Google’s Shift to Paid-Only Product Listings Will Hurt Specialty Retailers
Google sent shocks waves through the e-tailing world last week when it announced it would phase out free product listings it now publishes on behalf of about 200,000 merchants on Google Products Search and Google Shopping results pages.
Google has historically carried unpaid listings alongside its paid listings on the theory that the most complete listing of products would attract more shoppers. Google selected unpaid listings either by crawling the web to find relevant listings by e-tailers, or by pulling from product feeds that merchants submitted at no cost to Google Merchant Center. This enabled smaller retailers with smaller advertising budgets to sometimes appear alongside paid ads in Google Products and Google Shopping engine search results. In recent years, these free listings have increasingly been pushed below the fold, making them invisible unless a user scrolls down, but they still account for a major source of sales for independent outdoor specialty retailers.
Last week, Google announced it will decommission the Google Products search engine by this fall as it transitions to a “paid inclusion” model. Under this model, only advertisers’ products will appear in Google Shopping — the company’s shopping engine — and Google Products will be phased out. While many shopping engines already use this model, Google has historically shunned it, arguing that it presents users with a skewed and incomplete view of the market. Going forward, unpaid product listings will still appear in Google’s organic search results.
The move could at least double Google’s revenues from product listings, according to some published reports. For many independent specialty retailers, however, it will make competing online more expensive.
“This will really hurt,” said the marketing and e-commerce director for one outdoor specialty store that has been selling online since the late 1990s. “It’s been a great source of traffic and a big piece of our ‘pie’ on the web.”
Google Shopping has been among the top five sources of online sales at TahoeMountainSports.com and its highest source of no cost sales over the last three months, said David Polivy, a co-owner of the California retailer. It generates more than four times the traffic of Bing and Yahoo’s shopping channels combined.
“This will definitely put a pretty hefty dent in our traffic,” said Polivy.
The change comes as many retailers complain that soaring costs have already priced them out of the paid search advertising market.
“The CPA (cost per action) on paid search completely overwhelms the profit margin,” notes Mike Massey of Massey’s Outfitters in New Orleans. “Most sites cannot convert a sale at a margin that would allow them to pay more than 10 cents per click, yet I see people bidding $2.50 for clicks on sock brands. It might take 50 to 100 clicks at $2 a piece to make one $15 sale.”
While both Massey’s and Tahoe Mountain Sports still run paid search campaigns in niches where they can operate profitably, they have dramatically ramped down their Google AdWords campaigns in recent years due to rising costs.
Polivy said he is consistently being outbid for Google AdWords by comparison shopping sites — such as Nextag — that simply aggregate his and other retailers’ listings. When consumers purchase an item from a retailer through the aggregator’s site, the retailer then has to pay a commission.
Polivy said he has had better success with a technique called retargeting, where an e-tailer places a cookie in a visitor’s browser for 30 days to track what pages and products they view. The cookie enables the e-tailer to reach that visitor with custom display ads as they surf other sites on the Web. Tahoe Mountain Sports has also been focusing more on using email to drive customers across all its channels, including its brick-and-mortar store and social media sites in a bid to build the company’s brand.
“Generally our strategy has been loyalty. Loyalty, and to keep our customers coming back,” he said. “That’s really where it’s headed. You try to provide service and content to attract the customer, educate the customer, make the sale and then make that customer come back a second time for a second sale.”