2011 u.k. online retail christmas - kenshoo · retailer revenue up the week before christmas /////...

2011 U.K. ONLINE RETAIL CHRISTMAS

Release Date: January 17, 2012Covering Search Advertising Trends in the United Kingdom

2 November, 2011 through 2 January, 2012

S H O P P I N G

S E A S O N report

2© 2012, Kenshoo, Inc.

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Contents

Overview Infographic

Key Insights

1. U.K. Consumers More Comfortable Shopping Online Across Multiple Websites and Visits

2. Despite High Cost-Per-Click, U.K. Retailers Generate Strong Return on Ad Spend

3. U.K. Retailers Boost SEM Budgets and Receive Strong Consumer Response Rates

4. Last-Minute Shoppers Purchase Online, Driving U.K. Retailer Revenue up the Week before Christmas

5. Missed Opportunity Marks the Last Two Weeks of December as U.K. Retailer Search Ad Budgets Run Dry

Implications for Search Marketing in 2012

Summary Calendar

Glossary

Methodology

About Kenshoo

Contact

CONTENTS

Revenue Driven by Search Advertising

26% Sales Transactions Driven by Search Advertising

50%

Search Advertising Budgets

26% Conversion Rate from Search Advertising

31%

U.K. Retailers Boost SEM Budgets and Generate Strong Consumer Response Rates

3

U.K. Consumers More Comfortable Shopping Online Across Multiple Websites and Visits

1

Despite Higher Cost-Per-Click Rates, U.K. Retailers Generate Strong Return on Ad Spend

2

Kenshoo 2011 U.K. Online Retail Christmas Shopping Season Report

5 KEY INSIGHTS

Source: Kenshoo 2011 U.K. Online Retail Christmas Shopping Season Report | © 2012 Kenshoo, Inc.Note: Insights reflect year-over-year data from Kenshoo U.K. Retail Index from 2 November, 2011 through 2 January, 2012, vs. the same period one year earlier.

Search Advertising Average Cost-Per-Click

10%Search Advertising Return on Ad Spend

Missed Opportunity Marks

the Last Two Weeks of December as U.K.

Retailer Search Ad Budgets

Run Dry

5

Source: Kenshoo 2011 U.K. Online Retail Christmas Shopping Season Report | © 2012 Kenshoo, Inc.Note: Insights reflect year-over-year data from Kenshoo U.K. Retail Index from November 6, 2011 through December 31, 2011, vs. the same period one year earlier.

DEC. 1 2 3

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MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAYSUNDAY

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25CHRISTMAS

4 Last-Minute Shoppers Purchase Online, Driving U.K. Retailer Revenue up the Week before Christmas

Revenue Driven by Search

Advertising During the week

of 17-23 December

74%

Sales Transactions Driven by Search Advertising

4%

Conversions Rate from Search Advertising

Search Advertising Budgets

Last Two Weeks in December:

57%

66%

Kenshoo 2011 U.K. Online Retail Christmas Shopping Season Report

5 KEY INSIGHTS


KEY INSIGHTS

1. U.K. Consumers More Comfortable Shopping Online Across Multiple Websites and Visits //////////////////////////////////////////////////////////////////////////

U.K. consumers proved much more willing to shop online in 2011. Throughout the season, consumers turned to the Web to

complete purchases as total sales revenues for retailers driven by search advertising rose 26%. See Figure 1.0. This increase

is nearly 20% greater the lift seen by the Kenshoo United States (U.S.) Retail Index, which saw a 22% rise in year-over-year

(YoY) revenue for the same period.

FIGURE 1.0 | U.K. Seasonal Revenue from Search Ads Up 26%

Source: Kenshoo 2011 U.K. Online Retail Christmas Shopping Season Report | © 2012, Kenshoo, Inc.

2010 Revenue

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U.K. consumers are shopping online more often but they are spending less per transaction. This indicates a propensity to “shop

around” at various retailers rather than load up baskets with one preferred merchant. Or, if a consumer is loyal to one retailer,

he or she tends to make multiple purchases rather than buy everything in one session. Total sales transactions driven by search

advertising in the U.K. were up 50% YoY. Meanwhile, average order value (AOV = Revenue/Conversions) for the entire period

was down 16% YoY. See Figures 1.1 and 1.2.

FIGURE 1.1 | Change in YoY U.K. Sales Transacations and Average Order Value from Search Advertising in 2011

FIGURE 1.2 | U.K. Seasonal Sales Transactions from Search Ads Up 50%



Average Order ValueTransactions

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2. Despite Higher Cost-Per-Click Rates, U.K. Retailers Generate Strong Return on Ad Spend ////////////////////////////////////////////////////////

As search advertising becomes a more popular marketing channel for retailers in the U.K., cost-per-click (CPC) rates have

increased. Keywords that indicate consumers are in “buy mode” draw heavy competition from retailers who raise bids

hoping to capture incremental sales. For the entire period, average CPC was up 10% in 2011 compared to 2010. See Figure 2.0.

FIGURE 2.0 | U.K. Seasonal Average Cost-per-Click Up 10%

FIGURE 2.1 | £13.21 U.K. Retail Paid Search Return on Advertising Spend

Despite the higher CPC rates, U.K. retailers were able to generate a very strong overall return on advertising spend (ROAS)

throughout the season of £13.21. In other words, for every £1 spent on search advertising, retailers generated £13.21 in sales

through their websites. See Figure 2.1.



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3. U.K. Retailers Boost SEM Budgets and Generate Strong Consumer Response Rates //////////////////////////////////////////////////////////////////////////////

U.K. retailers were fairly aggressive with their search advertising budgets this year, trending higher YoY in November

before bottoming out in late December. Overall for the season, retail paid search budgets were up 26% YoY. See Figure

3.0. For comparison, U.S. retail search budgets were up 31% YoY as retailers reallocated funds from other channels to

support SEM efforts.

In response to the increase in retail paid search media spend, arguably the most important metric pertaining to consumer

response to search ads -- conversion rate -- was up considerably YoY. For the 2011 shopping season, overall retail conversion

rate from search ads in the U.K. was 31% higher than 2010 even as click-through-rates remained the same. See Figure 3.1.

Higher conversion rates show that retailers did a good job driving shoppers to optimised pages within their websites to

complete their transactions.

FIGURE 3.0 | U.K. Seasonal Search Advertising Budgets Up 26%

FIGURE 3.1 | U.K. YoY Search Advertising Average Click-Through Rate Flat and Conversion Rate Up 31%



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Click-Through Rate

Conversion Rates

2011 Budgets

2010 Budgets


FIGURE 4.0 | 2011 U.K. Revenue from Search Advertising up 74% During Week Before Christmas


4. Last-Minute Shoppers Purchase Online, Driving U.K. Retailer Revenue up the Week before Christmas //////////////////////////////

This year, U.K. consumers used their computers even more to get their last-minute shopping done as revenues for the last

week before Christmas were up an average of 74%. Historically, consumers went to brick-and-mortar retail locations when

up against the clock to get all the gifts on their list. In 2011, though, thanks to the proliferation of rush shipping and free

shipping offers, consumers turned to the Web down to the last possible minute. See Figure 4.0.

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YoY Revenue Change


5. Missed Opportunity Marks the Last Two Weeks of December as U.K. Retailer Search Ad Budgets Run Dry //////////////

In 2011, paid search budgets for U.K. retailers ran dry at the end of the year. For the final two weeks of December 2011, retail

search advertising spend was down 4% YoY. (Refer back to Figure 3.0 and compare this 4% decrease to a 26% increase for

the entire period.) While retailers were cutting back SEM budgets, consumers were significantly ramping up their online

shopping. In fact, YoY conversion rate, sales transactions and revenue were all up double digits the last two weeks in

December. Specifically, conversion rates were up 57% and transactions were up 66%. See Figure 5.0.

FIGURE 5.0 | U.K. Change in YoY Key Metrics for Final Two Weeks in December

Transactions

Conversion Rate

Revenue

CHRISTMAS EVE

NEW YEAR’S EVE

BOXING DAY

CHRISTMAS



The opportunity for retailers to capture late season shoppers is evident in the demand shown by consumers searching for

“deals” and “gift cards.” These queries reached their peaks on Google during Boxing Day and Christmas respectively. See

Figures 5.1 and 5.2.

FIGURE 5.1 | Search Popularity for “Deals” on Google in U.K. for December 2011

FIGURE 5.2 | Search Popularity for “Gift Cards” on Google in U.K. for December 2011

Source: Google Insights for Search, 2012

Source: Google Insights for Search, 2012


IMPLICATIONS FOR SEARCH MARKETING IN 20121. Rising cost-per-click rates mandate paid search technology adoption.

With seasonal paid search ROAS over £13, SEM will become entrenched on U.K. retail marketing budgets. However, as costs rise with

increased competition, each pound will purchase fewer clicks. In 2012, more companies will to turn to technology platforms like Kenshoo

to maintain margins and grow volume without sacrificing ROAS. To combat CPC inflation, tighter themed ad groups will be required and

solutions like Kenshoo RealTime Campaigns should be leveraged to dynamically assemble highly relevant keywords and ads based on

actual inventory availability and promotional merchandising.

2. Keyword portfolio management will help maintain ROAS despite increased competition.

Last year in the U.S. we saw that rising costs due to paid search competition drove down ROAS even as revenues increased. This year in the

U.K. we saw that reduced budgets sent money to the keywords with the highest ROAS. Next year there will be more of a fight over those

highly-profitable keywords and retailers will be forced to look at keywords with a lower ROAS in order to grow or even maintain revenue

volumes. Rather than make one-off manual bid adjustments, retailers can use tools like Kenshoo to automatically cluster keywords into

portfolios based on volume goals or efficiency constraints. Advanced algorithms will run thousands of models and clusters to continuously

optimise to a set business goal while meeting specific constraints. Therefore, SEM managers won’t have to worry about each individual

keyword’s bid or the cluster or folder it’s in.

3. Established SEM campaigns will have a significant advantage over new competitors.

The high conversion rates reflected in this report are not the result of good luck. A combination of well-prepared strategy and advanced

SEM technology helped retailers convert browsers to buyers. Today’s search engines reward proven campaigns and give them an advan-

tage over newcomers through higher quality score and lower CPC rates. New campaigns will be at a significant disadvantage without the

implementation of a paid search technology such as Kenshoo that can quickly assert relevancy and ramp up volume.

4. SEM focus will switch from the keyword to the ad.

As technology like Kenshoo becomes the standard for managing paid search campaigns, the focus will switch from the keyword to the

ad. Kenshoo’s scalable platform can automate millions of keywords and bids en masse both through its online user interface and the

industry’s only cross-channel desktop editor. Savvy search marketers will let the automated technology handle massive keyword lists and

ever-changing bids and give more manual attention to creating unique promotions and ad strategies.

5. Retailers who sustain investment in SEM throughout the season will maximise 2012 profit .

While economic uncertainty reigns across Europe, paid search has proven to be an irreplaceable source of quality website traffic and

sales conversions. In the coming year, retailers will become savvier with paid search and the channel will increase in its importance

to the bottom line. When times are tough, marketers trim the fat in their budgets and stick to what’s proven to drive ROAS. At the

same time, consumers will shop around online to find the best deals and transact accordingly. As a result, online retail revenue driven

by paid search will continue to increase and, this coming year, retailers must fully fund budgets and campaigns through the last two

weeks of December. Functionality from Kenshoo like budget management, seasonality forecasting, and scheduled actions will become

indispensable for SEM managers looking to capture seasonal opportunity.


SUMMARY CALENDAR


GLOSSARY

Click Through Rate:

Return on Ad Spend:

Average Order Value:

Conversion Rate:

Cost-Per-Click:CTR =

ROAS =

AOV =

CVR =

CPC = Clicks

Impressions

Revenue

Cost

Revenue

Conversions

Conversions

Clicks

Cost

Clicks

.


METHODOLOGYThe research provided in this report is based on the Kenshoo U.K. Retail IndexTM, a cross-section of Kenshoo retail advertisers

covering verticals like apparel, electronics, entertainment, home improvement, gifts, luxury goods, and toys. The dataset

includes paid search advertising in the U.K. across channels like Google, Yahoo, and Bing from 2 November through 2 January

in 2011 and compared to that same period one year prior. The statistics from this past season were culled from an aggregation

nearly 1 billion total search advertising impressions, 20 million clicks and 1 million online sales transactions.

ABOUT KENSHOOKenshoo is a digital marketing software company that engineers technology solutions for search marketing, social media

and online advertising. Advertisers, agencies and marketing providers use Kenshoo Enterprise, Kenshoo Local and Kenshoo

Social to direct more than $15 billion in annual customer sales revenue. The Kenshoo Universal Platform delivers automation,

intelligence, integration and scale to make better marketing investments. Kenshoo powers 6 of the top 10 global hotel

groups, 7 of the top 10 retailers, 7 of the top 10 telecoms, 9 of the top 10 ad agency networks, and 23 of the Fortune 50

companies. With campaigns running in more than 100 countries, Kenshoo customers include Annalect, Barnes & Noble,

CareerBuilder, Facebook, Havas Digital, Hitwise, iREP, John Lewis, KAYAK, LendingTree, Sears, Starcom MediaVest Group,

Tesco,Travelocity, Walgreens, and Zappos. Kenshoo has more than 10 international offices and is backed by Sequoia Capital

and Arts Alliance. Please visit www.Kenshoo.com for more information.

Kenshoo is a trademark of Kenshoo Ltd. Other company and brand names may be trademarks of their respective owners.

CONTACTPlease contact Ari Rosenstein, Director of Marketing Research at Kenshoo, with any questions about this research or the

insights derived.

[email protected]

http://www.kenshoo.com/

2011 u.k. online retail christmas - kenshoo · retailer revenue up the week before christmas /////...

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