Why not sell online?

Written by dgm’s CEO Asia Pacific, Fionn Hyndman published in Adnews 25th July 2008.

For some reason there are hardly any well-known high street retailers from Australia online and the ones that are, well quite frankly, aren’t doing a great job of it.
I buy my books from Amazon.com. It’s cheaper, delivers to me faster than a couple of well-known Australian bookseller sites and has amazing customer service, recommendations and follow-up.
I just don’t understand where the issue is. There is strong research evidence that there is an appetite by Australian consumers to shop online.
Heartbeat Research in 2007 reported that one in three Australian are members of online auction site and two-thirds of Australians that are online have brought something online through the internet in the previous 12 months, probably from overseas online vendors!
With some 50,000 Australians professional eBay sellers, why aren’t department stores like Myer and David Jones online?
In reality, e-commerce in Australia is eBay’s domain and while it is a person-to-person sales channel, it is the eBay brand that adds comfort to shoppers online.
Consumers feel comfortable with brands they recognise, and they want to shop with those well-known brands online. It gives them the comfort factor from a security point of view, but also lets them feel they know what they are buying.
Australian mainstream brands just haven’t woken up to the opportunity. They don’t perceive that their customers want to buy from them online, or maybe they are concerned that it will affect footfall in their stores.
Yet Heartbeat’s research tells us that out of every $11 spent by Australian consumers, $1 is now spent online – that’s a lot of dollars, and by 2010 the research predicts 80% of Australians will be online shoppers.
Yet in my experience, popular items with low margins, like consumer electronics are a nightmare, if not near impossible, to purchase online in Australia. Have you seen the Harvey Norman site? It defies belief, when the model could add lucrative revenues to the franchisees of Australia’s consumer electronics retail giant, let alone satisfy their customers.
Dick Smith is there and has a great opportunity over its competitors. However, it seems to have only put its toes in the water and is not making the most of providing a really engaging experience online.
Opening up to ratings, reviews and customer recommendations would add immense value as opposed to the straight-forward catalogue shopping cart experience that it currently is.
Peter Alexander is doing well by all reports and Sportsgirl has launched with links to social network Facebook. Then there are good comparison sites such as au.shopping.com and myshopping.com.au
Maybe these brands will drive a large dominant retailer to launch a real online service. I predict when that happens, it will be the single key market driver for Australian e-commerce, and that other retailers will follow.
Internationally, the multi-channel retail model has proven to add valuable profits to retailers in terms of cost effective sales, enhanced customer service models and increased reach. One of the UK’s largest consumer electronics giants, Dixons Stores Group, has actually taken the step of closing part of a chain of high street shops as the online model is proving so successful for them.
So why are Australian retailers not out there selling online - through arguably the most cost-effective channel available, one that has made retailing one of the biggest internet success stories in nearly every country except our own?

dgm Australia announce the hire of Nathan Wiseman

dgmAustralia announced today, that it has hired Nathan Wiseman from Zenith Optimiedia, as a Search Specialist.

Having gained search marketing experience over the last 4 years working with Zenith Optimedia and Sensis, he will be responsible for managing existing search client and new business wins.

Search price spike, fraud warning - by Caroline Adam - comment by Fionn Hyndman - Head of DGM - Asia Pac

Australian paid search spending patterns are following a similar pattern to the UK which could lead to bidding wars for premium keywords and click fraud, Iprospect chief executive David Holmes has warned.

In a report the search engine marketing firm is set to send to clients, it also predicted pay-per-click advertising is likely to grow beyond 50% of Australia’s paid digital advertising pie this year.

Holmes said the reasons for the prediction included iProspect research and spend data showing that search was at or above 43% of digital advertising spend in 2007. In addition, current growth of search was significantly greater than the growth in display advertising, although the latter was also growing strongly.

Holmes said the interest in search from clients was currently very strong. “The Australian market is following the UK market and the UK has just reported search at 57% of digital ad spend,” he said. “Australia is not that far behind the UK but is on a two year lag compared to the US.”

Iprospect has predicted that if Australia continues to follow the search spending patterns of the UK, with the emphasis on paid search rather than natural, the danger is it will experience similar problems to that market. If this transpires, bidding wars for premium keywords will see costs per click skyrocket, while click-fraud will become more prevalent.

Click fraud, which according to Iprospect is not a problem in Australia, occurs when a person, automated script, or computer program imitates a legitimate user of a web browser clicking on an ad, for the purpose of generating a charge per click.

However, Fionn Hyndman, head of DGM Asia-Pacific, said the increase in prices for premium keywords still had a way to go.“If you look at the competitive areas, they've gone up hugely in the last couple of years,” Hyndman said. “The whole thing comes down to sustainability for advertisers, and people need to look at not only the cost of a keyword but the value that keyword delivers. There’s a big difference.”

“As the search marketplace becomes more competitive, people will either have to understand the value of the terms on which they're bidding, or they will be priced out of the market.”

But with an auction model it was always going to be an open marketplace, he said. “As long as people are willing to pay it, the price will continue to rise.”

Hyndman also downplayed the threat of click fraud. He said all the technology and monitoring that were going into defeating click fraud in places where it was more of a problem, such as the US, meant that anyone who was trying to commit this crime in Australia, where it was practically non-existent, was unlikely to succeed.

“I don't see it as being a problem in the foreseeable future,” Hyndman said.

As well as this warning about costs, Holmes said the Australian search industry is nowhere near as sophisticated as it is in the US and “there is no excuse”.

While the US had three to four search engines that must be included in order for a campaign to be successful, Google had greater than 90% of the search marketing spend locally, Holmes said.

“It should be a lot simpler here because agencies are optimising one search engine rather than four, but that isn't the case,” he said. “There is no reason why the Australian market shouldn’t be as sophisticated as the US in paid search,” he said.

The other major difference between Australia and the US was the local industry’s reliance on paid search rather than organic, Holmes said.

According to Jupiter/Iprospect research conducted last year, over 70% of click traffic on Google Australia is organic, so all the money is being invested in 30% of the audience. “A search engine marketing firm needs to use both paid and organic and integrate them,” Holmes said.

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