How Online Retailers Are Luring Holiday Shoppers

Though not as glam as Sarah Jessica Parker or Heidi Klum, sponsored searches, electronic circulars, promotional e-mails and free-shipping incentives are among the unsung heroes working overtime for retailers this holiday season.

This year, Internet holiday sales are expected to rise 20 percent to $13.2 billion, according to Forrester Research. To claim a piece of the action, retailers are employing a number of online devices to reach consumers where they’re researching, comparison shopping and buying.

“Consumer have become very adept at cross shopping—and that’s when they use the Internet to become educated on products, features, retailers, price,” said Yahoo! retail category development officer Michael Schornstein.

One of the easiest places to start is search engines, where consumers input general and specific queries to generate or act on gift-giving ideas.

“There’s no better traffic out there than someone who has already told you what their intentions are. Picture how effective it is to get your message in front of a consumer who says, ‘I want to buy a pair of jeans today,'” said Rob Wilk, director of search engine marketing at Avenue A/Razorfish in New York.

The aQuantive-owned shop is aggressively snapping up keywords for clients such as Bare Necessities and 1-800-Flowers and writing holiday-specific copy that references shipping deals, price points and other distinct attributes that will make the user more inclined to click on their sponsored link instead of their competitors’.

Of course, the battle for uber-popular keywords like “electronics” and “toys” drive up cost-per-click rates, but Wilk believes it’s worth it. “If the rates are high, but your conversion rates are really good, you can afford to pay the higher rates,” he said. “It’s about getting those searchers to turn into buyers.”

Space150, a Minneapolis-based independent i-shop, bought search terms such as “iPod” and “flat screen” to drive traffic to Best Buy’s Web site and the consumer electronics chain’s companion site, KevinKringle.com. The latter is dedicated to Kris Kringle’s younger brother, Kevin, who is a holiday-challenged gift-giver.

The moral of the fictional character: “He needs to go to Best Buy to get the best gifts for the whole household,” said William Jurewicz, CEO and creative director at space150, which developed the site. The destination features four Web films that follow the exploits of Kevin.

Target employed four online shorts featuring Heidi Klum, Ice-T and others to plug a recent wake-up service at target.com/wakeup. But possibly the most well-known Web films of the season came from Amazon, which incorporated its products into five storylines starring celebrities such as Blair Underwood and Daryl Hannah.

In addition to the film series, Amazon again is wooing consumers with free shipping incentives—a tactic that has been adopted by many retailers. So as to not wreak havoc on their margins, some will only ship without a fee if consumers order a minimum amount.

Gap is such a case, offering free shipping until the end of the year with orders over $75. The apparel retailer, which has been using Sarah Jessica Parker to plug the brand, has created a virtual gift guide that consumers can flip through on Gap.com.

Everyone from Crate & Barrel and JCPenney to Target and Wal-Mart have repurposed their catalog or weekly circular assets for use on their Web sites. “They’re finding it fairly popular with consumers because not everyone keeps those lying around, or they just want to flip through it quickly or while they’re at work,” said Heather Dougherty, senior analyst at Nielsen/NetRatings.

For the first time this year, Borders has launched an online holiday catalog. To promote the new feature, the company sent an e-mail encouraging its database of customers to visit “GiftMixer 3000,” a device that suggests books, movies and music based on personality traits.

The effort is meant to “reinforce the idea that there’s something at Borders that’s virtually ideal for anybody,” said Tim Roper, a creative director at MDC-backed Crispin Porter + Bogusky, the Miami-based shop that works on the client.

“The retailers are getting better at the space,” observed Bob Hayes, vp, general manager of e-commerce at America Online. “They’re using the seasonality extraordinarily well, and the creative and the look and feel have improved mightily year over year.”