comparison shopping sites saw price increases in that range.
"The cost of advertising on Google has increased," says Mondy Beller, senior vice president of marketing for Shop.com, ranked tenth among comparison shopping sites (excluding the shopping portals of Google, Bing and Yahoo) by online tracking firm Compete. "We have adapted to that change by cutting back on spending and focusing on other sources of traffic." That includes working with magazines like Redbook and Good Housekeeping that cater to Shop.com's target audience of working mothers ages 30 to 55.
The combination of more consumers using Google to compare products, Amazon's relentless growth and the higher price of Google search ads all took their toll. Unique visitors to comparison shopping sites declined 18% in the fourth quarter of 2009, Compete says, while the number of consumers who clicked on Google Product Search listings in December 2009 increased 44% to 21.0 million from 14.5 million a year earlier.
Add in the fact that clicks from Google Product Search are free, and it's little wonder many retailers have made Google the top priority in their comparison shopping programs.
The match game
That's the case at eHobbies.com, which generates 85% of its revenue from comparison shopping sites from Google Product Search, up from 50% a few years ago, says Ken Kikkawa, CEO. "If we're going to spend more time looking at the data, we're going to spend it on Google," he says.
It's especially important to pay attention to how products are categorized in the feeds to Google, Kikkawa has found. Take puzzles. The taxonomy of eHobbies.com starts with toys, then puzzles, then the number of pieces in each puzzle, such as 500 or 750. Google's structure is: toys and games/puzzles/jigsaw puzzles, and then goes to more detail. For Google to display his products correctly, Kikkawa has to submit products categorized to fit Google's format.