Can Web 2.0 Arm Retailers in the “Price Wars?”
Posted by Joe Lichtenberg on Wed, Feb 14, 2007 @ 01:34 PM
Last week I spoke at the Electronic Retailing Association's annual Mid-Winter Conference about Web 2.0. From the conversations I had there, a few things were pretty clear...
One is that retailers are getting absolutely hammered on price, and it's mainly because of the transparency of the web. In response to increased competition on price, they're cutting prices even futher. Can anyone say "death spiral?"
The other is that there's this interest/fear dynamic that's prevalent among online retailers around social networking and Web 2.0. My session was packed with marketers that wanted to hear how they might leverage some of the new Web 2.0 tools in their marketing plans.
The topic of my talk was that while Web 2.0 is making it more challenging for marketers to maintain control in all verticals, not just retail, it also can hold the key to building brand loyalty and finding ways to compete that don't involve perpetuating the "sale mentality." I was absolutely blown away by the interest in this topic among the retailers.
The talk was chock full of examples. To wit:
Circuit City implemented customer reviews on their website, resulting in thousands of new site visits due to Google indexing these pages and ranking them highly in their search results (i.e. good SEO). The visitors that hit their site through these pages had 94% more site visits, 60% higher buyer/visitor conversion rate, purchased 43% higher priced items, and had 50% higher average order sizes.
I saw a lot of note-taking going on!
The net of my talk was that for any of the Web 2.0 initiatives to work, retailers have to let go of control, and let visitors have their say, whether they agree with them or not. This scares marketers to death. But in 2007, all of your customers know how to find customer reviews, forums, product reviews, etc. You can choose to host them or not. But if you don't, your customers will just go someplace else. Since it's happening anyway, you might as well do it and reap the benefits, including increased customer loyalty and decreased reliance on price as a differentiator.
Could this signal the tipping point, when retailers decide that the benefits to implementing Web 2.0 far outweigh their concerns?
Time will tell.