Retailers are exploring new ways to connect with consumers above and beyond the usual e-commerce strategies of making Websites user friendly and adding attractive online merchandizing. UPDATED 6/29 3:00 PM
Despite retail sales revenues estimated at $229.1 billion and growing in 2008, e-commerce, like its brick-and-mortar counterpart, has experienced slower sales growth in 2009 because of consumer confidence issues.
Enter new techniques aimed at attracting online retail business.
"The use of virtual worlds and social networking by merchants and others interested in monetizing on the Internet is simply exploding,” states Matt McAllister, marketing director for Offerpal Media, which offers online marketing, advertising, and technology solutions to retailers.
McAllister says that the monetization effort begins with social network providers like Facebook and MySpace . ”Many of these sites have had trouble making money because people go there to socialize, not to click on ads,” he notes. “The monetization strategy they are now using is to build a virtual economy within their Websites. For example, a visitor might want to send a gift to a friend, or he might be willing to pay for premium content. If he is playing an online game, he might pay for a bigger sword, or for a faster racing tire, if he is in a racing game.”
McAllister says that people have been willing to plop down money in this micro-economy, with average purchases ranging from 25 cents to $9. “When many people are opting for a special hat for their avatar, or for a bigger sword in a game, the transactions can add up into significant revenue. Another valuable retail enhancement for companies is branding. For example, if an online racing game player opts to purchase bigger racing tires for his virtual car for 25 cents, and the tires are all branded ‘Goodyear,’ there is enormous potential to build up name recognition that players will remember the next time they frequent brick-and-mortar tire shops.”
A second tier of virtual retail beyond social networks consists of virtual worlds like Second Life, which go beyond the gaming and socialization of social networks to recreate virtual equivalents of daily physical experiences. Retailers have taken this to heart -- and have expanded beyond promoting and selling to educating and testing. Examples include:
Sears, which in 2008 participated in seven different youth-oriented virtual worlds and avatar sites to promote its back-to-school fashions
Sony, Nissan, Adidas/Reebok, BMG Entertainment, and others that test product concepts virtually, because doing so is infinitely cheaper and faster than it is in the physical world
Coldwell Banker, which sells virtual real estate on Second Life and uses the experiences to train both real estate agents and new buyers about the ins and outs of buying and selling real estate -- while developing relationships that carry over into real-world business
Second Life, which makes “in-world” money from the lease of retail “islands” to retailers and acquired xStreet and OnRez (now xStreetsl.com), the two leading Web-based virtual goods marketplaces, this past January
”Shopping in-world is one of the most engaging parts of Second Life,” says a Second Life spokesperson. “Having a Web marketplace is a great way to find new designers, keep up with the latest creations, or just find that perfect gift, texture, dress, home, or couch. Our goal is to make the Web marketplace a wonderful complement to in-world shopping.”
Even without the shopping enhancement, the demographics of Second Life draw retailers. Second Life reports 43 million monthly user hours, more than 1 million steady users, and 84,000 concurrent users at any point in time. Shoppers exchange one U.S. dollar for 265 Second Life Linden dollars, which they use as currency in the virtual world.
Second Life’s uptick appears to be part of a larger trend. According to Forrester Research Inc. , the online retail market will continue to grow, despite the slow economy. Forrester says that in 2008, the online slice of the retail pie was 5 percent, but in 2009, that slice is projected to grow to 6 percent, and by 2012 it is projected to be 8 percent.
“There’s a lot of room for growth,” says Offerpal’s McAllister. “Users are coming online by the hundreds of thousands every day... It feels like we’re just at the tip of the iceberg.”
Our virtual selves are an extension cum reflection of our physical selves. So whatever problems we cause to each other in physical world - we will cause similar problems in v-world. So we may begin to feel the need for v-police & v-prophets.
Ha! Who cares about things like texture in Linden, Mashka? The point is to dwell strictly in your head.
That is part of the reason I have deep reservations about online activities in "virtual worlds." It may be creative, but it's not engaging healthy creativity. Instead, it restricts the participant to hours hunched over a screen, living in a materialistic fantasyland of his or her own making. That bothers me.
Well if you think the virtual world is immune to the current credit crisis, then you should think again after reading this: The physical credit crunch has forced some avartars to resort to stealing virtual curencies and sell them for real cash:
Mary :-) Very interesting post. while there is a fundamental changing in the human being living. We all live in the city contest. So we have to think in a mobility approach versus a mobile human way of life sometime better then virtual. The city becomes the media. The ipermedia is inside the venue.
Let me add the 4C paradigm discussed recently at MIP University in Milan with Mr. Kotler and professor Noci: Credibility > social network is a mass channel Contestuality > advertising no more as content interruption but content proposal Conversation > Creating chances of meeting because "People are the message" Clarify > Paying attention on money investments in the media channel
To do the following process: 1) Strategic Advertising. The new advertising is strategy oriented not anymore mass advertising 2) Tools and Messages. Ceteris paribus "all else being equal" Planning must be defined to understand which channel prefer or start the multichannel integrated program. 3) Advertising Driver. Based upon PR/communication mix on own databases. 4) Internal Value Chain. Traveler Centric communication in the mix of product and services provided by different provider as for hotels chain, Airlines etcetera
To get the following results: Advertising Con-vertising (converting) example: Social network Co-vertising (co-creating) example: YouTube X-Vertising (multi-advertising) example: feed, RSS, blog, wiki
I have some doubts about the virtual shop/mall approach on what above to rich more clients and enhance their business.
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