Yahoo! just announced an online-circular program promoting online "inserts" for six national retail chains including Target, Staples and Nordstrom, and plans to have 25 more retailers on tap by the fourth quarter. MSN has been running its Digital Circular program for six months. And last week, CrossMedia Services announced a rollout of ShopLocal, which it is operating with Gannett, Knight Ridder and Tribune sites, the newspaper groups that acquired the promotion company in May. There are 140 newspapers in the parents' groups, and 50 national and regional retail chains have signed up with CrossMedia.
cheap, efficient, effective
Yahoo!, MSN and CrossMedia say retailers have caught on to online circulars in the last year because they are cheap, efficient and effective. The conversion rate is 3% to 5% higher than traditional banner ads, according to Mark Ugar, senior sales director-verticals at MSN. Their overarching goal is to drive those purchasing customers precisely to the place the offline counterparts always have-to the local brick-and-mortar store.
"Seventy to 75% of the consumers who see the online circular go into the retail stores and purchase products based on what they've seen," said Brian Hand, CEO of Chicago-based CrossMedia, which hosted online circulars for retailers two years before making the newspaper deal. That finding is on the crest of a trend that has become a retailing truism in 2004: Consumers like to compare prices and products on the Web before buying at a local store.
A survey Yahoo! did of 3,300 of its members showed that 62% research online before making a purchase of $200 or more, and 51% research online before making a purchase of less than $200.
"If you are a consumer today, you are not abandoning one medium for another-you're looking at all media," said Michael Schornstein, category development officer-retail at Yahoo!
The electronic inserts are remarkably un-Internet-like. They are, in fact, identical representations of their offline siblings. Readers can thumb from one page to the next the way they peruse pages in a newspaper. Interactive elements are a click away, however, enabling the user to zoom in and examine particular products, perform a search-engine-type search for a certain item or build a shopping list that can be printed out and carried to the mall or carried through to an e-commerce transaction. Visitors see the circular for the retailer in their area after they type in their zip code.
That paper-and-glue-type creative works, said Katherine Cusack, VP-consumer marketing at Staples, which runs banners for the chain's circulars on Yahoo! sites, on crossmedia.com and its network of newspaper sites, MSN, iVillage and others. "The circulars appeal to customers who are looking at the circular offline and customers researching online."
But are the online circulars a threat to newspapers? Yahoo! claims they enhance the retailer's offline presence, and Ms. Cusack concurred, pointing out that Staples has not reduced its newspaper advertising.
While Web usership has skyrocketed, Sunday newspaper readership has declined steadily-falling from 68% of the population in 1998 to 63% in 2002, according to the Newspaper Association of America.
"Newspapers are losing readers, but so is every other medium," said David Cole, editor of News Inc., a newsletter about the newspaper business. "I don't think retailers are going to stop advertising in newspapers because there is a Web."
Newspapers, with their thousand-fold sales force, can offer offline/online deals that portals like Yahoo! cannot, Mr. Cole said. Plus, consumers don't think about going to Yahoo! to check out local stores.
True, said David Hallerman, senior analyst at online-research firm, eMarketer. "But consumers don't think about researching products by going to their local newspaper."
In addition to Yahoo's greater reach, Mr. Schornstein said the portal's Internet prowess gives it an edge. Yahoo! can reach retailers' target audiences by slicing and dicing its member registration data and behavioral data it gathers on Yahoo! sites. It can also append its data against retailer's customer lists to refine a particular campaign for a marketer.
Newspapers are old hands with online advertising, said Tim Landon, president of Tribune interactive and classified, pointing to job site CareerBuilder and auto marketer Cars.com, both of which Tribune Co. co-owns. But, he conceded, "We understand the importance of the portals-we'd certainly like to work with them."
Perhaps the answer is that the traditional and online media need each other. Mr. Hand hinted that a CrossMedia deal with a major portal is in the offing. He wouldn't say which one, but the deal will surely heat up the online circular competition.