Online Retailers to Increase Social Media Experiments

Online marketers that sell exclusively via the Internet may have good reason to spend more on social media than traditional marketers. After all, maintaining a strong online presence where customers are shopping should increase sales. But a newly released survey shows that pure-​play online marketers lag when it comes to social network advertising. This year, these retailers say they’re still in an experimentation mode with social media.

The e‑retailers that responded to the State of Retailing Online survey for Shop​.org, carried out by Forrester Research, have an annual average marketing budget of $5 million. The amount spent on marketing varies a bit according to business type:

  • Web-​only retailers: $4.3 million
  • Multichannel retailers: $7.3 million
  • Manufacturers that sell online to consumers: $2.7 million

Online ad expenditures break out in the follow formats and percentages:

  • Paid search: 37%
  • E‑mail: 17%
  • Affiliate marketing: 13%
  • SEO/​natural search: 9%
  • Comparison shopping engines: 5%
  • Remarketing/​behavioral targeting: 5%
  • Social network ads: 3%
  • Traditional portal deals: 2%
  • Other: 9%

While the average e‑retailer spends about 3% of the marketing budget on social network ads, pure-​play companies only spend 2%. On the other hand, multichannel retailers and manufacturers spend 4% of the online ad budget on social media. The survey results reveal a reluctance to spend more on social networks because only 29% believe the channel is helping their business to grow. However, 72% of survey respondents will increase their spending on social networks in 2011. However, these businesses are still loyal to SEO/​natural search – and 75% will spend more on this platform with 90% of merchants claiming it is the best way to acquire customers.

Until social media proves it can bring in customers as well as search engine marketing and affiliate marketing and deliver ROI at the same level as e‑mail and paid search, online retailers may remain reluctant to invest big dollars in this platform. For some players, social media may become more of an inexpensive way to build brand and listen to customers than a promotional tool.

[Source: Retailers place their bets on social marketing. InternetRetailer​.com. May 2011. Web. 5 Jun. 2011] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.