Shopzilla’s Recent Revenue “Hiccup”: A Perspective That May Surprise You.

General Commentary

No one can believe that a decline in revenues, as reported by Shopzilla’s parent company Scripps this week on a pro forma basis of about 9%, is a good thing for anyone.  Well, let’s think through clearly and see actually what this might mean from a few different perspectives.

From Scripps’ Perspective: Actually….Okay.

Scripps is a publicly traded company which has shareholders demanding growth each and every quarter from each other their divisions. While they know that some divisions will perform better than others any decline in net income is not good and other divisions will have to pick up the shortfall. That is the bad news.

The reason this is “okay news” is that Scripps is in the middle of incorporating and marketing uSwitch in the United Kingdom and that “project” affects earnings and profitability of the entire interactive division, of which Shopzilla is a part.   The other “okay news” is that Scripps is “tweaking” the business model of their interactive division to stay ahead of competition and this usually results in a quarter, or two, of slower growth as changes take affect.

I wouldn’t worry that that this a harbinger that online shopping is slowing down anytime soon.

From Shopzilla’s Perspective: Not so much fun!

Shopzilla is recognized as one of the leaders, if not the leader, in the comparison shopping space so any revenue loss, or stagnation, from year to year shows that…

Either…consumers might not be using comparison shopping as much…Or…that consumers are not using Shopzilla as much and instead opting to use competitors’ sites. 

If you look at the upward growth in money spent in the online shopping marketplace and the proliferation of online shopping destinations (I have over 100 listed on my office whiteboard as of today, and I am sure I am missing some), the latter is probably the case.  It is not that Shopzilla is not useful, and provides an excellent service, but rather that consumers like options. 

Moreover, the face of online shopping is changing radically as niche comparison shopping engines are popping up every month that don’t have pressures on them to make gobs more money each quarter,  these include GolfPricer, specializing in golf related goods and ShopandPrice, electronics, to name just a few.  This of course cuts into the marketplace share that Shopzilla enjoys.

Also, new ways to shop are emerging, which appeal to certain type of shoppers leading to CSEs branding themselves with certain demographics and thus creating loyal followings.  Shop.com is trying to do this as they have a make over that certainly appeals to the higher end, female 35-45 audience. 

Basically, consumers are being spoiled to as to choice.  They have a lot of places to find a product they are looking for.  So for Shopzilla, they are victim of being at the forefront of something very special which the marketplace is catching up on….and quickly.

From the Online Merchant’s Perspective: Wonderful!

Why wonderful?  Simply because the statistics show that online shopping is growing even with Shopzilla’s flat to declining revenues, compared to 2006.  I ask myself the simple question of where did those revenues go?  And there are two possible answers:

1. Consumers are not using CSEs as much as they used to OR
2. They are using “other” CSEs and shopping destinations to find their products

From the Online Consumers Perspective: Fantastic!

Why? Answer: Choice!

And please no one tell me that the product they find on Yahoo! Shopping is superior to the one they find on Shopzilla, PriceRunner, PriceGrabber or over 90 other CSEs.  The consumer now has an opportunity to be brand loyal to a CSE.  The CSEs that can service and market themselves the best will continue to grow as they build a loyal audience and offer more services than just shopping by price.

I think it is clear that the latter is happening and Shopzilla’s “lapse” in revenues is only a sign that Shopzilla needs to do some things to better compete in a growing and fragmented marketplace. 

From Ed D. Tail’s Perspective: Exciting!

I am in the world of e-commerce and firmly believe that the use of wireless devices and the advent of 3G and 3G+ technologies will change many things for the better.  I also have much more to comment on as e-commerce is still in its natal stages of development.

When we are able to deliver video and heavy laden files even faster to people on devices they carry around with them in their pockets then companies, who have relied on technology advances to have a competitive edge, will now have to rely on “old fashion” branding and marketing.  Maybe they can learn some valuable lessons from Johnson and Johnson, Gillette, Red Bull, and Coca Cola.

And as I said at a recent conference, CSE’s and Shopzilla are having to face what any online business has to deal with in today’s fast paced, instant gratification, information hungry, wireless marketplace. And that is: 

Creating an overall experience for your customer and not simply a click and buy service.

Gone are the days of having a radical, technological advantage on your competition and here are the days of brand building.

At least for the CSE marketplace.

HELPFUL TIPS FOR THE DAY:

1. Since this is genral commentary I would digest the above and see what you think.

2. Shopzilla's "hiccup" in earnings is not a harbinger of the decline in online shopping.

3. The online marketplace is offering more choice to where consumers now shop onine and that is GREAT for everyone but CSEs who might me losing market share.

4. CSEs differentiating factors into the future are 25% functionality and 75% building brand loyalty.