Big Retailers Inviting Competitors Into Their Sandbox

Some major retailers are opening their online space to competitors, as they monetize their sites that have high traffic, but low conversion.

Natalie Zmuda’s March 8, 2010 article in AdAge Digital Media brings up an interesting trend. (Link to article at the end)

In a nutshell, the article talks about retailers who are looking for more revenue in down times. With conversion rates of only 3%, some are finding new revenue in the form of paid ads from Google AdSense. Natalie mentions Target, Wal-Mart and CSN.

The idea of inviting competitors’ ads into your sandbox makes for some interesting questions.
- How strong does your brand have to be for this endeavor to produce a net gain?
- How do you manage the risks and rewards of a program like this?
- How do you weigh the benefits of the ad revenues against the unknown lost sales?

Google AdSense lets you block select advertisers, so you can tailor your program to allow competition that’s less direct. Fringe customers might produce more revenue from AdSense than from the shopping cart. And if your conversion rate remains the same, the program could be called a success. On the other hand, surfers might find a new and more satisfying source.

The Target, Wal-Mart and CSN sites handle the ads differently. They also differ in their use of social media.

Target Stores:
- Target has no sponsored ads on their home page, but they can be found at the bottom of some of their deeper pages, like men’s jeans.
- Target appears to make no use of social media.

Wal-Mart:
- Wal-Mart’s site is similar. At the bottom of their bedding page they have sponsored ads linked to competitors that don’t carry the same brand.
- What is different about Wal-Mart’s site is their links for Twitter, Facebook, Mobile and RSS.

CSN:
- CSN differs. The page with exercise bikes has more prominent sponsored ads, high and on the left side. At least one competitor has some of the same equipment at the same price.
- CSN not only has links for Twitter and Facebook, they also have a blog with sweepstakes you can enter.

More questions:
- If retailers open the door to sponsored ads, how do they juggle product lines?
- Do they have to develop unique or exclusive lines to minimize competition?
- Would there be a struggle between their primary business and their advertising business?

The AdAge article can be found here.

Steve Smart provides marketing help for busy entrepreneurs. He can be reached at srsmart@2Qsolutions.net or 636-699-8772.