Impact of Social Sites on Retail Sales Less than Thought

A new study from JupiterResearch indicates that social sites do little to influence sales but can help with branding. Specifically, social and community sites influence only about 12% of online shoppers to buy more than planned.

About 53% of online shoppers go directly to a retail website to buy while 3% go to blogs first. That means that if you want to use user generated content to sell your products, you had best find a way to incorporate it directly into your retail site.

There are two things about social sites that make them unattractive to shoppers–inefficiency and lack of fundamental information. Shoppers are simply unwilling to wade through lots of biased and incomplete data on social sites. However, 29% say that they use social sites to reaffirm decisions.

Supreme Court Decision Makes Huge Impact on E-tail

Today’s Supreme Court ruling allowing manufacturers to set minimum retail prices is a very big deal, and has huge ramifications for many internet retail businesses.

To understand what could happen as a result of this decision, you must first understand the impact that the Internet has made on retail. In a nutshell, it has created a consumer-friendly environment in which both online and offline retailers engage in suicidal price-cutting wars. The reason for this is simple–instead of consumers having maybe only one or two choices of where to buy specific merchandise, they now have thousands of options, and retailers have to fight furiously for their piece of the pie.

Five More Important Facts About User Reviews in E-tail.

Here are some facts about the use of user reviews that come from a presentation I heard recently from Patti Evans of JupiterResearch.

1) Customers are about twice as likely to write user reviews about good shopping experiences than bad ones. Likewise they are twice as likely to write user reviews about products they like than products they do not like. This is good news for retailers and should help alleviate fears about user reviewers hurting sales.

2) Customers that write user reviews likely spend much more money online. The 20% of online shoppers that write the most reviews account for 32% of total online spending.

3) Almost 50% of online shoppers find user reviews helpful. That 50% spends more online than the other 50%.

Four Things You Should Know About Collecting User Reviews

At Internet Retailer 2007, I was impressed with a presentation presented by Geoffrey Robertson, VP of eCommerce at JC Whitney. JC Whitney is the largest direct marketer of automotive aftermarket parts in the world, and is also one of the largest e-tailers.

Robertson discussed the recent addition of user reviews to their site and gave great information about the impact on sales. Here are the highlights:

1) User reviews have a huge impact on sales. JC Whitney reviews utilize a five star rating. Products that rated five stars saw a 16% increase in revenue, while products that rated four stars saw a 8% increase. However, products that rated three stars saw a 10% decrease in sales. Two stars resulted in a 23% decrease and one star resulted in a 31% decrease in revenue.

Why Do User Reviews Affect E-Tail?

If you are at all trying to stay current on the state of internet retailing, you have probably heard from many sources that you should consider collecting and displaying user reviews for the products you sell.

This makes sense. It is important to understand that people are starting to trust collaborative wisdom more than sources that traditionally would be considered more authoritative.

Read this report from Pew Internet. If you want your eyes opened, look at the graph on page four that compares traffic between Wikipedia and Encarta. If that will not wake you up, nothing will.

Combatting Chicken Little (Is the E-tailing sky falling?)

Everyone is buzzing about the New York Times article from last week that suggests that we are entering the “Dot Calm” era. In a nutshell, sales growth was at 25% online last year, but seems to be slowing.

The article correctly notes an important trend–the multi-channel shopping experience that shoppers seem to like. They want to use the web for information and then go to a brick and mortar store to actually pick up the product. This spells trouble for online-only retailers but signals an opportunity for retailers that are involved in multi-channel or are developing their own brands.

All in all, I think that the reaction to this article is far overblown. We all knew that online sales growth would slip because almost everyone that can be expected to shop online is now connected to the Internet and shopping away. The maturation of online retail was inevitable.

Slick Tools Increase Conversion (If They are used!)

As I wrote last week, interactive tools that enhance the customer buying experience are the current hot trend in internet retail. These tools use client side technology to allow customers to quickly find the best product for them based on criteria they specify.

Blue Nile’s “Build Your Own Ring” is a good example of this kind of tool, and is probably a big reason for their incredible growth. Home Depot’s Grill Finder is another impressive tool.

At Vitabase, we have been experimenting for the last few months with our Health Guru, a tool that allows customers to answer a few questions and recommends the best health supplement based on their answers. You can see how it helps a customer choose a multi-vitamin here.