Posted on | March 25, 2013
Written by | Ian Griffith
It wasn’t so long ago that wine stores could afford to be complacent about their websites. Online traffic would likely find them from a product search on a search engine or wine directory site, competition wasn’t too bad and Google Product listings were free. It was tempting for retailers to treat online orders as less important than “real” customers who walked in the store. But times have changed, competition has become more intense online, and every new customer comes with a premium.
The biggest change came last summer when Google announced that their product listing service would no longer be free. To add insult to injury they banned alcohol advertising on the new platform, a ban that has only recently been lifted. Fortunately Amazon had just launched its own product ads service for wine stores the previous year. As Google Products went dark, Amazon quickly became the new source of reliable traffic and conversion rates turned out to be remarkably good.
Advertising on Comparison Shopping Engines (CSEs) where stores can buy traffic based on product searches, used to be an activity reserved for more ambitious sites. The field of CSEs mainly consists of shopping sites that use arbitrage to convert their search engine ads into referral fees from retailers who want to buy that traffic. Margins are thin and ROI depends on being able to focus referrals on products that convert well. What’s different about Amazon and Google from the other CSEs is that their traffic is homegrown, a byproduct of their other activities. In general, it looks like consumer trust in their brand is leading to better conversion rates and ROI.
Amazon is a latecomer to wine sales; it didn’t sell or advertise any alcohol until September 2011. More recently they have been selling wine from US wineries as a marketing agent; a business model that has been getting a lot of scrutiny from the New York SLA. Perhaps given this regulatory attention Amazon has started monitoring retailer listings for offensive products and aggressive shipping policies. Stores have been suspended for carrying products containing the name “moonshine”, infused whipped cream, and tequila in gun shaped bottles. With their feed monitoring in a state of flux it can be frustrating for retailers who find themselves suspended without a clear explanation.
Since the beginning of March, Google has been showing wine ads on Google Shopping for the first time since last summer. At the time of writing Google is trying to overcome a technical problem where “not-family-safe” products are unable to be displayed as the default search option. Hopefully this will be resolved soon as the retailers we work with have been chomping at the bit to list their products on Google’s feed. At the moment the few stores listed on Google Shopping are taking advantage of very low advertising rates, on average around 10¢ per click; this compares with Amazon at 25-29¢ CPC. As more stores start to compete on Google Shopping we do expect to see bid rates grow and become more targeted as stores figure out bidding strategies for higher margin and higher priced items.
While Amazon’s CPC rates are more expensive, their site has been producing conversion rates as high as 4%, which quickly compensates for the CPC rate. This leads to a per visit value from Amazon referrals at around $4 compared to $1 for Google Shopping; both indicate a good ROI against the CPC rate. The other part of this story is that both sites can channel thousands of visits per month towards your website.
Some stores may not be comfortable with the idea of paying for new visitors online, but this is the new reality for retailer eCommerce. By now, most stores have come to appreciate that online customers are just as real as store customers, and in many cases are the same customer. Given the alternative of dwindling visitors and sales, stores can no longer afford to be complacent. The first step is to list your inventory with both of these giants.
To comment on this column or to learn more about how Beverage Media can help with
a website for your store, visit BevSites.com or contact Ian Griffith at 617-864-1677.
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