How does a Web start-up with fewer than 20 staffers get its hands on a sea of searchable inventory data for local stores across the U.S. — data Froogle, Yahoo Shopping and eBay’s Shopping.com drool over, yet can’t touch?
By making it all about the foot traffic, that’s how.
|Scott Dunlap, NearbyNow CEO and founder|
The company in question, Mountain View-based NearbyNow, has found early success by making product inventory in physical shopping malls searchable. Its model is predicated on two simple economic facts. One, for all the power of e-commerce, the vast majority of retail purchases take place offline, and probably always will. And two, the Web’s second-fiddle status in terms of consumer spending doesn’t preclude it from playing a big role in offline buying decisions. Indeed, a growing body of research demonstrates its clout in pre-purchase research.
The company has set out to answer two basic offline shopping questions: “Is it in stock?” and “Where is it cheapest”? The service also lets people reserve products before they shop.
The catch with NearbyNow, which offers both Web and wireless product search, is it’s limited to malls and the stores that inhabit them; the Gymborees, Body Shops and K-B Toys of the world. There are a few reasons for that. Top among them is that malls provide good scale as most American shopping centers are owned by the same three or four companies, and the same several dozen stores are replicated across nearly all of them. Add to that the sheer density of products and high intent to buy.
But its narrow focus on malls hasn’t discouraged attention from many Internet giants, including Google and eBay, who would love to get their mitts on NearbyNow’s inventory database. According to Scott Dunlap, founder and CEO, they’ve failed to get that data so far because “the value proposition wasn’t right for retailers.”
“If someone like Gap gives their data to Google, they’re just going to use that data to cross-sell people to someone else [via the Froogle comparison shopping engine],” he said.
The company recently began offering a mobile component that allows mall rats and their parents to use a wireless handset to find what they want, right from the food court. The triggers for these SMS queries are short codes plastered on the walls and entryways of mall complexes. In its SMS-based reply messages, the company delivers both organic results and paid ads from other stores in the same complex.
The company offers several ad products, including “rich listings” on its Web site, CPM ads in the same environment, and the SMS ads. The latter include a “blue light special” option, where retailers can offer sales and promotions for limited time periods to people who are right in the building. Early tests of these messages produced results that were almost too good. For instance, the company enabled American Eagle to give away $25 iTunes gift cards with the purchase of a pair of jeans. As it turned out, the jeans were clearance-priced at under $20. The store was mobbed.
Dunlap likes to say the company backed its way into location-based advertising, long a marketing holy grail for its promise of real-time geotargeting to phones.
“The key thing here is opt-in,” said Greg Sterling, a local search expert and principal of Sterling Marketing Intelligence. “The fantasy of location-based services and marketing is ‘something is pushed to me’ as I’m walking by the store [since] the carrier knows where I am. Location-based advertising is a very real thing in a mobile context, but it’s all going to be opt-in.”
NearbyNow’s Web-based ad products tend to command a premium, since almost all visitors are planning a trip to the mall and therefore purchase intent is high. As of two weeks ago, Dunlap said, the CPM for the search term “shoes” was about $45. A rich listing, which comes with hosted images and the ability to let shoppers reserve products, costs from $50 to $200 a month.
Measuring success can be a problem when foot traffic is the primary marketing goal. Retailers using the NearbyNow system have a few options, however, including the use of printable people can bring into the store. For obvious reasons, site users who reserve products are also trackable. Products cannot be reserved via phones.
Almost as interesting as the retailers who have used the system are those who pointedly have not. Tiffany’s refused, as did a number of other jewelers. Louis Vuitton wasn’t interested, nor was Victoria’s Secret. No surprise there. Upscale retailers don’t have much to gain by allowing their products to be displayed alongside budget merchandise. “At the higher end, retail is all about fantasy,” notes Sterling.
A few other companies, such as StepUp, CNET, and Become, have made small amounts of product inventory data searchable, but none offer the NearbyNow’s depth of inventory. According to Dunlap, 4 million products have been viewed through the company’s Web site by “hundreds of thousands” of unique users. For the time being, NearbyNow has a presence in only four malls in San Jose and Tucson, but Dunlap claims it will be in 20 cities by April, and in nearly 100 malls by next Christmas.
“Consumers are embracing the Internet more and more for product research,” said Sterling. “Lost amid all the hype about cyber Monday… is the fact that the offline retail economy dwarfs the online.
Depending on whose numbers you want to believe, he notes, e-commerce hovers around 3 percent of total U.S. retail spending, a figure none other than Amazon CEO Jeff Bezos has predicted will grow to between 10 and 15 percent of all spending.
“Admittedly, e-commerce is fairly new, but the new dominant paradigm is people using the Internet for product research and then buying it locally,” he said. “Nearbynow is trying to address that missing piece,” he said. “This is a comparison engine for inventory inside a mall.”
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