In July, BarnesandNoble.com launched the e-books section of their online bookstore with the intention of capitalizing on the growing market. Consumers have increasingly been turning to e-books that equip a reader with added conveniences and often a chic electronic device. Although Barnes & Noble lacks, at least for the time being, an e-reader similar to Sony’s e-reader or Kindle, Amazon.com’s industry leading e-reader, digital bookworms welcomed the new e-bookstore with open arms.

The e-books section of BarnesandNoble.com was visited by more than four times as many people as Amazon.com’s Kindle Store (and over 75x Sony’s eBookstore) in its first week. However, their successful launch cooled rather quickly after a few weeks.

One possible reason why BarnesandNoble.com’s e-books section couldn’t maintain their initial momentum was due to the lack of an official e-reader. Unlike Sony and Amazon, BarnesandNoble.com presently only offers an application a person can download to their PC, Mac, iPhone/iTouch, or Blackberry. While the free download is nice, the e-book experience isn’t the same without an e-reader like Kindle. Given this shortcoming, how was BarnesandNoble.com able to entice so many shoppers to visit their e-books section?

A highly effective email campaign helped to lure book lovers to BarnesandNoble.com’s new e-books department. When looking at the role of Webmail in driving traffic to the various e-books stores last month, BarnesandNoble.com stood out with 17% of its traffic coming from webmail.

Who did BarnesandNoble.com target when marketing their new e-books: consumers of rival e-bookstores or the untapped market of paper-book readers? An important commonality among the three e-book competitors to keep in mind is the lack of cross-platform compatibility. Since an e-book purchased from one retailer will not read on an e-reader associated with a different retailer, cross-shopping becomes a strong indicator of consumer churn.

BarnesandNoble.com’s e-book shoppers were the least likely to cross-shop at one of its two main rivals. Since their e-book section was just launched, this indicates that their customers are new to the market rather than converts from either Sony or Kindle.

BarnesandNoble.com’s appeal to the common reader will gain even more traction when the Plastic Logic Reader hits the market sometime early 2010. The Plastic Logic Reader will be exclusive to BarnesandNoble.com’s e-books and will turn the battle against Kindle into a fair fight. A large part of Kindle’s appeal is the convenience and function of the e-reader itself. Although still in Kindle’s giant shadow, BarnesandNoble.com’s e-books may be poised to rise out of it soon. Having already proven the ability to draw interest from consumers new to the market, Barnes & Noble needs to sustain and further develop that interest. The Plastic Logic Reader may be the final piece to the puzzle in BarnesandNoble.com’s efforts towards supplanting Kindle from the top of e-books industry.

When it comes to brick and mortar retailers, Walmart is clearly the market leader just by its sheer size. In fact, Walmart’s dominance transfers online where it received 33M visitors in August which was 10% more than the next closest brick and mortar rival, Target. Not only does Walmart attract more consumers but it is also growing at a faster rate than Target. For the past 6 months Walmart.com has seen double digit year-over-year growth in site visitors, outpacing the growth rate for Target.com.

One might wonder how a giant like Walmart continues to maintain such strong growth. One reason is their aggressive online advertising campaigns. In the past six months, Walmart has run several prominent display ad placements on the front pages of large portals like Yahoo! and AOL.

But just how effective are these six-figure investments?

We took a look at a one-day homepage campaign that Walmart ran on the AOL homepage on August 6th. We compared consumers who were exposed to this ad against a control group of consumers who were not exposed but were otherwise similar in behavior and composition. The comparison of the exposed behavior against a control group allows us to measure the true lift of the campaign on online behavior.

Our data below show that the Walmart campaign had an immediate impact on the exposed consumers, driving an 81% greater rate of visitation to the site just within the first week after exposure. More interestingly, the impact of this campaign carried through to four weeks post exposure. With each passing week after August 6th, exposed consumers visited Walmart.com at a higher rate than the control group. By the fourth week, 27% of exposed consumers had visited Walmart.com which is 52% greater than the control group.

This was only one of multiple homepage campaigns that Walmart has run so far this year. Imagine the compound impact of all these campaigns on site visitation to Walmart.com. Clearly, powerful online advertising is one factor driving this retailer’s online growth.

In addition to running prominent online display advertising, Walmart has also been testing various ad formats, from clickable video to more involved interactive ad units. So in part 2 of this blog series, we will investigate differences in the impact on online behavior for these various ad formats. Stay tuned!

Each month, Compete takes a look at the top 25 most-trafficked web sites within one of industry categories. Back-to-school shopping played a role in shaping the top 25 retail web sites for July.

Amazon Stays at Number One
Budget-conscious consumers seem to be finding a safe haven with the discount retailers, and this, in part, helped Amazon.com retain its number-one spot on the top 25 list. The site attracted 67.2 million unique visitors (UVs) in July, more than double the traffic of the next closest retailer Walmart. Amazon has benefited from consumer’s flight to value online, as well as growing consumer interest in its popular line of Kindle eBook readers. Compete’s analysis of Amazon’s Kindle success continues here.

Going Back to School
Despite doomsday predictions for the 2009 back-to-school shopping season, the number of back-to-school searches – including terms like “school supplies” and “back to school” – rose to 1.7 million in July 2009 (up from 1.2 million UVs in July 2008). Among the top ranked retail sites, sites catering to back-to-school shopping such as Staples, Target and Wal-Mart all experienced traffic growth during July. Bed, Bath & Beyond (now number 18 on the list) received the biggest month-over-month gain in July, however, increasing 21%. Compete’s analysis of back-to-school trends continues here.

CVS Pushes Walgreens Online
Both CVS.com and Walgreens.com saw their traffic rise month-over-month, but CVS.com’s growth outpaced that of its rival 15% versus 5%. Although Walgreens.com continues to maintain a sizeable online lead over CVS.com, the CVS.com has narrowed the gap of late. And, CVS.com traffic has risen 103% year-over-year since the site was re-launched last summer. Stay tuned for this ongoing competition for pharmacy visitors.

For more retail analysis go to www.blog.compete.com/retail.

Consumers looking for a great deal got the bargain of the summer thanks to Microsoft’s Bing Cashback program. The Bing Cashback program enables users to save money when shopping online by offering cash back on purchases made at participating retailer sites. For two and a half weeks in August, Bing Cashback featured a back-to-school campaign in which merchants offered up to double their typical rebates on select purchases. Several retailers even touted a whopping 50% cash back on purchases. Compared to the month prior, traffic to the Bing Cashback/Shopping portal during those 2+ weeks increased more than 30% as consumers flocked to the site searching for great deals. Participating retailers also saw surges in Bing driven traffic as millions of consumers clicked through to the participating merchants to shop.

• Not surprisingly, mass merchant and electronic retailers dominated both these lists. Students (and parents) in need of computers, dorm supplies, backpacks, books, and new clothes visited these retailers en masse.
• Even with some merchants offering 50% cashback, Overstock, Sears, and Buy.com could not be knocked from their top positions on the most visited list.
• Walmart fell short of the growth experienced by Overstock and Sears and actually declined in the Top Visited rankings.
• Eastbay benefited heavily from its 50% cashback offer; traffic sky rocked over 600% and the merchant edged its way into the Top 10 list.

And did the increased cash back actually lift sales? Definitely!

• For most of these retailers, conversion rate among Cashback users was more than double the rate of other shoppers.
• Eastbay, again, stands out with a staggering 22% purchase rate; apparently Cashback users can’t pass up half priced sneakers.
• Cashback users snatched up discount electronics. The purchase rate for Cashback visits at HP was 10X higher than the general purchase rate. Equally as impressive, 1 out of 5 times a Cashback user visited Newegg they purchased an item.
• Tigerdirect.com is the only retailer whose Cashback purchase rate is less than the general purchase rate. I guess when you are buying big ticket electronics, a few more percentage-points cash back in your pocket is worth shopping around for.

Bing’s back to school promotion effectively drove more sales at retailer sites. In fact, the promotion was such a hit that Microsoft ended the event several days earlier than originally announced. The success of this campaign indicates that back to school shoppers this year were prepared to shop, but were very price sensitive. Given shoppers’ tighter budgets, the extra savings probably prompted sales of items consumers were delaying purchasing or willing to forgo all together. Looking ahead to holiday shopping, it is promising that an extra sale is all consumers need to open their wallets a little bit wider.

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.

Earlier this summer, there were several reports that Dell has made $3M thanks to its use of Twitter, mainly to notify people about outlet deals on dell.com. The microblogging service that garnered media attention with reports on things as trivial as celebrity feuds and as serious as protest of the Iranian election results also had a tangible dollar amount associated with its use. The Dell announcement also provided a benchmark of sorts for marketers looking to measure the monetary impact of their social media use.

But where does Dell stand when it comes to getting referral traffic from Twitter, relative to other sites that sell products to customers? To find out, I looked Compete’s referral analytics data, which shows us what site people went to right after they were on Twitter. Although this doesn’t include referrals from mobile devices or Twitter clients (e.g. Tweetdeck, Tweetie, and Twitterific), it does give us an idea of how traffic from the site is flowing to other parts of the web.

To do this analysis, I compared Dell.com to the sites that sell products to consumers online (let’s call them “selling sites”) that got the biggest percentage of referrals from twitter.com. I also looked at the percentage of each site’s overall traffic that was made up of referrals from twitter.com, to gauge how big of an impact the microblogging site was having for them in the grand scheme of things.

The data is shown in the chart below. Each site’s rank in terms of getting referral traffic from Twitter’s website is in brackets, which you would read as “across all sites on the web, eBay ranked 15th in getting share of referral traffic from twitter.com.” The bars show the percentage of each site’s referral traffic that comes from Twitter referrals, which you would read as, “a tenth of one percent of craigslist’s referral traffic is made up of referrals from twitter.com.”

A couple of interesting points to note here:

• Among these selling sites, eBay is getting the largest percentage of the referral traffic from Twitter.com, even though those referrals make up about the same proportion of eBay.com’s overall traffic as they do for Dell’s site
• Etsy, a site where people can sell handmade and vintage items, saw the largest percentage of their traffic from Twitter.com in this group, at just over 2%
• In terms of getting Twitter referral share, Dell ranks 205th, and only about 0.1% of its site traffic comes from twitter.com

What does this mean? A couple of implications come to mind.

First, there is still an opportunity for these selling sites to increase their traffic from Twitter.com to make up a larger portion of their traffic, and take advantage of Twitter’s strength of delivering simple information quickly to a designated audience.

Second, a little seems to go a long way. Dell was able to make money using Twitter without garnering a large percentage of twitter.com referral traffic, and without a big chunk of their overall traffic coming from Twitter. Again, this data doesn’t include traffic that came from Twitter clients or mobile devices, but it does give us an insight into the traffic patterns from the website.

Third, a couple of the sites ahead of Dell in this analysis are places where people can buy, but also post their own items. It could be that people are using Twitter to promote what they are personally trying to sell. Although sites like Dell probably won’t (and shouldn’t) enable the average person to sell on its site, encouraging the audience’s participation through retweets could help boost traffic.

Twitter may be enigmatic, but it has potential for marketers. Typing 140 characters isn’t hard, but figuring out how much, and how to tap into it, is the true challenge.