After over a decade of caution, paired with a few false starts and missteps along the way, the world’s largest advertisers, namely consumer packaged goods manufacturers, are getting serious about selling their wares online. The makers of much of what fills the shelves of our nation’s grocery stores, drugstores and mass merchants are exploring new ways to use the web not just to promote their brands, but to finally sell their products directly to consumers.

Today, manufacturers of brands from Tide to Colgate to Huggies (and everything in between) derive a minuscule amount of their sales online. Inevitably, that will change as consumers look for additional ways to use technology to simplify their everyday shopping habits. Retailers like Drugstore.com, Walmart, CVS and Amazon.com hope the future is now. Amazon’s Subscribe and Save program, for example, has been around for a couple years now and attracts a slowly growing, albeit modest, base of shoppers. Under the program, consumers can save 15% on specific everyday products, such as diapers, if they sign-up for automatic reordering (Amazon also offers free shipping on orders over $30.) Subscribe and Save attracted 68,000 shoppers in July, up a 21% over last year. Judging by the fairly limited assortment of eligible products, however, the effort has yet to be fully embraced by manufacturers.

In June, a new venture dubbed “Alice” (yes, you guessed it, named after the Brady Bunch’s affable housekeeper) debuted offering consumers a slick new way to purchase everyday products online and have them shipped for free. Unlike past efforts, Alice is unique in that it is does not act as a retailer. Rather, Alice serves as a conduit through which manufacturers can sell directly to consumers. The manufacturers set their own prices and receive the sales proceeds. Alice handles order fulfillment, shipping and the customer experience. Anyone who has previously shopped online for household products knows that prices are generally higher (sometimes considerably) than those found in stores. By selling directly to consumers, manufacturers are able to price their products below those found on most online retailers and more competitively to those found in stores. Alice makes money by offering brands prominent, premium placement on the site and by providing manufacturers a means for marketing directly to consumers.

To put Alice to the test this past weekend, I went to my local club warehouse and noted the prices and quantities of ten products my family purchases frequently. I then went on Alice and compared the unit costs of each item. I found that while a couple items were more expensive on Alice, a few were about the same price, and a couple were even cheaper thanks in part to the coupons Alice found for me and automatically applied.

Although currently in beta mode, Alice has grown quickly since launching in June, with its traffic doubling in July to reach 387,000 unique visitors. Much of that growth has come through word-of-mouth, fueled by bloggers trumpeting the site to deal seekers—Blogger.com was the top source of referral traffic to Alice in July, accounting for 18% of all referrals. Alice users are able to select the items they often purchase and sign-up to receive automatic reminders when they are likely due for a reorder (Unlike Amazon’s Subscribe and Save program, Alice currently does not automatically send reorders to its customers, but plans to soon add the feature.)

So far consumers are looking at a wide assortment of products on Alice. For the month of July, the most often shopped for products included bar soap, laundry detergent, coffee and diapers. Not only are users of Alice coming to shop, but an increasing number are coming to actually make purchases: Alice’s conversion rate rose to respectful 3.5% in July. It’s worth noting, however, that Alice is helping to sway cautious first time users by waving its standard six item minimum order policy. Time will tell whether or not these buyers will return and make more sizable orders from the site.

While it remains to be seen whether or not users will stick with Alice, this venture is the clearest signal yet that a market exists for the online purchase of these products. Beyond the near-term financial impact of selling directly to consumers, sites like Alice offer manufacturers a platform from which they can finally build and foster direct relationships with their consumers. For these marketers, making sales is great, but creating direct links with consumers and having a wealth of consumer purchase data to analyze is priceless.

Amazon’s sheer size (65 million unique visitors in April) gives it a powerful soapbox from which it can pitch virtually anything to its captive audience. Many of the tens of millions of U.S. consumers that visit its homepage each month have undoubtedly noticed the site’s ongoing, fervent promotion of its popular Kindle ebook reader. Since the original Kindle launched in late 2007, Amazon has marketed Kindle almost without interruption on its homepage.

Amazon continues to update and test new advertising messages for Kindle, and on any given day cycles a couple different ads on the site. In May, these Kindle ads generated over 60 million ad impressions and since the start of the year, the ads have seen steadily increasing clickthrough rates, with expected spikes corresponding with new product introductions. The highest clickthrough rates were reached the week ending February 14th following the introduction of the 2nd generation reader. In total, 3.4% of homepage visits that week resulted in shoppers clicking to see the new Kindle.

These efforts, coupled with largely positive reviews, have helped drive high consumer demand for Kindle. Kindle interest has grown steadily over the past 18 months, with recent jumps attributable to the 2nd generation launch in February and the announcement of the larger-format DX reader last month. Over a million consumers shopped for the updated Kindle during its first week on the market. Luckily for both consumers and Amazon, the company seems to have worked through production bottlenecks and accompanying stock-outs that plagued the original device’s launch.

The fact that the Kindle homepage ads have remained so prominent for so long is a clear sign that Amazon believes they are working in driving consumer interest. Given the value of the real estate the ads occupy (500 x 300 pixels), something else would have long ago replaced them had they not generated sufficient results for the company. From a broader perspective; however, how well are the ads performing relative to other referral sources such as search and email in driving interested consumers to consider a Kindle purchase?

In May, the homepage ads drove nearly 45% of all visits to the Kindle product pages, while another 26% of traffic was referred from other places within Amazon (banner text links, on-site search, category navigation, etc.). Search engines (such as Google) and Amazon’s email campaigns drove 6% and 5% of traffic, respectively.

From a post-click engagement perspective, search engines drove the highest level of Kindle engagement and purchase intent. Searchers averaged over 5 minutes on the page learning about Kindle, versus just 3 ½ minutes for consumers referred through the homepage links. Search also performed best at driving consumers to purchase. This is understandable given that searchers are by definition looking for the product to begin with rather than reacting to a marketing message placed in front of them. 4.3% of consumers referred via search engines added the Kindle to their shopping carts, slightly higher than homepage and other Amazon referred traffic sources. Email, on the other hand, fared poorly with consumers spending considerably less time viewing the product and relatively far fewer demonstrating immediate purchase intent

With Kindle, Amazon seems to have a created a product that corrects for many of the problems that slowed consumer adoption of earlier attempts at ebook readers. If consumers continue to clamor for these devices, I wouldn’t expect Amazon’s Kindle ads to disappear from the homepage anytime soon.

To read up on the latest trends in online retailing, visit us blog.compete.com/retail.

At web giant eBay, it’s out with the new and in with the old both in terms of corporate strategy and product mix. After trying in vain to remake itself as an online “retailer” of fixed-priced items to rival the likes of Amazon.com and Walmart, eBay last week cried uncle when it announced it was returning to its roots as an auction clearinghouse for used goods and collectables (in addition to overstocked items). Why the change? The past year has not been kind on the one-time darling of the web which has seen its traffic and fortunes decline.

To compete in the fixed-price marketplace, eBay enacted a series of policies and site changes that favored power sellers at the expense of smaller sellers. As casual sellers abandoned the site, buyers have migrated elsewhere in search of the hard-to-find products upon which eBay built its business—traffic to Craigslist has risen 40% over the past year. In contrast, eBay’s traffic was down 5.2% last month over the previous year, while Amazon’s traffic rose 18.7%.

Not only are fewer shoppers returning to the site, but average order values have stagnated at around $28 (other than the spike during the holiday season.) Since eBay’s marketplace revenues are driven by fees charged to sellers, declining traffic and flat transaction values have led eBay to raise its fees in hopes of meeting Wall Street’s expectations. As a result, eBay is squeezing the very sellers on whose backs the success of its business rests.

The more eBay has tried to be a retailer, the more its customers have gravitated to sites offering better overall shopping experiences with lower total prices, better customer service, and predictable deliveries; not to mention the avoidance of the risk of fraud. The percentage of eBay’s visitors who shopped at Amazon jumped from 41% in February 2008 to 53% last month. Over the same period, Amazon visitors’ cross-shopping of eBay has remained unchanged at 58%, suggesting eBay’s fixed-price strategy has failed to attract significant numbers of new shoppers to the site.

By focusing so much on fixed-priced items sold by large sellers, eBay has blurred the distinction between it and the litany of shopping comparison sites and tools on the web (such as shopping.com which eBay also owns). In so doing, eBay has traded away much of the brand equity that once set it apart from the rest of the online retailing universe.

With its greater emphasis on fixed-priced goods, it’s not surprising that eBay has seen a steady increase in the number of shoppers making “Buy-It-Now” purchases over the past year. In February, 11% of eBay’s visitors, or 7.8 million customers, made a Buy-it-Now purchase (up 20% from the previous year). However gains in fixed-priced activity have been eclipsed by declines in eBay’s traditional auction business. The percentage of eBay’s traffic that made a bid on an auction-style listing dropped from 13.5% in February 2008 to 12.2% last month. In total, 1.5 million fewer shoppers placed a bid on eBay last month than did last February.

eBay’s challenges are multi-faceted, and it remains to be seen whether by simply returning to its roots as an auction site it can win back buyers and sellers who have long since given up on using the site. Online retailing has evolved significantly since eBay was founded over a decade ago. Savvy consumers have learned how and where to find deals online, but value intangibles beyond price when making their purchase decisions. Consumers expect a level of service that in some respects is beyond eBay’s ability to control in its role as middleman. Given that, eBay would be better served looking beyond product strategy and focusing instead on improving the shopping experience for buyers and sellers as its constant tinkering seems to be doing more harm than good.

At roughly $3 million a spot, this year’s crop of Super Bowl advertisers relied heavily on humor, feel-good messaging and timely promotions to stand out in this time of economic uncertainty. One measure of the cross-channel effectiveness of these advertisements is the degree to which they drove consumers to the brands’ websites on the day of the game. Here’s how Super Bowl advertisers ranked based on the change in Daily Reach on Super Bowl Sunday.

Highlights

• Denny’s Grand Slam breakfast giveaway scored with Super Bowl viewers. Traffic to Dennys.com soared 17 fold as consumers flocked to find details of the promotion and find directions to their nearest restaurant.
• Pepsi came out ahead in the cola wars, at least online. While Coke’s feel-good ads were generally well received, these “branding” spots lacked any clear call to action. Pepsi, on the other hand included a plug for its newly launched social-media micro site, refresheverything.com, which saw a 199% jump in visitors on the day of the game.
• Anheuser-Busch, a Super Bowl staple on multiple levels, fared well, particularly Bud Light with its “Drinkability” campaign. Both budlight.com and budwiser.com more than doubled their reach on Sunday, no doubt in part due to consumers looking to replay their favorite commercials.
• Service-based advertisers such as Monster, CareerBuilder, Cars.com and E-trade actually saw notable declines in site reach on the day of the game. Aside from branding, from a direct response respective these spots were targeted only at a subset of the viewing audience that is currently “in-market” for a new career, vehicle or investment account.

TNS Media has prepared a research brief on the impact of this year’s Super Bowl advertising, which is available for download here. The brief pulls together insights from Compete as well as TNS Cymfony, TNS Media Intelligence and TNS Media Research and includes both traditional and new media data sources.

While the 2008 holiday shopping season brought considerable anguish to the retailing industry, Amazon.com was the standout exception. As rivals lick their wounds and look ahead to a challenging 2009, the retailing giant offered them a measure of salt recently by reporting the holidays were actually its “best ever.”

After posting huge losses throughout its formative years, Amazon long ago quieted cynics who predicted it would never earn a nickel. Like its namesake river, Amazon continues its steady assault on everything in its path. In December, Amazon was once again the top online retailer…by a mile (excluding auction site eBay). Amazon’s December traffic surged 20% year-over-year, outpacing Target.com and Walmart.com’s respective 16% and 15% growth. In contrast, eBay’s December traffic (~80 million unique visitors) remained flat for the third consecutive year.

Amazon’s outstanding performance in December is even more evident when compared with ten rival discount retailers and department stores. Amazon’s share of visits across all of these sites jumped to 39% in December, up 18% from the previous year. This growth came at the expense of nearly every rival, although bankrupt Circuit City and struggling Overstock.com showed considerable weakness, down 44% and 35% respectively. Amazon’s gains were a result of not only attracting more consumers to its site, but also getting them to come back more often. Amazon visitors logged an average of 4.5 visits to the site throughout the month of December. Compare that to the average rival retailer that registered just 2.1 visits per shopper.

There are many keys to Amazon’s growing online dominance, including its zealous devotion to customer service and its masterful use of consumers’ browsing and purchase data to tailor the site for each visitor. This past holiday season, however, Amazon’s success was due in part to its aggressive promotion of the Amazon Prime membership program. For $79 a year, Prime entitles members to free two-day shipping on most orders with no minimum purchase required.

Growing the program was clearly one of Amazon’s key marketing objectives during the holidays. Shoppers responded to its free 1-month no-obligation trial offer by signing up in droves: enrollment averaged 3.4% of purchasers throughout the holiday season. The trial offer particularly resonated with last-minute shoppers. During the peak shopping week that ended December 13th, 4.8% of purchasers on Amazon signed up for Prime.

Amazon seems to have designed Prime with two goals in mind: increase customer loyalty (why would members shop anywhere else?), and to a lesser extent, increase impulse buying.

What impact on members’ shopping habits does Prime have? Does it drive heightened Amazon loyalty? Consider the following observations of Prime member shopping patterns in December:

• 49% of the time Prime members shopped online, Amazon was at least one of the retailers they visited (compared with 29% for non-members)
• 40% of the time Prime members shopped online, Amazon was the first retailer they visited (compared with 24% for non-members)
• 53% of total online retail purchases made by Prime members in December were made at Amazon.com (vs. 29% for non-members)

It’s clear that even when members don’t buy a product on Amazon, membership in the program increases the likelihood they at least consider Amazon for the purchase. Undoubtedly, a large number of consumers who recently signed up for the program will cancel their membership before the trial ends. Yet many, now accustomed to the convenience of the service, will gladly part with the membership fee to avoid downgrading to regular shipping rates and delivery schedules.

As state governments across the country circle Amazon’s growing war chest like starved vultures, retailers of all sizes would be wise to consider the impact on their business of a growing Amazon Prime membership base. I would not be surprised to see rivals experiment this year with similar programs in hopes of countering Amazon’s growing clout. As pressure mounts on retailers, developing strategies to counter Amazon’s new “ace in the hole” will be key to their ability to continue to attract, engage and retain the best online shoppers.

A quick comparison of traffic trends to the Barack Obama and John McCain’s websites in the closing weeks of the race shows a surge of support for Obama last week versus only a modest gain by McCain. For the week ended November 1st, nearly 4.9 million people visited Obama’s website, a 60% rise over the previous week, and twice the level Obama reached on the heels of his August convention speech. McCain saw just a 9% increase in his site traffic last week to 1.4 million, meaning that in the final week of the race, McCain finally reached the level of traffic he enjoyed after announcing Sarah Palin as his running mate.

A political unknown only a couple years ago, Obama succeeded in defeating the Clinton machine in the primaries and the GOP’s standard bearer last night, in part, thanks to his skillful leveraging of the Internet to connect with voters and marshal their support.

Congratulations to President-Elect Obama who in January will be sworn-in as our nation’s 44th President.

Click here to download the weekly traffic data shown above.