Yahoo and MSN have worked hard at catching up to America Online in recent years, at least as far as their online shopping malls go. The three portals now feature many of the same marquee retailers, offering the same merchandise, frequently at the same prices. Not surprisingly, they attract the same types of people -- in their mid-40s, with household incomes around US$65,000 and annual online spending of about US$450.
So why would so many retailers continue to throw advertising money at all three?
They shouldn't, according to a report released last week by Forrester Research. If retailers follow the report's advice, consumers can expect to see merchants secure deals with just one among the so-called big three, and perhaps also start appearing on more shopping-specific sites like Amazon and eBay.
Such a migration would have obvious implications for the Web sites' advertising revenues. The portals could stave off trouble, though, thanks to changes that have been in the works for months. AOL, Yahoo and MSN each said last week that they would introduce new versions of their shopping areas in the near future, with features that should help them distinguish themselves from one another.
Not that their similarities have hurt them until now. Carrie Johnson, a Forrester retail analyst and the author of the report, said that online retailers that advertised with portals last year credited them with delivering 26 percent of their visitors and 19 percent of their sales.
"They're still very important for driving traffic and branding," Johnson said. "And they've all gotten good at merchandising, and creating an environment where customers feel comfortable shopping. The problem is, because retailers work with so many of the portals, it just requires so much to run those relationships well."
Among other things, Johnson said, it takes time to work with the portals' merchandisers and marketers to examine product placements, oversee promotions and review the performance of ad campaigns. "If retailers concentrate on just one and make that relationship sing, it would be worth a lot more money," she said.
Added features
With each of the portals promising revamped shopping areas soon, that decision could be difficult. MSN, for one, is continuing to add shopping features, even before the newest version of its "e-shop" opens in June. On Monday, for example, it plans to introduce My Virtual Model, a feature enabling shoppers to create three-dimensional models of themselves online, to see how clothes of different retailers will fit.
Parul Shah, an MSN product manager, declined to describe the changes that would be made in the new e-shop. But she disputed Forrester's assertion that the sites were essentially the same. For one, Shah said, MSN intentionally works with fewer big merchants -- about 150, compared with about 200 each for AOL and Yahoo. Yahoo also lists more than 10,000 smaller merchants on its site.
Yahoo executives rejected Forrester's characterization, as well. Jennifer Dulski, director of commerce marketing for Yahoo, pointed to research from AC Neilsen last year that said that 70 percent of online shoppers visited Yahoo monthly, compared with 52 percent for MSN and 45 percent for AOL.
Beyond mentioning that Yahoo would create a separate category for shoes, Dulski declined to give details about the impending changes in Yahoo Shopping. But she said the company would feature more wide-scale sales along the lines of the one it held last month, in which 100 merchants discounted more than 1,000 products, and experienced "holiday-like sales volume."
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