DEATH OF PUREPLAY RETAIL

INTELLIGENCE REPORT DEATH OF PUREPLAY RETAIL CUSTOMER ACQUISITION

Traffic Must Be Bought The war for Google.com first-page search real estate is fierce. In retail, omnichannel players are challenging Amazon’s dominance, creating a bidding war for high-value terms that requires organizations to continually increase their CPC marketing budgets. 6 In Q1 2015, Macy’s and Nordstrom spent an estimated $6.4M and $4.0M in paid search listings for the top 1,000 apparel- related keywords, outspending Amazon as well as sister site Zappos. 7 Given the nature of their business models, pureplay e-tailers are particularly reliant on paid search traffic. The average pureplay e-tailer receives 20 percent of its total search engine traffic via paid search listings, compared with 16 percent for the average omnichannel retailer and 14 percent for the average evolved retailer. This outsized reliance on SEM is precarious—not only must e-tailers bid head-to-head with well-capitalized omnichannel retail juggernauts, but the nature of Google search is inherently winner-take-all. Clicks disproportionately go to the highest-placed search ads, with little room for differentiation. As a result, pureplay e-tailers’ search strategy is significantly more expensive to execute. E-tailers bid on seven times the number of keywords versus evolved retailers, and spend an average of three times more on search engine marketing.

Death of Pureplay Retail: Desktop Paid Search Traffic as a Percentage of Overall Search By Operating Model August 2015, n=24 Pureplay Retailers, n=19 Evolved Pureplay Retailers, n=20 Omnichannel Leaders

20.0%

16.1%

13.7%

Pureplay Retailers

Omnichannel Leaders

Evolved Pureplay Retailers

Source: Similar Web.

Death of Pureplay Retail: Monthly Desktop Paid Search Metrics, by Business Model October 2015, n=19 Evolved Pureplay Retailers, n=24 Pureplay Retailers ■ Evolved Pureplay Retailers ■ Pureplay Retailers

3X

$80,898

7X

53,247

$30,580

7,820

Average Number of Paid Keywords

Average Cost of Paid Search Traffic

6. “ Marketing Budgets 2015 ,” Econsultancy, February 26, 2015. 7. “ Apparel and Paid Search—Q1 2015 ,” Ad Gooroo, June 29, 2015.

Source: SEMrush, L2 Intelligence Report: Death of Pureplay Retail, January 2016.

8

January 12, 2016