Many of you are still in the dark as to what comparison shopping is and how it works, so I’m going to provide some quick comparison shopping information to help you decide if it’s right for you. To keep it brief and simple, I’m going to leave out some of the nitty gritty details that take a while to explain.
Just to give a quick overview first about what it is, comparison shopping sites provide users with the ability to search for a product and then see the price of that product at multiple websites. So, for example, if you’re looking for a Canon EOS 50D 15.1MP SLR Digital Camera and you want to find the best price, you can go to Nextag.com today and compare the prices of 14 different sellers. On that product, the prices range from $929 to $1596, and you were able to do the price comparison within 10 seconds rather than looking at different sites for 30 minutes to find the best price.
Some of the major Comparison Shopping Engines include Shopping.com, Shopzilla.com, Pricegrabber.com, Smarter.com and Yahoo Shopping. Google Product Search is not a traditional comparison shopping engine but should be mentioned because it’s the most heavily trafficked, produces more sales than any other engine, and it’s free. It’s a good place for starters to see if there is demand for your product.
Now, the logistics: comparison shopping sites rely on their clients sending “data feeds” which are basically excel spreadsheets with all of their product information. The information required includes SKU, Price, Title, Description, Image URL, Manufacturer, Condition (new, used, refurbished) and Category. There is also a lot of non-required information that you can provide as well, but we’re not going to get to that in this brief overview. Most shopping carts have the ability to export a data feed with all the required information, so the basic process with comparison shopping is to extract the data feed, manipulate the data feed to make the campaign effective, and submit the data feed to the comparison shopping engines via FTP or direct upload. After the feeds are uploaded and processed, you’re ready to roll.
Comparison shopping is a form of Pay-Per-Click (PPC) marketing. Every time that someone clicks on your listing and is brought to your site, you are charged a click fee. Some sites allow you to bid for higher placement and others have a flat-rate fee structure where each category on their site has a pre-determined click fee. Most click fees range from about $0.25 cents to $0.60 cents, but they can be higher or lower depending on the comparison shopping engine. One engine charge $0.55 cents a click in their electronics category and $0.25 cents in their musical instruments category, while another site might have them reversed. It generally depends on how much the comparison shopping engine is paying to get the traffic there.
The click fees are generally much lower than traditional pay-per-click charges through Google, Yahoo or Bing, but the traffic is usually a lot lower as well. Low traffic is generally the disappointment with anyone that is discouraged with comparison shopping. In general, the plus side to comparison shopping over traditional PPC is that the conversion rates (percentage of sales vs. clicks) are much higher because comparison shopping engines allow the consumer to do all their shopping on their site before they click and visit yours. They know exactly what they’re going find when they get to your site as opposed to PPC where they aren’t really sure what they’re getting and they often hit the back button quickly if they don’t immediately see what they’re looking for. Conversion rates for comparison shopping are often 2 or 3 times as high as PPC.
Comparison shopping is not for everyone though. For example, if you sell coca-cola memorabilia and all of your products are $3-$6 with a average total purchase of $10, comparison shopping probably won’t be profitable for you. Assuming your gross margin is 50% on all of your products, you only have an average of $5 per sale to spend on marketing before you’re in the red. That means that if you were getting clicks for $0.25 a click you would need to get at least 1 sale for every 20 clicks and that’s unlikely. You might get it though, who knows, but even if you got 1 in 20 you’re still only breaking even. You would want to do more like 1 in 10 to make a decent profit margin per each item. On the flip side, if your average ticket is $250 with a gross margin of 40%, you have $100 to work with and if you can get 1 sale for every 100 visitors to your site (which is average), it would cost you $25 and you’d profit $75 on that item after all was said and done. In essence, it is easier to have a profitable comparison shopping campaign if you sell bigger ticket items.
One other thing to keep in mind is that there are some products that just don’t sell well online. Let’s use waste baskets as an example. They’re cheap, plain, bulky to ship and easy to find at any local variety store. Products like that do not sell well. When people are shopping online they’re looking for a great price or for something that they can’t find at a local store. Some people shop online for convenience but probably not for waste baskets. Big ticket items that people can save $300 on by buying online do really well as well as unique and hard to find items. Someone may actually be willing to buy a waste basket online, if it’s part of a bathroom set that has a shower curtain, bath mat, soap dish, and toothbrush holder that were too cute for words and that they never could have found locally.
Comparison shopping can be a great source of revenue or a great waste of money depending on whether your products are a good fit for the service and whether the campaign was executed correctly. What this amounts to for most ecommerce businesses, is that it’s another great channel to market your products. Ask us more about comparison shopping management and how it works for your benefit!