By MICHELLE TSAI
August 20, 2004
Shopping online can be frustrating, especially if a keyword search for "black notebook" on a retailer's Web site turns up listings of black laptop computers as well as paper notebooks - or perhaps nothing at all because you misspelled a word. Wal-Mart Stores Inc. (WMT), Walgreen Co. (WAG) and other retailers believe the tool is crucial to increasing online sales and are working to make site search smarter - smart enough to figure out what you're really searching for.
Most shoppers still don't use the search function on e-tail Web sites, but the tool is gaining popularity. Online marketing firm DoubleClick Inc. (DCLK) found that 19.1% of Web site visitors in the second quarter used the search function, up from 15.1% a year ago. Search now drives 8.4% of online sales, with most shoppers still browsing online menus.
Customers who use the search tool tend to already know what they want to buy, so retailers want to make sure those sales close. The tricky part for retailers is to understand, even if queries are vague or flawed, what each visitor is ultimately searching for and - an even more complex question - what other items a customer might want to buy.
"It's easier to predict that people who like John Grisham are going to like the next Grisham book - easier than understanding that the mother who buys the personalized baseball card holder for her son is also likely to buy the closet organizer," said Paul Goodman, vice president of e-commerce at gifts retailer Lillian Vernon Corp.
The most important feature for customers online is the ability to refine searches, according to Jupiter Research retail analyst Patti Freeman Evans. "If a customer can't find a product they're looking for, they're going to leave your site and go somewhere else. [Site search] has huge potential impact as far as conversion and driving sales," she said. Sales conversion reflects the percentage of visitors to a retail Web site who make a purchase.
Kathryn Koegel, research director at DoubleClick, added that good search tools are essential for online retailers because customers are doing more comparison shopping.
Wal-Mart and Walgreens started testing a new advanced search tool from software firm Endeca Technologies Inc. earlier this month on their Web sites. Walmart.com, which previously coded simple Web promotions one by one, will have the ability to set up 100 rules to automatically promote merchandise based on a customer's search - leading to thousands of possibilities. Results on Walgreens.com's new online search are now organized by attributes like price range, brand, department, or special features.
Investing in an improved site search tool can pay off for online retailers. Endeca said its 120 clients who adopted advanced search tools saw an average of 20% increase in order size and 30% increase in conversion rates for customers using search, who as a group have a higher conversion rate than visitors who don't use the tool. Conversion rate for a retailer's online business tends to range between 2.5% to 4%, according to the software firm.
Retail clients typically pay between $150,000 and $400,000 for Endeca's software, and the firm's client roster is now twice as long as it was a year ago.
But three-fourths of all companies with more than $50 million in revenue still use a home-grown or open-source software, according to Jupiter Research. Eric Peterson, a Web site technology analyst with the research firm, said that companies will need to use software from companies such as Mercado Software Inc., Endeca and EasyAsk Inc. for better-than-average search results.
After outdoor gear and apparel firm Patagonia improved its search tool, the conversion rate for its customers who used search - 60% of all site visitors - increased by 33%, said Web site manager Lee Rea. Now when customers search for jackets, the site presents results organized by categories and a few clicks can send a shopper to all of Patagonia's jackets for alpine climbing that sell for less than $250 and come in orange.
Lillian Vernon saw more dramatic improvement after installing a new search tool from software firm EasyAsk, with conversion of customers using search jumping between 50% and 75%. Now the firm wants to use search queries to determine what other products its customers might purchase.
Endeca's Chief Executive Steve Papa said the next step in site search will be personalization, something he likened to reorganizing all the shelves and aisles of a store for each customer's preferences.
"That's the challenge of going to WalMart: it doesn't feel like a boutique. What we do online is create a boutique for whatever it is you care about," said Papa.
-By Michelle Tsai, Dow Jones Newsletters; 201-938-4314; michelle.tsai@dowjones.com