Groupon says its focus is on the bottom line, rather than top-line growth.
There are more ways for the store next door to reach shoppers via the web.
Visitors to MyRecipes.com, a site for cooking enthusiasts operated by magazine publisher Time Inc., can look up recipes that range from "low country shrimp pilaf" to "beef tagine with butternut squash." Red dollar signs appear before ingredients that are available from local grocers, as determined by the computer's location.
A recent search from Chicago for the ingredients needed to make the latter recipe, for instance, showed that Garden Fresh Market, a regional chain with five locations in the Chicago area, carried Kitchen Basics chicken stock, priced at $2.50 a carton until Jan. 22. Visitors can then add the items to their shopping lists before visiting the store.
The service, powered by Grocery Server, shows how online retailers are using the web to reach nearby shoppers and consumers interested in regional and local goods. With more than 20% of searches on Google relating to location, according to the search engine, local retailers striving to compete with behemoths like Wal-Mart Stores Inc. and Amazon.com Inc. can hardly ignore the power of the web to make their sales pitches to shoppers who are inclined to shop near home. "Internet marketing is a great equalizer for retailers," says Candace Corlett, president of WSL Strategic Retail, a marketing consultancy.
To reach such consumers, many local retailers are looking beyond the daily-deal programs that in recent years have inspired consumers to buy their wares but which also produced complaints from local merchants about high costs and scant repeat business. A report late last year suggests growth rates for daily-deal programs are cooling off. While the amount consumers spent in 2012 on daily deals, flash sales and other online discounts was set to increase nearly 87% compared with 2011, consultancy BIA/Kelsey says, the year-over-year growth rate will start to slow after this year.
"After astronomical growth in 2012, the online deals marketplace is showing signs of maturity," says Peter Krasilovsky, the company's vice president and program director. "There has been consolidation in the space, deal conversion rates may be suffering due to overfamiliarity and the market may be near saturation."
Some national chains already use the power of the web to reach consumers near their stores, including Wal-Mart, Sears Holdings Corp. and Walgreen Co. Wal-Mart and Sears both run online localized advertising—Wal-Mart's is through Facebook and Sears' is through digital circulars—and pharmacy chain Walgreens lets consumers check Walgreens.com to see what products are in stock at local stores. The drug store chain says roughly 50% of consumers who shop Walgreens.com say their next action is to visit a Walgreens store location.
That's just one example of how online influences local shopping. Indeed, while local online marketing remains in its infancy, among the main demands from local shoppers is accessing inventory and store-location information for nearby merchants, says Steven Roth, vice president of digital strategy for e-commerce marketing firm Channel Intelligence Inc.
Wal-Mart stands out for its effort to use Facebook to strengthen the bonds between consumers and their local Wal-Mart stores. Summer 2012 brought a marketing push that enabled teachers to digitally submit classroom supply lists, and online shoppers to buy those items via the classrooms.walmart.com site. Around the same time, the chain gave consumers who Like local stores' Facebook pages early access to the chain's holiday-only layaway program.
Local retailers also are using social media in similar ways. Take Calvin's Fine Jewelry, a 15-year-old store and web retailer with one location in the Northwest Hills section of Austin, Texas. Owner Calvin Smith says that even with the spread of online jewelry retailing, many consumers prefer to visit local stores to see rings, bracelets and necklaces close up, and to develop a personal relationship with a jeweler.
That's one reason behind the retailer's "Bling Blog," which offers information on diamonds, colored gems, jewelry designers, current jewelry styles and related topics. The blog takes advantage of what Smith considers the nimbleness of small local retailers. "National chain competitors are not currently able to track quick changes in customer preferences and trends, and lack the flexibility to quickly reach out to customers in a non-commercial way," Smith says.
He adds that engaging consumers with content other consumers create—Calvin's e-commerce site highlights the stories and videos of local consumers who have purchased its jewelry—helps him reach younger consumers. That can be especially useful for those Austin shoppers who, holding true to the city's "Keep Austin Weird" values, would rather support neighborhood businesses than larger out-of-towners.
"Once local leads are converted to customers they are extremely loyal, and often consider more than just price when making a purchase," he says. "National shoppers tend to be more specifically price-oriented, and are more difficult to convert to long-term customers."
The image of the independent merchant anchored to the neighborhood may pull at the heartstrings of some consumers, but retailers need more than sentiment to attract shoppers to their stores. Among the most recent tools for local online marketing is a feature released last year by Google for its AdWords paid search program. The feature enables marketers to customize their paid search ads by ZIP code and insert locations and phone numbers into ad text—leaving out such information is among the most common failings of small, local retailers when they market online, experts say. That means a chain could show a paid search ad with the address and phone number of one store for a shopper in a particular ZIP code and information about another store to a consumer who lives a couple of ZIP codes away.
"Location targeting within AdWords helped us double our lead volume and cut the cost to acquire new customers in half," says Lois Erbay, marketing director for California Closet Co., a storage-products merchant that operates an e-commerce site and 77 stores. "We plan on building on that success by using ZIP code targeting to create even more locally relevant campaigns for our customers."