Wednesday, 28 October 2009

Kelkoo Announces new pricing and charging model for October 2009

Kelkoo, one of the oldest shopping sites in the UK, has recently announced that they intend on changing the way they charge merchants for the traffic that they drive to retailers. This is somewhat of a bombshell for most merchants, especially as the charges are increasing the costs for no tangible increase in quality. In a market that is becoming increasingly more competitive with competitors willing to adjust their rates to accommodate the needs of merchants' ROI targets, it remains to be seen the impact that their new charges will have on merchant retention. At face value some of the new caveats to their updated contract are difficult to swallow. Sadly the vagaries of the contract leave a lot more questions than answers. The fine print of the merchant annual charges does state a maximum spend cap, which does seem illogical, as surely it is in their interests to maximise the spend rather than cap it off.

Listed below are the current stipulations that allegedly apply to all merchants, however it remains to be seen if Dell / John Lewis/ DSGI and DRL are going to accept a Kelkoo logo on their site and redirect traffic back to Kelkoo that they have probably paid for!

• 3% service fee (applicable to all merchants)
• 14 days payment terms
• Annual integration fee of:
- Basic merchants £100
- Standard merchants £300
- Gold merchants £500
• A backlink to Kelkoo from all merchants
• Mandatory Kelkoo tracking
• Direct Debit for all merchants
• Minimum monthly spend cap £500

One of the major points of the new contract that most concerns me at Onefeed is the stipulation that merchants have to use Tradedoubler tracking. We all appreciate the need for a decent tracking solution, however we cannot see the mileage in recommending a solution that simply doesn't actually meet the needs of the merchant. Let me explain...

Firstly, Tradedoubler does not offer the ability to track the CPC rate that you are paying for each click. Bear in mind that there is often a different rate for each subcategory of product that merchants advertise. Our software does exactly that! The real benefit to our merchants is that with a very accurate CPC cost combined with the sales revenue generated on these clicks you can see exactly the ROI ratio that you are generating, even down to the product level. Ultimately this means that each one of our merchants can trim those products that don't meet the cost of sale targets they want. Sadly if you use Tradedoubler you are only going to see a conversion rate that doesn't give you a true reflection of what is going on. Maybe this is my pessimism, but this is obviously in Kelkoo's interests to promote a product that doesn't expose the real figures for merchants.

Secondly, with Tradedoubler their product is truly third party, so there is no integration with your feeds and the way in which the feeds are generated. In real terms it means that you have to login to Tradedoubler to see your conversion rates and then go back to your ecommerce provider platform, find the feed and the right product to remove the badly performing item. Long process! With Onefeed you simply just click the button within the analytics and the product is removed. Or better still you set a rule that automatically removes the products for you, without you even having to lift a finger! How easy is that!

Finally, Kelkoo has full access to the data that you are supplying to Tradedoubler. The effect of this is the same as the other sites where they will use this data to increase CPC rates in categories where you are performing well. Sadly this is the case with all shopping sites where they provide a 'free' tracking tool. Ultimately you do pay for it if you do well.

In summary Kelkoo's new rates are very difficult to swallow and something will obviously need to change on their end in order for them to grow. Essentially the message as I see it is -
1. We don't want any small merchants any more (small merchants won't pay the £100 fee on top of their CPC fees).
2. We want to charge an extra 3% for doing the same job as all the other sites.
3. We need to increase our page rank and therefore our free traffic, but expect merchants to pay for this with the annual fee on top!
4. We want to make you use a tracking system that we can use to monitor your performance which doesn't really provide any other benefit above Google Analytics.
5. We don't charge enough on our CPCs but we're not sure how much we should charge so we'll add extra surcharges that make this a bit more profitable.

It's a shame that these changes have been masqueraded as a means of improving the relationship between themselves and their merchants, whereas in reality it has had the exact opposite effect. It also means that as an important source of new merchants to the shopping sites we cannot begin to recommend a site that charges more for something that should be part of the service. Surely the simple solution to all of this would be to incrase the overall CPC on their site by 3-5p depending on the category?

Watch this space....

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