In the beginning portions of 2009, there was seemingly little innovation on the horizon. Since around 2004, online shopping had been done in relatively the same fashion. Consumers typically used different search engines to initiate the purchasing funnel, and many times consumers would find themselves funneled into a comparison shopping engine based experience through paid and natural search listings. Now the patterns are changing, and it’s not the result of any one specific company or development.

The Rise of Amazon

In case anyone had missed it, Amazon has become a Goliath since beginning to sell books. Using a third party selling platform that is second to none, Amazon has single handedly changed the conception of a retail site. When Amazon first began to integrate third party sellers with their own platform, eBay was easily the king of the hill (or queen if you will) of partner selling. Using eBay’s auction format, individual merchants, with barely a keyboard, could easily sell their goods to millions of customers. Amazon however, pursued a slightly different format.

Amazon built a platform that allowed for typical single price transactions instead of time consuming auctions (although Amazon did try to do auctions as well). This platform was tear-jerkingly hard to integrate with, because of endless fields of product information that had to be created and kept updated in addition to orders, to ensure consumers would have a positive experience. Amazon was also keen on eBay’s empowered buyer model based on feedback. So Amazon evolved strict rules to ensure a seller was offering a quality transaction. Even today, if a merchant lowers their guard for 30 days, enough damage can build up to bring down the entire account. This adhesion to quality began to slowly retain costumers looking for a consistently good experience.

As Amazon grew, more third party sellers and greater selection came. Amazon poured resources into making sure products were understood systematically, so that product selection was accurate and comparable. Using the Amazon Unique Product Identifier (ASIN), a product listing could be monitored, controlled, and enhanced. By matching seperate sellers, Amazon could also build out robust product information by having the merchants tell Amazon, not Amazon having to find the information themselves. The overall product catalog grew not only in quantity, but also in detail. Having so much information on purchase activity, allowed Amazon to accumulate extensive merchandising information. Being able predict order volume and profitability, Amazon could now also sell products their merchants were selling and maximize profit. Amazon continues to expand their selection, and by providing lightning quick shipping and guaranteed satisfaction, Amazon has used it’s relationships to enhance the consumer experience to such an extent that Amazon is the default destination for consumers above any other retailer (meaning Amazon sells more online than anyone, end of story).

Covering All The Bases

Just in case the average Joe didn’t know about Amazon, they covered the bases by pressing hard on all fronts. Having an extensive product base, Amazon had a large selection to market, and also knew which products were the most valuable. Amazon aggressively utilized Google AdWords, among other paid inclusion systems, to place listings by related keyword searches. Rarely could you run a search for a certain product or type of product without seeing an Amazon paid listing. Of course, Amazon also had such such an extensive online presence, they also ranked highly for natural listings as well. Confronted on both fronts in paid and natural search, there was another channel of advertising available for Amazon to utilize.

Amazon looked to the shopping engines, and comparison engines running Amazon listings is one of the worst decisions they could have made. The reason is that shopping engine consumers are constantly driven back to Amazon. How many times will a consumer search for a product and hit Amazon, without actually starting at Amazon to begin with? A quick guestimate would be between 3-10 times, but the point is that consumers will just start with Amazon eventually. So using the comparison engines’ own systems, Amazon is slowly draining away market to their site. Brilliant really, except the next part is even better.

I Went To a Fight, and A Sale Broke Out

When two 800 Pound Gorillas meet in the forest, what does it look like? It looks like Amazon and Walmart sizing each other up in 2009. Walmart has been established as the preeminent retailer in the world for a number of years now. Utilizing an industry changing just-in-time inventory system, an extremely aggressive negotiating startegy to lower prices, and a flat out will to win, Walmart is the world leader in physical store sales. However, as many people are becoming aware of, online retail will dwarf physical store sales for nearly all companies, in the very near future. Walmart has it’s eyes set on being the destination for online purchases, and Amazon sees that coming.

What is truly brilliant, is how Walmart and Amazon used a dull, drained economy to fuel more growth. As consumers had their pocket books squeezed, consumers began to search for better deals. Walmart and Amazon had already become leading destinations for cost conscious shoppers, but in case anyone had missed the point, a price war developed between the 2 retail giants and played out in the media. Just the advertising from a typical sale can drum up sales, but exposure of having the press cover your sale, and essentially label both Walmart and Amazon as the destinations of price sensitive shoppers, that was priceless attention. Wonderfully orchestrated, whether completely planned or not.

Google Labs Get Cooking

2009 also saw the emergence, or perhaps reemergence of Google. The economic tail spin that was 2008 shook up a lot of people, including the folks at Google. Plans were changed, office expansions put on hold, workers moved around, etc. One other thing that happened, is the Googineers (a nod to Google’s engineer focused culture) looked at their presence in the retail area and began to pull together a new direction. Google Product Search had been in beta for a long time, but didn’t get huge amounts of traffic. That began to change within the last couple of years, especially with increased placement on the search results page. Google began to take products from Google Product Search (aka GoogleBase), and insert these offers with natural listings, as a type of search result supplement, known as the Google OneBox. The listings included picture, title, and price, store name and condition. Simple and efficient, Google began to absorb the comparison engine style listing into their results creating large amounts of traffics for retailers. Anyone see where this is going?

Google fluctuated the placement of these listings throughout 2009, but more and more consumers began to use them. It must of been such a clearly good idea, that someone decided these enhanced product listings should be part of the Google AdWords program as well. However, how do you do that?

Google had experimented in the past with the idea of a drop down box, known for a while as the Plus Box, and now known as Extension Ads. Essentially, product listings funneled from Google Product Search could be dropped down in some cases from the paid search listing, with a click of a “+” sign. It’s still a good idea, but for now the product listing choice quality is sporadic in relation to the keyword search, and a relatively small percentage of consumers click through the box currently. However, there is a more overt way to display the listings: just throw them out there like the OneBox. However, Google had gotten creative with the sauce again. Just like the auction platform of AdWords was a new step, Google went away from the PPC model. Instead, as is widely reported and seen in product search results, Google Product Listing Ads are now populating the upper right menu bar and driven by commissioned sales.

It’s pure speculation, but the sucess of Amazon, eBay, and and the rise of Microsoft’s Cashback program must have convinced Google that there was an opportunity in commission based selling that needed to be captured. With Google Checkout proving to be difficult to expand, Google went in a new direction. By leveraging the Google Affiliate Network and Google Product Listing Ads, which can be easily integrated with the Google Product Search feed and tracking code installation, Google could now be a part of the retail business without shipping a single item. PPC based ads are nice, but instead, for a merchant to simply pay a commission from each sale is a great business model. The wizardry is taken out of the accounting department, because ROI is easy to control and measure. Simply set a commission rate, and then balance that against your sales revenue and find the sweet spot. In the end, Google is served and so is the consumer, by having an easy time finding what they are looking for. Hey, finding what people are looking for is what Google specializes in, right?

What About CSEs?

All this leads up to a simple conclusion, it’s time for comparison shopping engines to change, or disappear.

That sounds drastic, but lets take a holistic view. Already through the course of 2008 and 2009, there has been tremendous pressure on the shopping engines to deliver high quality, high ROI traffic to merchants. Since the economy was contracting, and the consumer’s pie was shrinking, shopping engines became increasingly focused on delivering high quality traffic to ensure a sale, not just funneling part of the increasing avalanche of internet based revenue. This refinement process has already resulted in financial pressure on shopping engines that have not been able to keep up in the smaller, tighter pond. The stresses from other sources has made this pressure even greater.

By Amazon and Walmart increasingly becoming the default destinations for budget minded shoppers, this has begun to squeeze precious traffic away form comparison engines. The motivated shopper who is looking for the best deal is no longer starting at a shopping engine, but that motivated shopper is now going to Walmart and Amazon.

The next part of the crunch happens in finding shoppers who are in browse mode, and perhaps don’t care for Walmart or Amazon. That shopper is primarily doing searches on Google.com. When searching, the consumer is still bombarded with Amazon and Walmart listings, but they now have image enabled ads which easily catch the eye. Remember that web based shopping is all visual: you need to see the screen first before you mentally process the information. Having image enabled advertising on Google search result page is no small change. Increasingly these image based Product Ad Listings, Google Product Search Results, and Ad Extensions are pulling traffic right to the merchant without any help from comparison engines.

Remember the question from before, “do you see where this going”? There is where: Google has now begun to move beyond traditionally formatted text based results, and into more of a virtual result. Whether video, images, text, or now actual products, Google has taken shopping engine structure and begun to integrate this with their typical search results. Increasingly this provides less incentive for a consumer to bother going through another shopping engine, when they are essentially already using one in Google.com.

David vs. Goliath

Malcolm Gladwell rocks. Gladwell as an author is brilliant in his ability to draw connections and seek patterns in data which at first are not apparent, if not completely contrary to conventional wisdom. One of his articles focuses on the David vs. Goliath situation. This occurs when two parties face-off, and one party is seemingly over matched by the other’s strength. This situation occurs constantly, whether old Microsoft vs. old IBM, or new Microsoft vs. Google. Goliaths such as Walmart, Amazon, and Google are pursuing strategic goals which do not leave much room for traditional shopping engines. When considering rumors that Google is looking to limit the shopping engines’ ability to advertise using AdWords, the urgency level picks up a couple of notches. The key for the seemingly weaker David figure, is to change the battle ground and change the way of engagement. In this sense, the shopping engines need to change they way they do things, aka, use their apparent disadvantages as strengths. Being smaller, shopping engines can more easily evolve and maneuver.

Put simply, to change the tide, shopping engines need to become innovative again. At one time they were cutting edge in their ability to deliver multiple offers, additional merchant information and consumer feedback. Literally the CSE worked as a complete resource, aggregating purchasing data which helped merchants target consumers, and in turn which helped the consumer’s purchasing decision. Shopping engines need to find some of that creativity again. Whether this is done through dynamic social engagement, iPhone enabled scanning devices, or many other options is irrelevant. The point is that another large e-commerce shift is occurring, and if the shopping engines don’t get out in front of that change, then shopping engines face the prospect of becoming e-commerce relics of a by-gone area. That, would be too bad.

Summary on eBay – Buy.com Agreement

The main point is that Buy.com has secretely (until now) flooded eBay with approximately 5 million listings. For these listings, eBay has charged no listing fees.

The listing fees have been the traditional barrier (in addtion to an auction style format) that has kept many large retailers off eBay. With fixed priced listings becoming the norm, the next stage was getting a retailer with a large inventory on without nasty listing fees, charged on a per item basis. Apparently, this wall has been breached with the Buy.com deal.

Without going into more detail, this means eBay is quickly and aggressively moving to get fixed priced listings as their main revenue source (already happening) and eBay will be targeting more traditional online businesses for expansion.

Actionable: Medium to Large Businesses Not Using eBay

If you are one of these businesses, this means you should  be paying attention over the next few months. Expect an announcement by eBay to begin recruiting businesses on negotiated agreements like the one with Buy.com, where items can be sold at an unspecified commission rate, and no listing feeds. This will essentially open up eBay as a marketplace. Like all other marketplaces, goods will react differently here. Mainly this would be an excellent place for overstock items and liquidations.

Actionable: Small Businesses Already on eBay

Start getting creative, because your business is about to change. The flood of more traditional retailers with large inventories could be pushing you out the door. Expect your business to decline as eBay changes it’s growth strategy. You will want to explore new marketplaces like perhaps Amazon, Facebook selling platforms, or elsewhere.

This change from eBay signals that the talk about fixed priced listings has begin full swing, and the result has been including merchants who couldn’t compete before. Having the cheapest price will still get you a long way, but as a smaller business, your marketing needs to take a big step up or your merchandising needs to be just plain outstanding.

Expect to hear more on this as the coming months unfold.

The article details how the recent eBay Live event served as more of a bulletin board of complaints than a celebration of opportunities.

The latest misstep is eBay’s decision to leverage feedback almost entirely towards the power of the consumer and not the seller. In short, neutral reviews now effectively count as a negative experience, and sellers have lost the ability to give feedback about buyers.

The recent changes and ever increasing fees are destroying the  communal qualities which allowed eBay to blossom into an ecommerce powerhouse. The very structure of eBay encouraged equal power sharing among those selling and buying. Hearkening back to a more ancient barter system, eBay allowed almost anything to be sold (including, famously, used women’s panties in the early days).

I would easily call this a barter system, simply because the transaction is so fluid. Backed by PayPal, a buyer could quickly turn into a seller: hawking the goods they just purchased or digging in the closet and find something else to raise cash.

Instantly through eBay, people suddenly had the ability to bring billions of unused dollars back into the economy by making everyday household items a commodity. Since when could you have a country wide garage sale? When could you use your wholesaling, warehouse-running buddy to start your own business…while you are still working at your current job!?!

I am not sure I would pronounce the eBay revolution dead, but recent decisions are certainly pushing this revolution straight into the coffin.

On the positive side, eBay is pushing to include more fixed price auctions. This will allow more traditional merchants to list products without overhauling the way they sell. For example, most merchants don’t have a starting price, a reserve, an auction duration, and a buy-it-now price in their systems. By allowing mass fixed-price listings to be positioned easily, there is the hope for innovation and sustainability in the future.

Until then, I hope the dark ages do not take over what has been a wonderful renaissance in online business.

The Cart program was a modified version of Shopping.com, allowing merchants to sell goods on a commission based format. Shopping.com would handle the check out process with their own payment systems and relay orders back to merchants for processing.

So why the sudden change?

There are no definitive statements beyond a sentiment to move on and focus energy on Shopping.com’s cost per click program. This makes sense as the CPC program is what majority of merchants are using. On the flip side, it’s a good bet that the problems of creating an Amazon style of format of integrated suppliers going through a single checkout and then dispersing those orders, has proven to be too big of an obstacle to overcome. This process continually confounds both retailers tyring to adapt their systems and the marketplace who has to struggle to make it all happen. One of many pitfalls to this type of system is proper order integration with product variations, different shipping configurations, and finally order fulfilment. Once this is all added up, I have a feeling that Shopping.com saw mounting integration costs with too little merchant adoption.

The neatest aspect of the Cart program was the ability to have products listed on eBay Express. This still seems to the golden opportunity that eludes many merchants and what eBay would be best advised to pursue to boost sagging sales and traffic numbers. There is no word yet on what if any solution will be available to get merchants better linked in to a fixed price format on eBay. However, I guarantee you as this is being written, someone in eBay is working on this very issue.

Taking over for Meg will be John Donahoe, formerly President of eBay Marketplaces. He will face a laundry list of challenges as eBay has slowed in growth, and has seen an increase in dissatisfaction among users. I guess a best wishes comment here would be in order.

I am putting this out there not only because it is a big deal, but also because I had seen whispers about this online. Does this mean Yahoo! is really about to lay-off a few thousand employees to streamline it’s own operations? Does that mean Yahoo and eBay are secretly bidding to absorb ChannelAdvisor? Hmm, it will be interesting to watch as there have been several notable rumors posted recently.

Amazon Seller Central

Shopping.com Cart Program

SHOP.COM

PriceGrabber Storefronts

Buy.com

Jellyfish.com

Google Product Search (when paired with Google Checkout)

Underbid

UBid

BuyersEdge

All of these offer different programs with a different style of marketplace selling. Some are completely enclosed like Amazon Seller Central, and some will relay the order information to the seller such as SHOP.COM to maintain order ownership. Of course, the best offering depends on the merchant using them.

Want to get on eBay but don’t want to deal with bids, starting prices, auction durations, and the other 9 yards of complications?

Then try the Shopping.com Cart Program.

The Shopping Cart Program allows merchants to sell items using a marketplace format similar to Amazon or Shop.com. The merchant can list the items and only pay a commission on an actual sale, instead of inbound leads via click through links. Using this program, Shopping.com will not only list items on their site, but also list items under the eBay Express platform, which allows fixed priced items to be listed on eBay.

For many merchants who are hesitant about the cost per click (CPC) model, this can be a good way to find a cost per acquisition (CPA) solution instead. This is also a great way to achieve double exposure and take advantage of the eBay-Shopping.com relationship.

So maybe it’s not the catchiest name in the world, but neither was Craigslist, and that site is an industry survivor. They still managed to pull in $25M in revenue last year. (PS- eBay owns 25% of Craigslist too).

One of the most popular ways for small time marketers and individuals to get free marketing has been through Craigslist, so now another opportunity opens up. If any marketers or merchants are looking for a way to tap into smaller incremental sales using the long tail method, then this would be a place to start. Try advertising a few goods on Craigs and Kijiji and see what happens. After all, it didn’t cost you anything now did it?