Gaming Google: The Growing Importance of Omni-Channel

March 1, 2011

Brian Kilcourse

On February 12th, the New York Times ran a fascinating article about the tricks that some companies have played to cause their websites to show up at the top of Google’s search lists. But before you decide at this information has little value to you and you hit the ‘back’ arrow to move on to the next Retail Paradox Weekly article, consider this: one of the accused companies is JC Penney (for the record, the company shrugs off the allegations).

According to the NY Times piece,

The company bested millions of sites — and not just in searches for dresses, bedding and area rugs. For months, it was consistently at or near the top in searches for skinny jeans, home decor, comforter sets, furniture and dozens of other words and phrases, from the blandly generic (tablecloths) to the strangely specific (grommet top curtains)…This striking performance lasted for months, most crucially through the holiday season, when there is a huge spike in online shopping. J. C. Penney even beat out the sites of manufacturers in searches for the products of those manufacturers. Type in ‘Samsonite carry on luggage,’ for instance, and Penney for months was first on the list, ahead of Samsonite.com.”

On 2/23 Google took manual corrective action, and as the NY Times article revealed: “On Wednesday evening, Google began what it calls a ‘manual action’ against Penney, essentially demotions specifically aimed at the company. At 7 p.m. Eastern time on Wednesday, J. C. Penney was still the No. 1 result for Samsonite carry on luggage. Two hours later, it was at No. 71. At 7 p.m. on Wednesday, Penney was No. 1 in searches for ‘living room furniture.’ By 9 p.m., it had sunk to No. 68.”

Without getting into how the trick was accomplished in the first place, suffice it to say that it irritated Google enough that it announced on February 26th that has changed its search algorithms to automatically weed out suspected abuses in the future. Google stated that “you can expect sites with shallow or poorly written content, content that’s copied from other websites, or information that people frankly don’t find that useful, will be demoted as a result of this change” (meaning, that sites that exhibit the abusive behavior will be ranked lower in search results).

The Growing Importance of an Omni-Channel Presence

The reason this story is interesting is that it points to the importance that retailers now place on the digital channels in influencing store sales. This jibes with what RSR has been saying about the omni-channel retail model. Simply put, it’s the notion that consumers use more than one channel (web, catalog, mobile, store) to make a purchase. The idea reflects the fact that consumers don’t see channels, they seek solutions: either a retailer satisfies a need or it doesn’t. Increasingly, consumers use the digital channels to make a purchase decision even if that purchase is ultimately completed in a store. Therefore, the notion of channels goes away.

AnOmni-channel go-to-market model is an idea whose time has come, at least according to Macy’s Chairman, CEO, and President Terry Lundgren, who recently stated on the National Retail Federation’s blog:

We talk a lot at Macy’s about omnichannel retailing. Our customer is multi-dimensional. She is busy at work and out with friends. She always has her mobile device in her hand. She’s active on Facebook and Twitter and YouTube and a dozen other social media sites… We want that customer to be able to interact with Macy’s no matter where she is or how she shops. It makes no difference to us whether she buys something in our store or online… or whether she is shopping from her desktop computer or her Droid or her iPad. Macy’s best customers are those who shop us in-stores and online. We have a whole series of strategies in place to drive our store customers to the Web, and our online customer to the stores…Today’s customer is not monolithic. And that’s the way we are approaching our customer.”

Apparently, JCP agrees with Mr. Lundgren’s assessment. According to a recent statement by the company’s CEO Mike Ullman, the company has “made significant progress transforming our company over the last several years by… introducing new and innovative retail technologies that have made J.C. Penney a retail leader in the digital age.” To back that up, JCP has implemented a selling application on Facebook and another for the iPhone and Droid. Consumers can sign up for mobile coupons on the corporate website.

Is Omni-Channel a Fait Accompli?

Perhaps it’s a coincidence, but on the same day that Google announced the changes to its search algorithms, Penney announced its 4th quarter earnings. Same-store sales for locations open at least a year increased 4.5%, and the company announced a 36% rise in profits over the same period the year before. This performance tracks well with competitors such as Kohl’s, which reported a 4.3% increase in revenue for stores open at least a year. Macy’s also reported a 4.3% increase.

Implied in the NY Times article is a tacit understanding that retailers take it as a fait accompli that that non-store digital channels exert a huge influence on store performance. Most consumers know this intuitively. If the NY Times assertions are to be believed, JCP wasn’t taking any chances, and did what it could to lure web surfers to its stores by gaming the search engine. According to an online advertising analyst group, Chitika Research: “How much is the top spot on Google actually worth? According to data from the Chitika network, it’s worth a ton — double the traffic of the #2 spot, to be precise.”

No More Naiveté about the Digital Retail Ecosystem

It’s important for companies to remember that in this always-on global ecosystem of omni-channel retailing, no one company can act unilaterally. The underlying point of this story is how important the search engine is to retailers… a visa versa. According to an Advertising Age article quoted in the NY Times article, JCP laid out over $2 million a month on paid Google search ads. It’s an easy bet that somewhere at the end of the advertising money thread, manufacturers get involved too.

The digital channels are no longer a sandbox for geeks to play in — corporate naiveté (intentional or otherwise) about the digital interconnectedness of all the components of the retail ecosystem is no longer an acceptable position to maintain.

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