Comparison-Shopping Engines: An E-Tailer's Guide

By James Maguire | Posted June 16, 2005

As online merchants seek to draw as many eyeballs as possible to their wares, more e-tailers than ever are entering their products in comparison shopping engines. Many merchants agree the potential revenues from using these engines are substantial.

The list of leading shopping engines includes Yahoo Shopping, Shopping.com, BizRate/Shopzilla (two engines owned by one company), NexTag, MSN Shopping, PriceGrabber, Froogle, AOL Shopping, and MySimon. These engines place the offerings of many merchants side by side, allowing shoppers to make easy price and feature comparisons.

For small to medium-sized merchants, such engines can seem daunting. First, uploading and monitoring your data is time consuming. Also, using them requires merchants to place their goods and prices right next to many competitors — it seems too Darwinian to some sellers.

Also, some merchants point out, many shoppers aren't even aware of shopping engines. That's true. Estimates vary, but perhaps only a quarter of all online shoppers use them.

Worse, shopping engines can be expensive for merchants: most of the shopping engines work on a pay-per-click model, so every new visitor costs money. In fact, it's getting more expensive: as more merchants use them, bid prices escalate.

But here's the key point: the surfers who go to these sites are highly desirable for merchants. According to Forrester Research, about 18 percent of America Online shoppers use comparison engines, but that segment spends an impressive 24 percent more than average online consumers do. It's a commonly accepted fact throughout the industry: shoppers who visit a comparison shopping engine are far more likely to buy than visitors from regular search engines.

One other compelling reason to use them: whether or not you do, you can be assured that your competitors are. Ignore them at your own risk.

But what, exactly, are the merchant guidelines for using a comparison-shopping engine most effectively? To gain insight on that, E-commerce Guide spoke with representatives from two leading engines, NexTag and Shopzilla.

Getting Started
For merchants who are new to shopping engines, "It's better to start off slow," says Mark Bradley, vice president of NexTag. Choose a limited number of items to list, say, 50-100 products. Having at least this many allows an e-tailer to average the return on investment across a broad mix.

The best products to start with, Bradley says, are those that have the best margin and are already creating the best return on your own site.

Once that initial sample is posted, merchants first need to "get to a volume per day and a conversion that they're comfortable with, and then start ramping up their revenue by getting more aggressive with their bid."

This may not happen overnight. A merchant needs to be willing to spend money to properly test.

"We've seen it happen where people will say, 'Okay, I've got $1,000, let's look at this for two weeks," Bradley notes. However, depending on the product, "you need a good thirty day test." Or, looked at another way, a merchant needs a certain amount of clicks — which might take varying times — to find out what traffic and conversion rates are possible.

NexTag, as do many shopping engines, tells merchants how many clicks that category of product is getting, so sellers have a framework by which to judge their click-through rate.

Five Steps
Chuck Davis, CEO of Shopzilla, is — not surprisingly — a huge proponent of shopping engines. He points out that shopping engines offers many tools not offered by regular search engines, including the ability to sort by price, see merchant ratings, and get updated merchant information.

Davis lays out a five-step program for getting started.

  1. Sign up "Make $100 deposit to start playing," he says. A true test period, of course, will cost more. The length of a test period will differ based on what you're selling. "The magic of this medium is that everything is in real time, so you get feedback," Davis notes. "So you might experiment at a 20 percent acquisition cost, and go 'wow, we got a lot of sales,' and drop it to 10 percent acquisition cost, and go, 'we didn't get a lot.'" (An acquisition cost is the amount of a sale price a merchant must spend to make that sale.)
  2. Provide a product feed When merchants submit their data, like price, product specs, and shipping costs, it's called "a product feed," and most engines don't charge for this. (Merchants are only charged when shoppers click through.) Warning: sending an inaccurate product feed can throw off your rankings, and each engine takes its feed a little differently. It's worth tinkering with the product feed technology — some sites hire programmers to manage their feed. Also, the more information, the better. "Offering total price, including shipping, is a key to increasing conversion," Bradley says.
  3. Manage your CPC position through the online interface All the shopping engines offer an online interface to allow merchants to administer the bidding process. Many experts recommend that merchants monitor their cost-per-click on a weekly or daily basis (in some categories prices even change hourly). This online interface helps a merchant determine where in the engine's hierarchy a product is listed; for example, what subcategory. Also, this interface "allows the merchant to manage their CPC based on their margin or internal goals, by subcategory," Davis notes.
  4. Post special offers Since the engines list so many merchants goods side by side, grabbing shoppers attention often requires sweetening the deal. Davis recommends offering "Free shipping, or a free gift with purchase — something that allows your offer to stand out more than others."
  5. Get Rated Virtually all of the engines allows shoppers to rate merchants, and a mass of favorable ratings is highly persuasive to shoppers.

NexTag Bradley notes that getting reviewed is a key tool for increasing merchant conversions. NexTag, as do most shopping engines, offers a free piece of code for merchants to insert on their purchase confirmation page. "When shoppers check-out, it pops up and says 'how was your experience?'" When a seller gets 50 or greater positive reviews, "it dramatically increases conversion for a merchant," he says.

Two Types of Customers
"You have two types of shoppers in the shopping engines," Bradley notes. The first type are consumers who are considering a well-known merchant, and who will tolerate a somewhat higher price from that merchant — but they want to make sure the price gap isn't too large.

"Then you have the consumers who come in and say 'I'm only going to buy on price, and I want the lowest price.'"

It's a common misconception that all shopping engine users are going after the lowest price. "A lot of people think that a shopping engine just drives margin down," Bradley says. However, "if you to go our site [NexTag], you'll see Circuit City, Best Buy, Dell — they're not the lowest price. But they do huge volume through us."

Buying No. 1?
It costs more for a merchant to get listed higher in a shopping engine's search results. Is it worth paying more to get top ranking? Or does a lower ranking at a lower price actually a produce a better return on investment?

Traffic volume is indeed higher for rankings 1,2, and 3, Bradley confirms, "and then below 3, 4 and 5, it drops off dramatically."

The key point, though, is not volume but conversion. "You might get volume, but if it doesn't convert for you, you need to understand: is it because you've got a bad description of the product, is your product priced incorrectly, or is it the landing page on your site — is it merchandized correctly?"

For small to mid-size merchants just getting started, "I would not jump into the number one spot," Bradley advises. "It might blow through their budget and they wouldn't be able to understand how to optimize it."

"Many [new] clients come in at the category minimum," he says.

Classic Mistakes
Bradley points out three common (but easily avoidable) mistakes he has noticed over the course of seeing many merchants use NexTag:

  1. Listing-out-of stock products "Many merchants list out of stock [inventory] because they want the volume anyway, but they blend it in with other high-selling products," Bradley says. This technique can work — these sellers might get a back-ordered sale. "But for a new merchant, I would highly recommend not selling out-of-stock products."

  2. Not implementing ROI Tracker This software tool, which most shopping engines offer to merchants for free, records traffic and conversion rate for each product listed. It's a key monitoring tool. If a given listing is underperforming, then "merchants can de-list it, fix it, change the price, but it's a call to action," Bradley says. Many smaller merchants will say, "'Look, I want to see how the engine works before I implement that piece of code on the confirmation page.'" But merchants without this tool can only track the overall campaign, not individual products — it's like flying blind.

  3. Not watching the campaign daily in the first few weeks Depending on the number of skus, this daily monitoring might take a merchant as much as an hour. "If a comparable product is getting 1,000 clicks, and they're getting zero, they need to either increase the bid, add a marketing message, or aggressively make sure they're getting reviews," Bradley says. Merchants can place a cap on expenditures, say $500 or $2,000, and once that's spent their listings are turned off. But in the early days they need to closely watch what's working and what's not so they can adjust accordingly.

A mistaken attitude toward budget, Shopzilla Davis says, is limiting it to a set total dollar amount.

"A lot of media people at merchants, thinking in more of an old model, say that 'I have a media budget of X for the month.'" But, Davis says, "there are more progressive media types out there that say 'I have an allowable of X dollars per sale. As long as I can make 85 percent margins, after acquisition costs, I'll buy on as many sites as possible, all day long."

Shopping for a Shopping Engine
Each of the shopping engines offer special deals — which change constantly — to lure merchants. Before merchants spend money at an engine, it's worth checking with several of them to see which perks they're offering that month.

And it's a given that every merchant should list with Froogle, no matter what — it's a free service. Froogle doesn't charge merchants a fee for referrals. The site, like its parent Google, supports itself through advertising.

Many merchants place their products in several shopping engines simultaneously. They know that this broadcasts their inventory across the Web, and that e-tailing comes down to numbers: in general, the more eyeballs that see your products, the more you'll make, even if you have to pay for this larger audience.

So which engine should you start with? Bradley sums it up: "Try all of us."

Adapted from ECommerce-Guide.com, part of Internet.com's Small Business Channel.

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