How Google Shopping will Disrupt Online Retail

Google Product Search (formerly known as Froogle) recently received a new name, Google Shopping; a change that Google says will better connect merchants with the right customers, but it means merchants will have to pay to be listed.

Google Shopping will now be populated by Product Listing Ads (PLAs), which were previously an ad type found exclusively in Google AdWords and displayed in search engine results alongside organic listings and Google Product Search results.

Soon the free ride will be over, and merchants will have to adapt to the change. So what should online merchants be aware of to acclimate themselves with the new Google Shopping?

Impact on Google search results
The transition to Google Shopping is expected to be complete this fall in the United States and happen outside the U.S. next year. Following the migration of Google Product Search to Google Shopping, people will see three types of results on the search engine results page (SERP) for product-related searches: AdWords ads (paid); Organic results (free); Shopping results (paid).

Once the transition to Google Shopping completes, roughly two-thirds of the SERP real estate will be devoted to paid listings. Both Shopping Results and AdWords PLAs support images, making them more attractive than organic results and giving merchants another way to engage consumers. Marketers should be prepared to spend more in the near future to keep clicks coming from Google as organic listings get crowded out by graphic-friendly ad types.

Despite the potential to increase cost of goods sold, the new pay-to-play model of Google Shopping presents a silver lining for 99% of the online retail world. Google Product Search used to be dominated by the biggest online merchants like Wal-Mart, eBay and Amazon. Now mid-to-small-size retailers can buy their way in.

The trick will be to find the niches where they can compete with the big boys while turning profitable margins. For example, a local ski outfitter can push all of its equipment online and compete with the likes of REI and Sports Authority.

Continued

A recent search on Google Shopping for the new Samsung Galaxy S3 shows 19 different retailers with listings, none of them named Amazon, eBay, AT&T or Verizon. This illustrates that, even on popular products, there is now more room for smaller retailers who can smartly manage and update their product feeds.

As for the big merchants, they’ll have to find new ways to retain their competitive edge through merchandising and bid optimization.

Improve Your feed management strategy
The change to Google Shopping will greatly impact how merchants evaluate their investment in data feed management and comparison shopping engines (CSEs). Now that it will cost money to have products listed on Google, online merchants should re-evaluate each CSE on an ROI basis.

According to Alexa, none of the top 30 searches for Google are related to product or shopping. This reflects the fact that many people use online mass-retailers like Amazon and eBay as their true product search engines.

Merchants should start looking at Amazon and eBay as well as Shopping.com, Nextag, and Buy.com to list their products if they haven’t already done so. Creating a small feed with high value products is a great way to test out a new site. Tracking a few products on the Amazon Marketplace can provide a good indication about whether or not to expand activities in that channel.

Multichannel media mix
Merchants who previously relied on Google Product Search for a significant share of their traffic will now face a choice: either lose the traffic or pony up more money. The key should be analyzing the marginal ROI per channel to determine where to spend the next dollar most effectively.

For most merchants, some productive ads will warrant spending while others will not. Like AdWords campaigns, Google Shopping requires testing, refinements and more testing. PLAs let marketers control only the promotional text, so they should make sure to keep the copy fresh and continually test new offers. A/B testing provides a great method for measuring consumer responsiveness to different words.

Is Google Shopping going to be worth the price? Time will tell, but merchants should be much more selective than before and keep an eye on costs. Product Listing Ads are tied to AdWords, so merchants should make sure to set up automated reports to avoid exceeding budgets. A good reporting system will let marketers see ROI each day to understand how well budgets perform.

To make up for lost traffic and sales, it may be time to get those Bing campaigns up and running and expand the pipeline with some Facebook campaigns to drive brand awareness. Those merchants who relied on Google Product Search for an important chunk of their traffic will have to look at other free feed-based channels to try and make it up. They should also become more familiar with paid search and AdWords, as this will be the new mechanism in Google to drive traffic based on product related searches.

Merchants who had a hard time cracking into the old listings should be happy to know that the playing field has been leveled a bit, though it now comes at a cost.

Ariel Rosenstein is marketing research director for digital marketing software provider
Kenshoo.