Can you imagine using online advertising to drive people to Sears to buy a wrench? Well, that's what's happening today as marketers begin to discover that retail traffic comes from the Web.

ComScore (2006) reported that 63% of search-related purchases occurred in offline retail stores while 37% converted online. Over 80% of the offline conversions occurred in categories such as Video Games, Toys & Hobbies, Consumer Electronics, and Music/Movies/Videos. The study found that over half (56%) of ecommerce conversions are latent buyers while 44% were direct buyers.

Serious Buyers Are Search Driven

The study analyzed the search behavior of 83 million Americans conducting over 552 million searches within 11 product categories using one or more of 24 search engines during the 2005 holiday season. Of these, the 8.6 million who subsequently purchased items online were found to be intense users of search engines across all product categories. They performed nearly ten times as many searches as non-buyers.

Search Marketing Reaches Critical Mass

Search marketing has become a line item in the marketing budget, but it hasn't always been this way. I remember it being a tough sell back in the days when search represented less than 1% of the online advertising budget. Currently, search takes up 34% of the average online marketing budget, while search engine marketing accounts for 41% of all online advertising.

Paid search spending has increased faster than any other online marketing channel. Search marketing revenues in North America totaled $5.75 billion in 2005 and are projected to reach $11 billion in 2010 (SEMPO).

Search marketing effectiveness is well known for direct response, branding and latent offline sales. This year's annual MarketingSherpa survey at ad:tech shows that search advertising outperforms email marketing with 52% of marketers reporting that "search performance is 'Great-outperforms other tactics' compared to 47% for email house lists."

We know search works, but how can it enhance ecommerce? Here's how:

  1. Boost conversions with search engine optimization (SEO)
  2. Further enhance conversions with pay-per-click advertising
  3. Increase conversions with site search
  4. Enhance keyword bid management with Web analytics

State of eCommerce

The Department of Commerce estimated total ecommerce sales for 2005 at $86.3 billion, an increase of 24.6% over 2004. Total retail sales in 2005 increased 7.2% over 2004. Ecommerce sales in 2005 accounted for 2.3% of total sales. Ecommerce sales projections from eMarketer are as follows:

  • 2006 -- $101.0 (~20% increase)
  • 2007 -- $119.1 (~18% increase)
  • 2008 -- $139.0 (~17% increase)

Preparing for the Holiday Season

Holiday shoppers start early. The comScore study found that 60% of all searchers started their search process before November 15, 2005. The take-away for search advertisers is that holiday-season advertising budgets should be ample and released early enough to cover the aggressive search behavior of serious buyers.

Latent Search Buying

If you have a hard time believing that Web search drives retail sales, take a look at these two studies.

1. A 2004 comScore study reported that latent purchase conversions account for the majority of online buying activity. This study caused quite a stir last year by revealing that search marketing is more than a direct response vehicle; it provides branding as well.

The study also revealed the importance of using generic search terms in addition to trademark and product terms. Generic search terms (camera, PDA phone) received more than 70% of the total search volume versus 20% for trademark names (Best Buy, Gateway) and 10% for specific product terms (Canon digital camera, HP notebook).

2. In "The Role of Search in Business to Business Buying Decisions," Enquiro and MarketingSherpa found that:

  • Search engines play a dominant role in B2B purchases
  • Search engines are used in early or mid research phases of the buying cycle
  • Google is favored over other search engines
  • Search engine research takes place at least one to two months before a buying decision
  • Good balance between organic and paid search is necessary
  • Organic SEO gets over 70% of the clicks
  • Position is a factor, with over 60% clicking on the top three listings
  • Most users decide which listing to click on within seconds of scanning the page

Retail Sites Lack SEO

Most ecommerce sites are still not well optimized for organic rankings. Industry research confirms this two years running (2004 and 2005). OneupWeb's 2005 study reported that 83% of Internet Retailer Magazine's top 100 Websites are not using basic search engine optimization principles to gain high rankings.

What are these basic SEO principles? Your Meta tags, site architecture, keywords and content. These are the factors that allow your website to be readily indexed by the search spiders for favorable positioning on the search engine results pages (SERPs). The following data was reported for Internet Retailer Magazine's top 100 Websites:

  • 17% well optimized (compared to 12% in 2004)
  • 25% moderately optimized (compared to 23% in 2004)
  • 35% nominally optimized (compared to 29% in 2004)
  • 23% not optimized at all (compared to 36% in 2004)

Because of the strong correlation between search engine optimized sites and high rankings, traffic, and sales conversions, it is important for retailers to avail themselves of this marketing strategy. If not, the risk is lost opportunity costs and a loss in market share.

The study reported that 89% of the well-optimized sites were indexed on pages 1, 2 and 3 in the SERPs for their respective keyword queries, and 52% appeared on page 1. In contrast, only 4% of the non-optimized sites fared as well.

We've been talking about SEO for organic listings as a first step, but retailers can improve conversions even more by including paid search in the marketing mix. The advantage of sponsored listings is that they go live almost immediately and you can optimize the campaign with testing and control costs with bid management.

How does paid search compare to organic listings when it comes to conversions? Read Part 2 next week for a review of how SEO stacks up to PPC in terms of conversions. We will also cover strategies for boosting ecommerce search conversions and take a look into the future of search and ecommerce.

Discuss this article in the Small Business Ideas forums.

December 20, 2006

Paul J. Bruemmer has provided search engine marketing expertise and consulting services to prominent American businesses since 1995. As Director of Search Marketing at Red Door Interactive, he is responsible for strategizing and implementing search engine marketing activities within Red Door's Internet Presence Management (IPM) services.

Search Engine Guide > Paul Bruemmer > Retail Bonanza Starts With Search – Part 1