An innovative study conducted by Canadian retailer Hudson's Bay Company reveals investment in online search advertising produces a 2.6% uplift on in-store sales.
Hudson's Bay Company may be the oldest commercial corporation in North America, but when it comes to digital, its focus is on the future. In Canada, it operates the country's largest department store with 90 locations, as well as thebay.com.
In terms of online activity, Canada is a nation of highly engaged users. In fact, it ranks highest among top markets in average hours and visits per visitor, however e-commerce sales returns lag behind those of other similar countries.
But research demonstrates that 93% of Canadians use online search to research products and services (Google, 2012), suggesting that consumers conduct research about potential product purchases online only to then complete subsequent transactions offline. As a pioneering company, Hudson's Bay was interested in capturing and quantifying the impact of digital marketing on in-store purchasing behavior.
In autumn of last year, Hudson's Bay initiated its test on Canadian purchase patterns, the first of its kind. "There wasn't a retail online-to-store study for Canada, and we wanted to see what the results would be for Hudson's Bay specifically," explains Christina Callas,the company's senior vice president of e-commerce and digital marketing. "The goal was straightforward," she says, "to see the total return on investment coming from our search engine marketing campaigns and determine how it translates into in-store sales."
Hudson's Bay devised an innovative geo-based methodology. "We conducted a study that included a test group and a control group," Callas says. "We targeted 10 Designated Market Areas and selected two categories, beauty and apparel. We maximized the spend-per-week for those two categories for three weeks."
Saturating the test markets with online advertising for defined product categories, in this way, made it possible to analyze differences in sales between test and control markets at brand or category level. The sales lift was derived from comparing sales lift in the control markets versus test markets. "We used a 30-day lookback window to determine what the in-store sales lift was," Callas explains."This was used against a benchmark that took our sales, by store, by day, for the last two years to factor in seasonality, natural lifts and so on." This two-year lookback was used to ascertain the natural variability in sales and the confidence interval.
The project demonstrated that $1 of online search ad spend yielded $14.40 worth of in-store sales, representing a 2.6% sales lift. But Callas says the performance outcomes didn't end there. "Google was able to attribute crossover from the study into other categories as well." For example, the online-to-store multiplier for women's apparel was particularly significant, with $1 in incremental online sales corresponding to $40 in incremental in-store sales.
This proves that Google paid search is not only an effective online acquisition vehicle, but also an important in-store driver.
Moving forward, what's the impact of this groundbreaking work? "I think this further proves that Google paid search is not only an effective online acquisition vehicle, but also an important in-store driver," Callas says. "We need to be there, where our customers are looking and researching the products we sell. As a marketer, I say paid search is one of the most qualified digital marketing buys you can make."