Retailers Respond to a Changed Landscape
Around this time every year we review the results of our benchmarking report which shows how retailer websites on the Bevsites eCommerce platforms have fared over the past year. Looking to share useful insights we characterize the differences at stores that grew significantly or sustained sizeable sales with their online business. Previous articles have described the archetypes of The Coaster and The Priest, and descriptions of the paths different stores have taken to the top of the heap. This past year retailers had to cope with the impact of a sizeable loss in free traffic from Google and the larger websites realized that finding new sources of traffic was the priority.
The big news for online wine retailers was that in June Google stopped offering free product listings on their homepage. This column broke the news that as Google’s new Shopping service was being rolled out, alcohol listings were being dropped. This left a big hole in referral traffic for online retailers over the second half of the year. Google has yet to reconcile inconsistent policies on alcohol advertising but we expect that product feeds will be an option in the future for stores that are willing to pay for clicks.
Google Products traffic had been a source of free traffic and sales for all the retailer websites on our eCommerce platform, and for a majority of other online stores. This accounted for somewhere between 5 and 25% of a store’s sales depending on how much a store had diversified their traffic. Yet not all stores were willing to experiment with online advertising to find replacement traffic. For whatever reason, the lower traffic stores mostly decided to absorb the drop in traffic, and only a few were able to grow their sales over last year.
The most popular alternative to Google Products among the higher traffic retailers was Amazon’s shopping feed. This is a relatively new and abundant source of traffic for wine retailers. After several false steps Amazon has figured out different advertising options for retailers and wineries. Retailer feeds result in referral traffic where orders are completed on the store website. With only 3 referring retailers listed on each product, retailers rely on Amazon’s algorithm to position them in place for the referral. Stores will more clicks score better on the algorithm, so retailers with more products who have been listed on Amazon for longer will generate more traffic.
As you might imagine, stores in the top 20% of sales on our platform accounted for almost all the stores taking advantage of Amazon’s shopping feed. While some of the larger sites were unable to fully mitigate the loss of sales from Google Products, the Amazon sales made a significant impact. Almost half of this cohort found they were able to recover lost ground and on balance increase their sales when Google Products and Amazon were compared.
A key indicator that is missing from our view of the internet is the profitability of a store’s business. While we get excited at seeing large sales and high traffic we have a limited view of whether this was profitable activity for a store. Growth for the sake of growth may not be healthy, and once a store starts paying for traffic this puts pressure on margins and the risk of unprofitable growth rises.
As a group the higher traffic sites were able to achieve higher average conversion rates (closer to 2.5%), higher PageViews per visit (closer to 4.5 pages), and lower cancellation rates (under 10%) than the lower traffic sites. While design may play a role in these benchmarks, it is more likely that product selection, pricing and customer engagement are the keys to making the traffic count. Paying for traffic has become the new norm with online retail, and similar to locating your store in a higher rent district it puts a burden on the store to satisfy every customer.