google shopping and amazon 3p: growth via the ecommerce giants

Succeeding on Google and Amazon

IBM Smarter Commerce Conference

May 2014

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Mercent Retail: Ensures the world’s leading retailers are visible, competitive, and profitable wherever consumers shop

CatalogInventory

Price

Optimize dynamically:Assortment

ContentBidsPrice

Paid search

PLA

CSE

Local

SEO

Marketplaces

Retailer

Founded 2005 by Amazon.com veterans

Award-winning SaaS Platform: Mercent Retail™

– Technology & Services for Top Retail Brands

– Paid Search, Product Listing Ads, Marketplaces, Shopping Destinations,

Local

Clients: 200 Retailers / 550 B

Brands – Internet Retailer Top 500+

SaaS Model: Subscription license + variable fees on data, transactions

$1.5B 2013 annual transaction value

IBM DDX Certified Partner, WebSphere Commerce validation pending

Mercent Key Facts

Amazon is the most important search engine to “shoppers”

• 30 percent of online buyers use Amazon to research first (2012)• Google attracted 13 percent (2012)• Over 20% of ecommerce occurs on Amazon• Some estimate 85% of ecommerce transactions influenced by Amazon• Together Google and Amazon influence 40-50% of ecommerce

Source: Forrester Research quoted at:http://venturebeat.com/2012/07/26/amazon-online-shoppers-research/#14o1oVRyubfHzthx.99

5

Amazon’s product details and offer transparency are keys to search success

To succeed in retail search, Google is becoming more like a shopping site

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Over 50% of SERP above the fold is paid or Google curated

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Amazon’s playbook is well known, but its advantages remain strong

Broad assortment

Value pricing

Authoritative product catalog

Trusted fulfillment and customer service

Effective shopping user experience

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Big Retailers

Building Building

Building Building

Improving Improving

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Amazon’s 3P marketplace performs well

Same Store Sales Y/Y Growth %

Apr 1

3

May

13

Jun

13

Jul 1

3

Aug 1

3

Sep

13

Oct 1

3

Nov 1

3

Dec 1

3

Jan

14

Feb

14

Mar

14

Apr 1

40 %

5 %

10 %

15 %

20 %

25 %

30 %

35 %

40 %

45 %

Y/Y Growth % Prior Year Y/Y %

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Google Shopping performs better

Same Store Sales Y/Y Growth %

Apr 1

3

May

13

Jun

13

Jul 1

3

Aug 1

3

Sep

13

Oct 1

3

Nov 1

3

Dec 1

3

Jan

14

Feb

14

Mar

14

Apr 1

40 %

20 %

40 %

60 %

80 %

100 %

120 %

Y/Y Growth % Prior Year Y/Y %

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Comparatively, Google Shopping is the faster growing channel

Same Store Sales Y/Y Growth %

Apr 1

3

May

13

Jun

13

Jul 1

3

Aug 1

3

Sep

13

Oct 1

3

Nov 1

3

Dec 1

3

Jan

14

Feb

14

Mar

14

Apr 1

40 %

20 %

40 %

60 %

80 %

100 %

120 %

Google Shopping Amazon Marketplace

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PLA serve mostly to non-retail-brand queries

Account Type Cost Impressions ClicksClient 1 Multi-channel 100% 100% 100%Client 2 Multi-channel 100% 98% 98%Client 3 Multi-channel 98% 98% 97%Client 4 Multi-channel 99% 98% 97%Client 5 Multi-channel 99% 98% 96%Client 6 Multi-channel 99% 98% 97%Client 7 Multi-channel 100% 97% 97%Client 8 Multi-channel 99% 97% 97%Client 9 Multi-channel 99% 96% 97%Client 10 Online 100% 100% 100%Client 11 Online 100% 100% 100%Client 12 Online 98% 99% 97%Client 13 Online 100% 99% 97%Client 14 Online 99% 98% 99%

% of PLA (cost, impressions spend) against non-brand search queries0% 20% 40% 60% 80% 100% 120%

1

2

3

4

5

6

7

8

9

10

11

12

13

14

PLA Impressions (% served on non-trademark queries)

PLA has grown relative to “traditional” paid search . . .

Comparison of Google Shopping to SEM Ratios

Apr 1

2

May

12

Jun

12

Jul 1

2

Aug

12

Sep

12

Oct 1

2

Nov 1

2

Dec 1

2

Jan

13

Feb

13

Mar

13

Apr 1

3

May

13

Jun

13

Jul 1

3

Aug

13

Sep

13

Oct 1

3

Nov 1

3

Dec 1

3

Jan

14

Feb

14

Mar

14

Apr 1

40 %

10 %

20 %

30 %

40 %

50 %

60 %

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Sales Ratio Ad Spend Ratio Conversion Rate

. . . And despite rising CPCs on google Shopping . . .

Apr 1

2

May

12

Jun

12

Jul 1

2

Aug 1

2

Sep

12

Oct 1

2

Nov 1

2

Dec 1

2

Jan

13

Feb

13

Mar

13

Apr 1

3

May

13

Jun

13

Jul 1

3

Aug 1

3

Sep

13

Oct 1

3

Nov 1

3

Dec 1

3

Jan

14

Feb

14

Mar

14

Apr 1

4$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.33

$0.49

$0.59

Google Shopping Average CPC (Mercent clients)

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. . . But to retailers, the economics are quite different relative to Amazon . . .

Amazon Google Shopping Shopping

Sales % of Total 43% 42% 15%

Avg. Order Value $50 $162 $114

Units Sold / Order 1.4 3.1 3.2

Cost of Sales Ratio 16% 13% 16%

Cost / Order $8 $20 $18

Sales / SKU Sent $6 $5 $0.47

“Owns” the customer Amazon Retailer Retailer

Average of “Trifecta Stores,” stores actively participating in all 3 channel programs during

April 2014

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. . . The impact is showing as Google Shopping grows share of sales

Trifecta Stores, Channel Sales Distribution

2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q20%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

67%62% 58%

53% 52% 51% 52%44% 43%

14%20% 26%

28% 27% 31% 32%38% 42%

19% 18% 16% 19% 22% 18% 16% 18% 15%

ShoppingGoogle ShoppingAmazon

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Amazon participation may impact efficiency on other customer acquisition channels

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13

-40%

-30%

-20%

-10%

0%

10%

20%

30%

YoY CSE sales growth

Not on AMZN in 2013 On Amazon all of 2013

Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-130%

100%

200%

300%

400%

500%

600%

YoY Google Shopping sales growth

Not on AMZN in 2013 On Amazon all of 2013

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An oversimplified comparison:

Sales

Margin

Customers

Sales

Margin

Guaranteed return

Need to pay CPC

Need to manage customer acquisition

No guaranteed return

Need to pay CPA

Remarketing rights

You get:

You give:

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Great info . . . Now what?

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Certain fundamentals are necessary for success on both Amazon and Google

High quality data:– Well structured product data– Optimized product content– Timely, accurate inventory and price data– Compliant for matching

Competitive pricing

Excellent “back office” fulfilment and customer service

On Google: well structured campaigns and sound bidding implementations

Example of improving data quality - automate, optimize and structure content

Original TitleGretsch G6121 Nashville Solid Body

Mercent Optimized TitleGretsch G6121 Nashville Vintage Bigsby Electric Guitar

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Strategies need to be honed to each platform

Google

Advertise on

Enable channel partners

Fulfill through

Amazon

Sell to

Sell on

Fulfill through

Advertise on

Compete

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Considerations for setting Google strategy

Advertise “on” consistent with return objectives unless– Brand does not benefit from

broad promotion– Distribution is entirely left to

channel partners (i.e., retailers)

Consider funding channel partner ads on Google (i.e., COOP)

Partner, including fulfillment, without exchanging data necessary to preserve competitive differentiation

• Campaign Structure• Product Level

Analysis• Automated Bidding• Negatives• Promotions

• Keyword targeting• Data cleansing• Error resolution• Product Delivery

Success on Google Shopping - an integrated approach

Integrate feed management and campaign management tasks into single user interface

Product level performance is supplemented by the data feed to inform campaign analytics and strategy

FeedManagement

CampaignManagement

Product AdManagement

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Google

Advertising – Text ads, brand targeted– Text ads, non-brand– Shopping Campaigns (Product Listing Ads)– Local Product Listing Ads (Store Assortment on Mobile)

Shopping Express

Trusted Stores

Wallet

Circulars

Beta measurement programs

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Strategically, 4 steps to discover your Amazon strategy

What is your competitive differentiation to Amazon?

What are your brand strength/aspirations and time horizon?

What is your channel strategy?

What is your metric of success?

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Amazon consideration 1:

Competitive differentiation

Larger assortment?

High quality assortment?

Unique assortment?

More efficient operations?

Larger scale?

Advantageous supplier contracts?

Better customer service?

More appealing experience?

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Amazon consideration 2:

Brand strength/aspirations and time horizon

Own or building a brand?

In it to win it for the long haul?

Seizing a time limited opportunity?

Thought starter: Can you build a

brand on Amazon?

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Amazon consideration 3:

Channel strategy

Narrow

Wide

Direct-to-consumer only

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Amazon consideration 4:

Metric of success

Traffic

Sales

Orders

Profit

New customers

Customer Lifetime value

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Amazon

Advertise on– Product Ads– Display Ads– Brand programs

Marketplace (Sell on)

Fulfillment by Amazon

Checkout by Amazon

Pay with Amazon

Prime on Your Site

Sponsored products

Brand pages on Amazon

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A question of how, not if

Thank you