The Rise of E-Brokers

Intermediaries are everywhere. In fact, these days, the Web seems to be a constant ebb and flow of aggregators. In the recent Forrester Research report “eCommerce Brokers Arrive,” Carrie Johnson provided new insights into current market dynamics and made some gutsy predictions about future winners and losers.

Johnson’s report is based on interviews with 50 retailers about their relationships with portals, comparison-shopping engines, niche content sites, affiliate programs, and affiliate networks like LinkShare.

Just the Facts

According to Forrester, “Retailers value intermediaries. Seventy-four percent of retailers plan to renew their deals, which almost 50 percent characterize as very valuable.” More impressive, retailers interviewed by Johnson claimed, “Portals and affiliate programs perform the best. They drive 34 percent of sales, while niche content sites and comparison-shopping engines muster 12 percent.” One point of caution: “Retailers must be free to cut deals…” Forrester warns that merchants should stop making deals unless they “run less than six months, are performance-based, and have easy outs.” Sounds like exclusivity could be a real buzz-killer.

Shakeout Underway

Forrester predicts, “Comparison engines and rating sites will die.” A mere 9 percent of consumers bother with sites like mySimon.com (a CNET property), and only 3 percent check out BizRate.com. Still, Forrester claims BizRate.com could be an acquisition target for a company like an AOL.

Other sites in Forrester’s projections include DealTime, which “subsists on 2 to 3 cents per click” but doesn’t offer customers “any phone support, even though 57 percent of online buyers prefer the phone for customer service.” The report continued on to say that if GO.com couldn’t make it, the future looks bleak for sites like PriceGrabber.com.

E-Brokers Emerge

Instead, Johnson predicts that the survivors of the shakeout will be e-commerce brokers, which are defined as “intermediary sites that provide retailers with marketing, merchandising, and customer service, and that support consumers throughout the purchase process.” Sounds a bit like the personal shoppers found at places like Nordstrom today.

Getting Complementary

One important development in the support of Forrester’s assertion will be the use of adjacency to increase average order size. E-commerce brokers will facilitate partnerships between merchants with complementary products.

The Winners

Well, Forrester predicts portals will still be important, driving 25 percent, or $67 billion, of e-commerce by 2005. Specifically, it cited AOL, Yahoo, and MSN as having the “valuable visitors.” It also imagines AOL using its currency to buy sites like Epinions.com or ConsumerREVIEW.com.

Affiliate programs and affiliate networks will be close behind, representing 20 percent, or $53 billion, of e-commerce sales by 2005. That’s up from an estimated $10.5 million in affiliate-driven e-commerce sales for 2001. Forrester also expects more contextual selling as affiliate marketing matures.

Overall, Forrester’s latest report is bullish on portals and affiliate marketing, and bearish on niche content sites and comparison-shopping sites. It predicts a new class of intermediaries — e-commerce brokers — will emerge, offering a more comprehensive set of merchandising and support services to merchants predominantly on a performance basis.

Conference Update

Affiliate and performance marketers should be aware of three upcoming conferences. AffiliateFORCE/2001 sets sail for the Bahamas on April 20. Seating is limited. And there are two upcoming U.K. conferences. The SMi Group is hosting Affiliate Marketing April 25 and 26 in London, and Marcus Evans Ltd. is hosting Affiliate Marketing 2001 May 21 and 22, also in London.

If you run an affiliate program, or want to start one but aren’t sure how, I welcome your questions and comments. Please include your contact information.