Marketing Pilgrim

These are interesting times to be sure. While some are claiming that there is little relation between what is happening on Wall Street to what is happening on Main Street, there is little doubt that retailers have a lot to worry about.

Want an example of how things trickle down through the economy? Consider my children’s lemonade stand they used to set up in our business park. Last year, they minted money. This year, they never opened. Why? On most days, our building’s parking lot is the only one that has cars in it; the other businesses are down to only a few days a week or out of business completely. Granted, we are in a small business park and most businesses here are related to the construction industry. But it is still a bit sobering.

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There were a few presentations from Internet Retailer about video that piqued my interest. Dave Witzig from ShopNBC discussed the impact of video on their highly successful ecommerce site and made some very strong statements that should be of interest to everyone.

1) Product videos should be your focus. ShopNBC has 6,000 1-3 minute product videos (representing half of their total SKUs). Focus on these videos primarily before going into other areas.

2) Customers that watch videos convert at twice the rate of customers who do not. Yes, you heard that right. That being said, he did not say what percentage of customers watch videos.

Because of the growing broadband penetration, video is becoming more and more mainstream. In fact, Witzig said that watching video online is now the fastest-growing form of consumer entertainment.

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Even though I am home, I will continue to write about the Internet Retailer conference over the next few days. Today, here are some thoughts about social marketing trends.

It is clear that internet retail is currently in love with the concept of marketing socially. If I heard one presentation about social marketing, I heard thirty. Of course, most of them were almost useless because here is a little secret. There are not many retailers selling hard goods that are having success with social marketing.

For example, many so-called experts continue to talk about Second Life. Give me a break. If you have twisted views about sex, go to Second Life. If, on the other hand, you want to sell product, do something else. There are no success stories that I know of where online retailers have created any real business in Second Life. Most people in Second Life have something very different on their mind if you know what I mean.

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Today, Internet Retailer released their annual Top 500 Guide that chronicles the online retail industry in general and the top 500 online retailers in particular. As I am listening to their presentation of the report, I am typing these highlights.

Total E-Retail revenue hit $166 billion in the US in 2007, representing 6.3% of total revenue. The top 500 online retailers accounted for 61% of the total E-Retail revenue. Total retail growth was at 3.8% last year while E-Retail grew at a much healthier 21.8%.

The fastest growing categories in 2007 online were jewelry (36%), books/other media (32%), mass merchants/dept. stores (31%) and apparel (24%). The slowest growing categories were health and beauty (11%), flowers/gifts (11%), food/drugs (12%), and hardware/home improvement (13%).

Internet Retailer segments online retailers into four categories—retail chains, web only companies, catalogers, and manufacturers. Strangely, catalogers grew the fastest at 30% and the retail chains grew the slowest at 18%. This is interesting because retail chains are in the best position to capitalize on the multi-channel advantage.

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I am at the Internet Retailer conference in Chicago this week. You do not hear much about this conference in the blog world for some reason. That is strange considering that there are 5,000 attendees and practically every major company in internet retail is represented here.

There is always a lot to learn from this conference, though you have to look for the nuggets. The keynote and major presentations are from leaders of major retailers. In my opinion, the chance of a retailer standing up in front of 5,000 competitors and giving away too much information is pretty slim. But at least, you can get a feel for where the industry is heading.

The keynote address this morning was by Mike Boylson, Executive VP and Chief Marketing Officer at J. C. Penney. He spent most of the time telling us how great J. C. Penney is and showing commercials of their new brands. Their main site, jcp.com, did $1.5 billion in sales last year, making it the 15th largest online retailer.

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After yesterday’s firestorm, I feel the need to clarify a few things and then explain what I mean by branding.

1) Was I linkbaiting? No. Telling the truth as I see it even when it is unpopular is not necessarily linkbaiting. I do have a small gift for provocative titles though.

2) Do I really believe what I said? Yes, every word. Some people seem to find it stunning that I would actually believe what I wrote. Trust me when I say I do believe it.

3) Do I know what I am talking about? You can be the judge of that. I have been pretty successful selling online for ten years though.

4) Can a small company actually brand themselves? Yes, and if you keep reading, I will tell you how.

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According to Shoemoney, SEO has no future. I do not always agree with him, but in this case, he is dead right. Let me pull on my flame retardant suit before I explain why.

First, understand that the only reason SEO has ever worked is because search engines were not advanced enough to always show relevant information. I remember when I started selling online. At the time, I had only a few competitors in my industry and it was easy to beat them in the SEO game. It took only a few metatags and such, and within weeks, I was dominant.

That went on for years. Back in those days, a monkey could have dominated search engines rankings. We moved from metatags to inbound links with the right anchor text and continued our domination. How easy was it? I basically knew during that period how many inbound links we needed to achieve top three rankings, and the results were uncannily consistent.

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InternetRetailer.com reports that the highest conversion rates among major online retailers during March were the following:

Office Depot – 20.9%
QVC – 19%
VistaPrint – 18.3%
Roamans – 18.1%
Lands’ End – 16.2%
eBay – 15.7%
1-800-Flowers.com – 15.5%
eBags.com – 15.3%
L.L. Bean – 14.6%
Pottery Barn Kids – 14.2%

These conversion rates are through the roof when compared with industry averages. In fact, they are not even believable unless you understand what the most important driver of conversion is.

Several years ago, a company I owned brokered online advertising. When working through the numbers with clients, it became obvious that some of them were completely in the dark about conversion. One client that comes to mind stockpiled an inventory equal to the number of impressions she was buying from us. In other words, she assumed a 100% clickthrough rate and 100% conversion! I don’t know how many times I have heard clients tell me that everyone buys that comes to their site. (After all, why wouldn’t they?)

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I confess I am feeling a bit uneasy these days. These are interesting times to be in retail. Having been in business back in 2001, I know what a recession is like, but I also know that it is possible to survive and even flourish during bad times.

I remember sitting at my desk one morning going about business as usual. I happened to check Drudge and saw headlines that the World Trade Towers had been hit. At the time, I had just quit a consulting position and hired my first employee. My business was profitable but just barely.

I remember the shock well, and I remember telling my employee that we might as well quit working because we were not going to do any business. Sure enough, no orders came in the rest of the day except from one customer stuck in the middle of the woods somewhere that was blissfully ignorant of the attack.

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According to the National Retail Organization, online retail should grow to $204 billion this year, which represents a 17% increase over last year. (Many experts predicted a 20% increase in 2008.) Considering the economy is in a slump, this is very welcome news to online retailers. I personally am not surprised. At Vitabase, our first quarter was up very dramatically over the same period last year.

As is normally the case, the top categories for online retail include apparel, electronics, and cars.

I am especially interested in some other data in the report. For example, 53% of online retailers are spending their marketing budget on customer acquisition while 21% are more focused on customer retention.

The real shift in thinking though is in the approach to social marketing and widgets. 65% say they are going to focus more on social networking advertisements (I am not sure if they mean viral campaigns or actually buying ads on social sites.)

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According to Jupiter Research, only 2.6% of online shoppers use blogs for research before making purchases. Of course, that makes some internet retailers wonder if blogs should be part of their marketing strategy.

In my opinion, this study does not provide the answer to that question. It merely indicates that people do not research products on blogs. I have no doubt that this is true. It seems obvious that if shoppers want to research, they are going to go to highly authoritative sites. However, that does not mean that blogs do not offer marketing opportunities, and I know for a fact that blogs do generate sales.

Here are three benefits to blog postings:

1) Overall buzz about your company and products.
2) Consumer referrals. If credible and visible people talk about your products, it will help your sales. In fact, we track sales every day back to blog posts and forum posts.
3) Inbound links. Frankly, I think this is becoming less and less of a benefit as Google and other search engines continue to devalue these links.

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Zappos has decided that it wants to be known more for customer service than discount pricing. It is eliminating its free overnight shipping guarantee as well as a guarantee to refund 110% of the difference between its price and a lower competitor’s price.

If you are not familiar with Zappos, they sell shoes and other clothing and are one of the largest online retailers (#31 according to Internet Retailer ). They also own a few other sites such as 6pm.com which is more of a discount clothing store.

According to CEO Tony Hsieh, this policy change took place because the goal of Zappos is to be known more for customer service than low pricing.

I find this situation very interesting for several reasons.

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