MY HOME

by Gary E. Haffer

The size and importance of the online marketplace is rapidly increasing. Forrester Research released an online retail study projecting that the Internet brought in 2 billion in retail sales in 2006, while influencing 8 billion in offline sales and over half a trillion dollars all together. With e-commerce continuing to increase its impact on retail sales, online retailers have begun utilizing comparison shopping sites by the thousands.

According to another study, while only 18 percent of online consumers use comparison shopping sites that segment spends 24 percent more than average online consumers do. It is certainly a desirable method of generating sales leads; however, as more online retailers use comparison shopping sites, bid prices will undoubtedly escalate. Some argue that customers who visit these sites seek the lowest prices and for that reason will only drive their margins down. So what is the key to long term success for these businesses? The answer is brand building.

The comparison industry is extremely crowded with a limited number of different services that only demonstrate marginal points of differentiation. The leading shopping engines are AOL Shopping, Froogle, MSN Shopping, NexTag, PriceGrabber, Shopping.com, Shopzilla, and Yahoo Shopping. The comparison shopping space was once solely occupied by small retailers with slim marketing budgets. But now that numerous big players like J.C. Penney and Nordstrom have entered the arena, many smaller retailers have withdrawn their businesses from comparison shopping sites altogether. As a result, other retailers are hesitant about allocating advertising money to these sorts of sites. What they do not realize is that comparison shopping sites provide the best turf in which a small company can build its brand because of the increased exposure. According to comScore Media Matrix, Shopping.com was ranked the 20th most visited website in 2005 and alone had approximately 22.6 million unique visitors on average every month. When listed in a comparison shopping site, it is important for a small online retailer to provide an incentive for shoppers to choose over one of its competitors. Consumers are generally becoming more comfortable giving their credit card information online. However, the internet experience still fails to leave many customers with a feeling of security. This is why they usually value brand security over the cheapest products when shopping online. Today, virtually all comparison shopping sites allow shoppers to rate online retailers. User feedback and ratings systems can help to instill buyer and seller trust.

In the long run, online retailers need to develop a brand as a destination site through the facilitation of excellent product and store reviews - instead of simply matching their prices with those of Wal-Mart??. A mass of positive ratings is highly persuasive to potential shoppers and will ultimately lead to higher sales conversions. To achieve this, online retailers can begin by diligently managing their data feeds. Failing to do so will cause their businesses to fall to the bottom of the product search results or even worse, upset their customers who were reliant on the incorrect information. It is extremely important to keep information such as availability, pricing, product descriptions, and photographs up-to-date and accurate. Although it can be challenging for a small retailer to match the wide selection of products and lower prices that bigger retailers have to offer, it can still maintain a competitive edge on comparison sites by implementing a solid strategy for customer relationship management, frequent data feed updates and brand recognition.