The new Media Machine: Why retailers are the next advertising juggernauts Featured Image

The new Media Machine: Why retailers are the next advertising juggernauts

Reading Time: 4 minutes
eBusiness-Institute-Profile
eBusiness Institute Team

Retailing is notorious for its thin margins, so finding opportunities to increase profit is very high on the management agenda.  As one of the most forward-looking eRetailers in the space, Amazon began selling advertising to manufacturers 10 years ago, creating a separate media group (Amazon Media Group [AMG]).  In this post, we explore the opportunity behind this category of digital advertising that is sold by eRetailers. It is called Retail Digital Media and it targets shoppers to make them purchase a product on the eRetailer website.  We also expose the reason why manufacturers should take action as eRetailers gear up to monetize their valuable online real estate.

In the next 5 years, eCommerce will be the fastest growing channel globally, with forecasted growth 3x higher than the rest of the retail industry[1].  Even though most retail sales still take place in physical stores, Amazon anticipated the future of eRetailing: that shoppers are increasingly dependent on information online to influence their purchase decisions.

These days, Amazon enjoys a vaulted status: it has become not only a shopping platform but also a powerful search engine.  It is the #1 website where consumers begin their product search (55%), well ahead of traditional search engines (28% and declining)[2].  And research has shown that online research often leads to offline purchase, making online retailer websites an important part of the purchase equation.

For manufacturers, this means that eRetailers have direct access to a large, captive audience near the point of purchase.  In the U.S. alone, Amazon’s website sees over 180 million monthly unique visitors.  Even brick & mortar stores with eCommerce sites like Walmart, see 87 million unique visitors, nearly a third of the entire population.

 

Audience US retailer
Audience on US eRetailers

 

Given the formidable scale of this reach and the influence they have over buying decisions, eRetailers rightly began to monetize this opportunity, creating value for themselves, for their shopper and for the vendors that sell on their sites.

 

Enter Retail Digital Media (RDM).

 

Win-win-win

Selling media has three main benefits for the eRetailer: it increases their sales, it delivers an additional revenue stream, and it offers a new way to better serve the shopper by tailoring their shopping experience based on their preferences and past habits.  If retailers were anyway investing in infrastructure and technology to grow their online sales, and they had historical sales data, they could marry those two elements to provide a personalized shopping experience to delight the shopper.

For the manufacturer, retail digital media has become a proven tool to increase online sales.  One brand saw a +21% purchase intent increase after exposure to an ad in an eRetailer environment compared to the same ad on a traditional website[3].  Highly targeted and well-designed ads help shoppers better navigate product pages and introduce new innovation or different products when the shopper is most receptive.

For the shopper, seeing relevant, effective and timely advertising can improve their overall shopping experience and create loyalty towards that eRetailer.

 

personalization facts
Source: Smart insights research, 2015

 

Still, Retail Digital Media (RDM) remains an under-developed tool for advertisers

Despite the tremendous reach eRetailers have of consumers that are close to the purchase act, advertising on their platforms remains under-developed versus other online platforms.  For brands looking to invest in high ROI advertising activities, RDM is a no-brainer.  Nevertheless, while 78% of advertisers invest in media on Facebook as a media channel, only 31% are doing so on Amazon[4].  The most powerful eRetailer platform is still not considered as media channel.  This despite the fact that an eRetailer like Amazon has more data about buying trends, browsing history and purchase behavior than other major companies like Facebook or Google[5].

 

So why aren’t more advertisers capitalizing on this low hanging fruit?  Here are a few reasons:

  1. Navigating RDM governance is tricky and requires expertise. The development of a single header banner featured on the eRetailer site looks deceptively easy.  On the contrary, the approach requires a multi-disciplinary team (from sales, media and marketing) that connects people, processes and information.
  2. Executing a successful RDM program is entirely dependent on your trade negotiation. RDM is one tool within the sales team’s arsenal to build the business, and it directly impacts the overall trade negotiation at that retailer.  Negotiations should be carefully managed, and the sales team must have the right mindset.
  3. You should plan RDM with the same rigor as traditional media, and that requires media planning expertise. RDM that delivers high ROI requires the right media planning and buying, as formats and placements are critical to success.

 

Today, Amazon is investing resources in further growing its advertising business.  We can expect more RDM from advertisers starting to understand the potential of this advertising spend.  RDM is an opportunity for those not yet investing in the space, as retailers increase their capabilities and put resources in place to grow in this area.

 

Authors: Niloo Farmand, Alexia André

 

At the e-business institute we have been studying the Retailer Digital Media space since 2015.  Get in touch to know more and leverage this opportunity as a competitive advantage for your company.

 


Sources

[1] ClickZ marketer survey, October 2017

[2] Digiday UK: How Amazon is selling ad buyers on its growing advertising business, 5 September 2017

[3] Baazar Voice by Wakefield, 2013

[4] National Retail Federation estimates, February 2017

[5] BloomReach data, September 2016

Share

Share on linkedin
Share on twitter
Share on facebook

Contact Us