Comparison shopping engines can drive traffic to an ecommerce site. But there are over 120 such engines, and how to decide which of them to use and whether to use them at all are questions many merchants have. We spoke with Scot Wingo, CEO of ChannelAdvisor, a leading ecommerce software and services provider, about the use of comparison shopping engines for small to mid-size ecommerce firms. Wingo is an expert in comparison shopping engines and an innovator and pioneer in ecommerce generally.
PEC: How many shopping engines are there, how much do they cost, and how should smaller merchants be looking at comparison shopping engines as we roll into the holiday season?
Scot Wingo: “Comparison shopping engines [CSEs] have been around since the late 1990s. So, once there was enough ecommerce out there, then some entrepreneurs had the brilliant idea of having a search engine for those ecommerce sites, essentially, and comparison shopping engines were born.
“When we look at the broad view of ecommerce, we have data that suggests that, of the different channels where ecommerce takes place, search is the largest at about 40 percent; marketplace is about 25 percent; and comparison shopping engines drive about 15 percent of ecommerce. So, CSEs are not the most important channel, but they’re definitely top three from those retailers.
“As we look at comparison shopping engines, there are a lot of them out there. Our software supports 120 comparison shopping engines. In the U.S., most people kind of think about the big seven, which are things such as Google’s comparison shopping engine called Google Shopping, Shopping.com, Shopzilla, PriceGrabber (which now also powers Yahoo! Shopping), NexTag, TheFind, and others.
“It can be horizontal in nature, meaning you can find almost any product. We’re also seeing an explosion of vertical comparison shopping engines. So, for example, in the jewelry and apparel categories, it’s very popular for there to be comparison shopping engines that are really specialized in those areas.”
PEC: How does a small merchant, wearing several hats, know which of these comparison shopping engines to get on? And, given all the complexities involved with comparison shopping engines, are merchants better off focusing their resources on something like SEO or paid search?
Wingo: “What we’ve found is that smaller merchants often have a lot of success on marketplaces. Paid search or AdWords is pretty complicated and it’s pretty time consuming because you have to come up with the keywords. So, a lot of merchants use comparison shopping engines as a second broad category of channel that they work with. A lot of that’s driven by some of the free engines that are out there.
“There’s general misperception that CSEs are very risky and expensive. With some of the older ones with a cost per click model, that is something you need to keep an eye on. But what we could probably recommend for small merchants is to take advantage of some of the free offerings out there. The largest of those is Google Product Search, also known as Google Shopping. Whenever you do a search at Google, you’ll see quite a lot of different components on the page. It’s called the ‘one box’ page, so you have the paid and natural results. Frequently now, you’re seeing YouTube there, but then you also see Google Shopping results integrated there. There’s a hybridization happening where Google has a whole bunch of offerings where they’re marrying the comparison shopping engine experience of Google Shopping with the paid ad experience of AdWords. You’re seeing things like product listing ads, product engines, all kinds of interesting collisions like that, so I think this is a really important area for small merchants.
“Bing Shopping has actually gone to an all free model in the last 30 days in preparation for holiday 2010 season. It is very much like Google Product Search, and Bing now powers Yahoo! Shopping. So there’s one additional way to get traffic there.
“The third one is kind of an up-and-comer called TheFind. It does a very good job of working up the ranks of comparison shopping engines to be a top five engine, and it’s also free. So, there you have three of the top 10, all free and definitely something that you should look at.
“Should merchants put time in SEO or in comparison shopping engines? My answer is, do both. Comparison shopping engines help your SEO for a number of reasons. There are lots of inbound links, and it typically has very high page ranks because there is lots of content. So, a comparison shopping engine can actually be beneficial for your SEO strategy.
“Let’s say you have a certain product, like an LCD monitor or an LCD TV for example, and let’s say you’re on the front page of SEO. What comparison shopping engines allow you to do is be on that page [multiple] times, kind of like a shelf space strategy. So, what if for that search for LCD TV, you were in Google Product Shopping, and you are at the top for that. And you’re on the front page of TheFind and maybe NexTag, and they all rank very highly for that product. Well, now you essentially have four or five different paths to your offer through those different SEO campaigns.
“One way to think about it is you can piggyback on all the work from an SEO perspective to the comparison shopping engines. Then, the free programs give you a lot of data to figure out if the paid programs will work. You can see, for example, how much traffic is Google Product Search sending to your items and what are your top sellers. Those are probably really good candidates for a paid program. Then you can go to Shopping.com, Shopzilla, NexTag and PriceGrabber and start to implement a paid program with a lot of data behind it (so that you’re not flying blind), and then you can manage those programs and achieve whatever ROI metrics you’re after.”
PEC: Are there backend administrative issues that merchants need to be aware of when they start listing their products on those free shopping comparison engines?
Wingo: “Yes. Most of these engines are very technologically savvy on the frontend, meaning they’ve got really good search engines and crisp UIs [user interfaces] and lots of interesting things there; but on the backend, they’re actually pretty primitive. And that can be a big hurdle for a small merchant. By primitive, what I mean is essentially they each have their own file format and usually they deal in CSVs [comma separated values]. They get advanced and do XML. But in most cases, merchants are dealing with the comma-separated file. So, what becomes very cumbersome is spending all day in Excel generating CSVs for these engines. And, even if you do the three free ones, that’s three different formats, with three different ways you deliver them, and everyone has pretty dynamic products these days. So, if you update, or a product is returned, or you add a new product, or the price changes, you need to keep these data feeds pretty up-to-date. That can be kind of a maintenance nightmare.
“Another is that all of these engines have what are called minimum requirements, which are data elements such as short description, long description, URL, price, and maybe quantity. Those kinds of things are less than the minimum, and unfortunately, in today’s world, the minimum is never enough. So, there’s a bunch of recommended fields like attributes. Many engines may want up to 15 attributes for a product. If you provide only the minimum, your products aren’t going to get seen. So, it makes the data management issue that much larger for a lot of merchants.”
PEC: What happens when the merchant runs out of a product, but the feed is not current enough, and the shopping engine shows that the product is still available?
Wingo: “That is the worst click you can get because you have no chance of getting ROI on that click. If you’re out of stock of items, it’s a bad consumer experience to publish out there to the world that you have the item. Another one is where you may have raised the price on something and the consumer sees $99 but when they click through it’s $119. There’s no worse way to really aggravate the consumer than by not having great data out there.”
PEC: We often hear that merchants should find a niche and not compete on price. The strategy of using comparison shopping engines seems to run counter to that, however, by inviting merchants to compete on price when consumers are comparing products. Is that true?
Wingo: “To some extent, price does factor into it. Most of the comparison shopping engines don’t default to a low price search. Part of the reason is it’s very hard for them to know exactly what you’re looking for, and we sort by lowest price. That’s when you really see a lot of things that aren’t what you’re looking for.
“For example, you may go to an engine and type in ‘iPod’ and if you sorted by lowest price, what you’re going to find is a bunch of iPod accessories. The engines have a hard time filtering out some of that stuff. So, most of them implement ‘best match,’ trying to guess what you’re looking for. It’s part of that algorithm of search results, and merchant feedback is a huge part of that.
“When we talk to small merchants, there are many ways they can differentiate themselves. Service is a huge one and that ties in to merchant ratings. Service is really important. Selection is another one. Another element that small merchants have that large merchants don’t is what I would call content, having the best descriptions. Product reviews are really great original content that small merchants bring into the world. A lot of large merchants don’t really have customers that will take time or the passion to do reviews. If you have more stars or smiley faces, or whatever the comparison shopping engine uses, that’s going to be beneficial to you. If you can get content to the data feed and get it to the engines, someone may land on a page and see six different products described, but if yours is two paragraphs and everyone else’s is a short sentence, that’s going to make people feel like you’re more of an expert and they’re going to tend to lean towards you versus the other offerings.”
PEC: How do those free comparison engines make money?
Wingo: “They make money off of other parts of their site. Google makes its money off the paid search program or text links. TheFind is the same way and so is Bing. The rest have a cost per click business model just like paid search. So, it’s typically done on a rate card versus an auction. In paid search, you auction or bid using the CPC or the bid amount. Comparison shopping engines are usually a rate card that will say something like, ‘On Shopping.com, in the electronics category, you’re going to pay $0.40, and in apparel you’re going to pay $0.29, and over here you’ll pay $0.18,’ and so on. So, you pay on a cost per click basis. It’s up to the merchants to figure out, for their basket of goods, what they want to pay the engine.
“A lot of our customers boil it down to a percentage, or sometimes they look at return on ad spend. Or, a lot of smaller merchants will look at it from what we call an effective take rate or an effective revenue share, or what percentage of your sales went towards comparison shopping engines. Most of our customers managed somewhere between 10 and 20 percent.
“Let’s say you send a thousand products to Shopping.com and for 800 products, you are receiving 10 percent ROI or better. Maybe for 200 products, you’re not, so you stop advertising these products. You don’t have to advertise all your products. It’s up to the retailer, to decide which products are a good fit for the engines.
“Some of the engines actually allow you to bid. So, you could say, ‘800 of my products are doing really well, and maybe 100 of the products are doing well. Maybe I’m on that 5 percent revenue and I’d be willing to pay a little bit more or maybe I’ll lower my price.’ And then for the products that aren’t doing well, you can actually lower your bid, and say, ‘Okay, NexTag [for instance], your price for electronics is $0.40. I only make money on this item at $0.20, so that’s what I’m going to bid.’ Then the engines do things on their side to either promote or demote your items based on what’s going on with the bidding on a CPC basis.”
PEC: Tell our readers about your company, ChannelAdvisor.
Wingo: “ChannelAdvisor is a nine-year-old software company and we provide retailers software. The suite is called ChannelAdvisor Complete and it helps retailers with search, comparison shopping engines, marketplaces, web stores, and rich media. It is software as a service, or on-demand. You don’t have to install any servers. You just access our software through a browser. It’s a very low cost to get started and there’s no IT staff needed, so, it’s an ideal solution for small and large businesses.
“What our software does is in the field of comparison shopping engines–all those manual things I was talking about–our software takes care of that. So, at one level, we’re going to take your inventory and generate those data feeds for whatever engines you want us to. That’s only one part of it, the feed generation and translation part. On top of that, we’re going to add analytics so that you see which of your products are doing well, which are hitting their financial goal and which are not. And then, on top of that, we have something called channel optimization, where, on your behalf, we can delete the products from the feed if they’re not hitting your goals, or we can bid the CPC down for the retailer if the engine allows such a thing.
“So, on your own, you can manage one or two of these free programs. If you use our software, then adding other engines essentially becomes a checkbox for you to say, ‘Okay, I’ve gotten Shopping.com really working for me. Now, I’d like to add Shopzilla, BizRate and PriceGrabber and three others.’ Our software essentially allows you to do that, and literally in under an hour, versus doing it yourself, which would be a huge undertaking.
“So, that’s what we do. We really help retailers save time and effort and effectively sell more through these channels.
“In addition to comparison shopping, we also support marketplaces such as eBay, Amazon, and Buy.com. We have quite a bit that we do in the world of paid search and a lot of our customers that have come to us from eBay and don’t have web stores will use us for web store, as well. We have a premium web store.
“Lastly, we also have a rich media offering where, if you want to have apparel site or something like that, and you want to have advanced zooming and panning and color changing, we have a product line for that as well.”