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Sunday, June 15, 2008
As consumers’ love for online video builds, retailers fine-tune their rich media strategies
By Paul Demery

Watching the development of online video as a merchandising, marketing, branding and customer relationship-building tool is like watching a fast-paced movie that mixes fast-forwards to new technology with flashes from the past in the basic rules of marketing.

Tools and strategies are more readily available today than just a year ago for creating and distributing videos on retail e-commerce sites as well as through video-sharing sites like YouTube and a growing number of specialty content portals, where video content can coincide with Buy buttons to drive direct sales as well as support brand marketing campaigns.

“We’re seeing exciting things with video,” says Sarah Gallagher, senior manager of interactive marketing at outdoor sports gear and apparel retailer The North Face. “With more power to use rich media we’re seeing the next phase of how shoppers use the Internet. They have more control over what they view, and video keeps exploding with new uses.”

But turning the latest video technology into an effective way to connect with customers and prospective customers still requires retailers to take a hard look at old-fashioned rules of merchandising and marketing—developing video content that’s useful in helping consumers decide on purchases, for example, and presenting it when and where they’re most likely to want to interact with it.

“We have to make sure this is easy for our customers to use,” says Rich Lesperance, director of web sales and operations at Circuit City Stores Inc. “This is definitely about building repeat visitors and loyalty, and our entire emerging media and company marketing strategy is designed toward that.”

Engaging shoppers

Retailers who have taken careful steps to build out an online video strategy are beginning to better engage shoppers, says Sucharita Mulpuru, principal analyst, retail, at Forrester Research Inc. “When applied properly, online video can be incredibly valuable,” she says.

Phil Schoonover, president and chairman of Circuit City, agrees. “Video is the way people want to receive content,” he says. “Millennials (Americans born between 1980 and 1995) especially want to see videos of what they’re buying.” Video content on CircuitCity.com helped to grow the retailer’s web sales 40%, to $1.4 billion, for the fiscal year ended last month, he says.

Indeed, U.S. Internet users watched more than 10 billion online videos in December alone, according to comScore Inc.’s Video Metrix service. “We’re seeing a surge in people moving away from traditional media to spend more time watching online video,” Lesperance says.

Retailers reacting to that consumer interest by exploring online video’s capabilities are showing some notable successes. Ice.com, a web-only jewelry retailer, has experienced a 40% rise in conversion rates on products highlighted in online videos, says co-founder and president Mayer Gniwisch. And by showing its products on models in videos, which puts the size and appearance of jewelry in a better context for viewers, Ice.com has reduced the return rate on some products by 24%, Gniwisch says.

Strategies for building and deploying online video differ according to the goals of individual retailers. But one thing they have in common is finding a practical way to make online video work within a merchant’s particular retail environment.

Circuit City, for instance, has identified a two-part mission for CircuitCity.com: to serve as an engaging online store to build on its sharp growth in online sales and as a source of consumer education to support multi-channel sales, Lesperance says.

Product tours and demos

It is working with three video program vendors—WebCollage Inc., Easy2 Technologies, and SellPoint Inc.—to present product tours and demos from manufacturers. And it’s developing how-to videos using its own high-definition camcorder to shoot videos of tech staff and salespeople showing, for example, how to add memory to a laptop.

“One of our goals is to bring the customer as close as possible to having an in-store experience without having to leave the house,” says Rob Roy, a video content specialist at Circuit City.

A successful online video program, Lesperance adds, needs to work in an environment that considers information from several teams within a retail organization, including merchandising, marketing and online content management, combined with input from customers about which products could benefit most from video content.

One of the more popular online videos measured by customer usage that Circuit City has deployed, “Installing laptop memory,” features an employee demonstrating how to determine the correct memory card for a laptop, then opening the memory compartment and inserting the card. The idea for producing that video, Lesperance says, came from a customer’s comment in an online forum on CircuitCity.com.

Spending time

The North Face learned about consumer interaction with online video in its stores, where web-based kiosks showing sports lifestyle videos have engaged shoppers for extended periods. “We saw people interacting with kiosks between 20 and 30 minutes,” Gallagher says. “That proved that people want this kind of content.”

Now with more video content on its web site, The North Face has measured a general uptick in traffic, Gallagher says. The company is planning to launch its first e-commerce site this August, and video will play an important role in engaging shoppers, she adds.

Engaging online shoppers with video doesn’t always pan out as expected, however. The launch over a year ago of consumer-generated video at sports gear retailer Evogear.com has resulted in lower than expected participation by customers, who may not want to spend the time and effort to upload their own content, says head of e-commerce Nathan Decker.

But Evogear has followed up with other online video strategies that have been more effective, he says. Last year it realized incremental sales after running a pre-product launch video from ski brand Rossignol, which let viewers pre-order the new models before they hit the market, and it engaged online customers last summer in a weekly videotaped sweepstakes to which shoppers were entered with each web purchase, Decker explains.

And to produce a new twist to video content in customer reviews, it’s planning to videotape customers at its headquarters store talking about their favorite skis and other products.

The levels of effort and cost involved in producing an online video strategy also differ among retailers. At the high end are retailers like Drs. Foster & Smith, which is building its own video production studio to produce high-definition product and educational videos to complement the content customers are accustomed to seeing in its TV programs. HSN.com, the e-commerce site of IAC InteractiveCorp’s Home Shopping Network, is also on the high end, leveraging its connections with TV personalities like chef Wolfgang Puck in several types of video content.

Gordon Magee, manager of Internet marketing and analysis at Drs. Foster & Smith, says the retailer plans to expand its video inventory to hundreds from the fewer than 10 currently on DrsFosterSmith.com. “We will have a ton of videos from how-to’s to things on our company’s history,” he says.

And in keeping with the high level of video quality consumers expect from its “Faithful Friends” TV program, it will produce only high-definition, professional video content, Magee says.

Follow the video

HSN, which presents more than 12,000 videos on its site, uses video in a three-step strategy. First, a “green-screen” technique presents the sole image of a celebrity like Wolfgang Puck—appearing as if he just walked onto the page itself—to initially engage shoppers in the HSN cooking section. That is followed by a video of a lesson in how to create, say, Puck’s Mango Sorbet dessert. Finally, another video explains in detail how to best use products HSN.com sells alongside the videos to help make cooking chores (theoretically, at least) a proverbial piece of cake.

HSN develops its video content with Flash technology from Adobe Systems Inc., then manages placement on its site as well through external sites like YouTube with its Digital Assets Right Technology content management system, developed in house.

HSN won’t reveal the exact impact its videos have on sales, but they produce “a substantial lift,” says William Lynch, executive vice president in charge of marketing and content at HSN.com.

Other retailers take more modest approaches in deploying a video strategy, though the approaches still have several options to consider in technology and support services. Ice.com, which can produce about 50 product videos per day, spends on average about $60 to produce each video, including the $500-per-day cost of hiring models, and the fees it pays to a professional photographer (a photographer who usually does weddings and bar mitzvahs, Gniwisch says) and Internap Network Services Corp., which serves up Ice.com’s Flash video content through its content delivery network. Ice currently has videos for about 500 of its 2,000 product SKUs, though it plans to cover all SKUs with videos this year, Gniwisch adds.

A typical Ice.com product video such as one for a diamond ring priced at more than $2,000 runs 20 seconds and shows the ring by itself as well as on a model as she holds her hand to her face.

To ensure fast loading and quality presentations of videos, Evogear and other retailers also rely on content delivery network services from companies like Akamai Technologies Inc., Lime Wire LLC and Pando Networks. Retailers use basic content management software to manage the placement of videos on their e-commerce sites, though Akamai offers StreamOS, a content management system designed specifically for video.

While product videos on e-commerce sites are having the strongest and most consistent impact on sales at Ice.com and other retailers, video exposure on video-sharing sites also is spiking sales in some campaigns.

Eight videos Ice.com produced last year for Valentine’s Day cost about $1,200 and led to about $200,000 in online sales, Gniwisch says. The ticket to results, he adds, was running a timely campaign designed to attract a lot of attention. In each video, Ice.com executive vice president of marketing Pinny Gniwisch plays “Mr. Cupid” and interviews passers-by in New York and at the Deer Valley ski resort in Utah about what they think are the best and worst Valentine’s Day gifts. Some of the surprising answers, including one from a man who said he should only receive gifts and not give them, have received more than 10,000 views. Each video closes with the attribution, “A Project by Ice.com.”

Building the brand

Retailers are also exploring other ways to extend videos beyond their own e-commerce sites. In a brand-building campaign, The North Face posts sports videos on sports-related community sites like Go211.com and Biglines.com, and it uses Rip.tv to post videos as well as have them distributed to other youth and sports-related web portals. It also places video-enhanced ads on sports-content sites including Gorp.com and FreeSkier.com

In addition, The North Face pushes video content out to customers with widgets on their personal pages on Facebook.com and Google Inc.’s iGoogle.com. The project is tied to search marketing campaigns, which let viewers click into a video-enhanced search ad to insert a widget icon onto their personal web pages for receiving additional video content.

“We then can push snow sports and other videos out to consumers’ Google or Facebook pages,” Gallagher says. The North Face also is working with Fluid Inc., a web site design firm, to develop the ability to track how often users of widgets on Facebook and iGoogle view its videos.

Although she is not yet able to quantify results in traffic to TheNorthFace.com, Gallagher says search and banner ads that include video content have shown a higher than average click-through rate compared with ads without videos. ValueClick Inc., which provides technology for running video ads that lead into non-commercial videos, says video ads have shown click-through rates 10 times as high as banner ads.

HSN recently started working with a new service from Google that lets retailers position product information and Buy buttons on the same web page alongside a video on YouTube.com, following the same mix of marketing and merchandising available on HSN.com’s own pages. It’s another example of how quickly video and e-commerce are evolving, Lynch says.

“Two months ago we were using YouTube just for branding,” he says. “But we think this is the future of e-commerce: Give people better ideas on how to do things in engaging online video, and present all the products they need right on the same web page to make it happen.”

paul@verticalwebmedia.com


by: Shawna Seigel



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