Online Retail: Blogging For Profits

By Will Ashworth | March 15, 2010 AAA

Of the top 100 internet retailers of 2009, only 44 of them had a blog and just 36 posted on a frequent basis. Some of the names on this list are public companies. Investors rightly should expect retailers to do everything in their power to drive traffic to their online stores including the use of blogging. It's a critical piece of the e-commerce puzzle and many companies still are dropping the ball. If Wal-Mart (NYSE:WMT) is doing it, why isn't everybody else?

IN PICTURES: Learn To Invest In 10 Steps

Setting The Pace
Amazon.com (NYSE:AMZN) is without question the leader in online retail. Over the past 10 years, it has grown revenues from $2.8 billion to $24.5 billion and operating income from a loss of $863.9 million to a profit of $1.1 billion. It authors thirteen blogs if you count Zappos.com (acquired in late 2009) among them. If Jeff Bezos and company see the benefits, everyone should. Ignoring his lead is like a musician not listening to the musical advice of Sir Paul McCartney. It's just plain dumb.

Educating and informing customers while also receiving feedback is a critical component of the shopping experience. Avoiding its use isn't business suicide, but Amazon's prolific use of the medium is proof it works.

Winners
Two companies doing a good job of growing online sales are Kohl's (NYSE:KSS) and Gap (NYSE:GPS). Although both currently generate less than 10% of overall revenues from e-commerce, they are delivering double-digit sales increases on a quarterly basis. In terms of blogging, Gap operates two, one for each of its Athleta and Piperlime brands. Kohl's doesn't blog but it does make use of Twitter and Facebook quite well. Using this type of social media is great but blogging in my opinion still delivers the most information in the best possible format.

Quiksilver (NYSE:ZQK), a company that has struggled in recent years due to an ill-timed acquisition, does a great job marrying its blog with an online shop, all the while recognizing the importance of not pushing sales at the expense of its wholesale customers. It's a difficult balance for those companies doing both. Ralph Lauren (NYSE:RL) struggles with the same issue but also does a nice job online reflecting its lifestyle while not overtly pushing sales.

And Losers
Retailers that don't use blogs and instead tie their marketing horse to Twitter and Facebook exclusively make an error in judgment. While these two forms of social media have a place in viral marketing, there's clearly a lot of discussion around the downstream traffic Twitter sends to online stores. Hitwise did research in 2009 that shows only 9.5% of Twitter's downstream traffic goes to transactional websites such as online retailers while Google U.K. sends over 30%.

Blogs done well are certainly an important part of ranking higher on most search engines including the world's largest. Unfortunately, it seems as though a majority of businesses including Buckle (NYSE:BKE), my favorite retailer, are missing the boat despite evidence blogs do work.

The Bottom Line
For those consumers who hate to shop, the retail information available online has a huge impact on the decisions of what and where to buy. Maintaining a useful blog makes a huge difference to consumers, and it's worth considering when choosing retail investments as well. (For more, see Choosing The Winners In The Click-And-Mortar Game.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

You May Also Like

Related Analysis
  1. Stock Analysis

    Comcast Rolls Out 4K Ultra HD Content by Xfinity in UHD App - Analyst Blog

  2. Stock Analysis

    Are Amazon & Macmillan Making Peace with Multiyear Deal? - Analyst Blog

  3. Stock Analysis

    Wal-Mart to Heighten Poultry Safety Measures to Curb Risks - Analyst Blog

  4. Stock Analysis

    Amazon's 1-Hour Delivery Service Prime Now in Manhattan - Analyst Blog

  5. Stock Analysis

    5 Diversified Bond Funds to Add to Your Portfolio - Mutual Fund Commentary

Trading Center