Catering to Comparison-Shoppers
Comparison-shopping websites are a great marketing vehicle for online merchants who want to grow their businesses. These sites let e-tailers display product information in a simple format, allowing web buyers to make comparisons and choose the best product from a list of products from different retailers.
The stakes, though, have changed now that an increasing number of large e-tailers have entered the fray, making it more difficult for the smaller players to get noticed and driving up the placement fees that companies pay for better spots in search results. "Over the past 12 to 15 months, we have definitely seen a flow of larger retailers into the comparison-shopping site space," says Sean Behr, director of program sales at Shopping.comin Brisbane, California. Large retailers are realizing they need to be where the buyers are, he says, "and most shoppers start out at [comparison sites] like Shopping.com or other search engines when they are starting their shopping process."
Only about 18 percent of America's online consumers use comparison-shopping sites, but those who do spend 24 percent more than the average online consumer, according to a December 2003 report from tech research firm Forrester Research. In addition, 62 percent bought a product after using a comparison-shopping site. "With comparison sites, you get a relatively directed shopper or somebody who is in the mode to buy, so it's an effective ad buy," says Patti Freeman Evans, a retail industry analyst at Jupitermedia in New York City.
Whatever your budget, you can afford to list your products on one of the leading comparison-shopping sites, including: AOL's InStore, BizRate.com, CNET Network's mySimon, Google's Froogle, MSN Shopping, NexTag, PriceGrabber.com, Shopping.com, Shoptoday.usand Yahoo! Shopping. Listing is generally free, although some sites charge a nominal sign-up fee. Merchants are also charged a "referral fee" whenever comparison-site shoppers click over to their websites, whether or not those shoppers buy anything. The market average for referral fees is about 15 to 30 cents per customer, although they can run between 5 cents and $1. The variance depends on the product being sold, how popular it is, and what the market will bear.
Even if you don't sign up with a comparison site, your data may end up there since most comparison sites send out automated programs that crawl the web, collecting product information from retailers' home pages. (You won't be charged a referral fee if it wasn't your choice to be listed.) Most sites also charge for preferred placement in product listings. Not everyone, though, agrees that entrepreneurs should participate in pay-for-placement: "It's a good thing to get your name up there, but being first in the ranking is not always the most cost-effective thing to do," says Evans. Plus, most comparison-shopping sites include a vendor ranking based on buyer feedback, and that ranking is often looked on with more credibility than the sponsored listings.
Shopping.com has pay-for-placement for the first three listings, but "after that, all the other listings are sorted differently, and the most important factor is store rating [which comes directly from consumers]," says Behr. "We'll move better-rated stores above [other] stores, regardless of whether they're the largest retailer in America or the smallest." Notably, many of these better-rated stores happen to be small retailers, says Behr.
The CEO of Smooth Fitness in Mount Laurel, New Jersey, Joe Alter swears by comparison-shopping sites. His company sells its Smooth brand of exercise equipment at www.smoothfitness.com.
The company, which was co-founded by Joe and his dad, William, 72, has been selling online since 1996. The company, which also includes three retail stores and another website, had $18 million in sales in 2003 and, at press time, projected $25 million for 2004. More than 90 percent of the company's sales come from the web.
Smooth Fitness has been advertising on comparison sites since 2000 and is listed on most of the major ones. "The key thing for us is that [comparison sites] add credibility," says Joe, 42. "People [who] might not normally consider buying a $1,500 or $2,000 treadmill sight unseen might change their minds if they see it on a comparison site they trust and see some decent ratings. Sometimes, it's a deal-maker that wouldn't otherwise happen." The company pays $12,000 to $15,000 in referral fees per month, and 6 percent of its business comes from comparison sites.
Every comparison site determines placement a little differently, so e-tailers should closely track and monitor each site to make sure they're getting the best bang for their buck. SmoothFitness has one in-house employee working on comparison sites every day. Alter, with a background in marketing, spends a good deal of his time in that area as well.
Experts, entrepreneurs and service providers alike insist businesses can benefit from using comparison-shopping sites. "These sites are an especially good marketing vehicle for small e-tailers," says Evans. "Since it is generally a pay-for-performance type of environment, it's not a heavy investment to be in the same place where some of the bigger players are."
Says Behr, "You can have the three biggest retailers in America and four or five small retailers all on the same page. These sites level the playing field."
Melissa Campanelli is a marketing and technology writer in New York City.
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