Key growth drivers for commerce marketing in 2021
Precis: Commerce marketing isn’t new, but only now is it starting to get – just some – of the limelight that it deserves. Much of the discipline’s exposure is being driven by the publicity that US big box retailers have drummed up around the development of their new retail media networks across 2020. But what’s underneath this? What factors are driving so many retailers to invest? And where is the demand from brands stemming from? Moreover, why now?
Here, we explore what we believe will be the 4 key growth drivers for commerce marketing in 2021:
· The importance of the ‘first moment of truth’ during a pandemic
· The valuable and immediate impact retail media investment has on a retailer’s bottom line
· The abolition of third-party cookies and how retailers can offer the ideal solution
· Preparation for the changing demands of shoppers post-COVID who will seek physical experiences.
The ‘first moment of truth’ is one of the only guarantees for advertisers in the wake of COVID-19
In a year still shaped by the pandemic, there are many question marks for brands when it comes to investing their marketing budgets. When will big sporting and entertainment events recommence? When will high footfall locations regain significant levels of traffic? How will evolving lockdown restrictions impact consumer behaviour?
One of the few things that brands can actually be certain of is this: that every single one of a brand’s potential consumers will have to go into a physical or online store to purchase their product.
This means that what happens in and around stores (on or offline) is more important than ever.
Consequently, we’ve seen a major shift in how brands are planning their marketing. Many are shifting spend into commerce marketing, recognising that the ‘first moment of truth’ is more powerful now than ever.
What’s most exciting about this is that as brands cotton on to the increasing importance of commerce marketing, the discipline is moving up the marketing agenda, and becoming central to a brand’s entire campaign planning process, not just an add on. This is a pivotal moment for the commerce marketing industry.
Brands that can break away from traditional delineations of ‘brand’ and ‘shopper’ and adapt the way that they organise their marketing efforts according to what’s happening in the real world (not internal structures) will be the ones in pole position to accelerate performance.
And of course, retailers too can win in this environment; attracting investment from brand budgets (not just trade budgets).
This opportunity can only be realised, however, if a retailer’s media offering is both developed and effective enough to compete – and win – against other marketing channels vying for brand spend.
Effective personalisation in a cookieless world
Third party cookies will be extinct in the not-too-distant future. The impact of this on the advertising industry is huge: to continue to deliver tailored, targeted advertising, brands will need to lean heavily on first party data. But the problem is that brands typically don’t have enough first party data to activate, particularly those that rely on retailer distribution. And where brands do, it’s often scattered or siloed, making it difficult to effectively personalise.
In a cookie-less world, commerce marketing becomes the obvious choice for brands when investing online. Why? Because retailers can offer a 100% first-party data solution, at scale.
This proposition is hugely attractive for brands – they’re able to continue to deliver effective, personalised advertising that customers still want, but instead of leveraging third-party cookies, they leverage the retailer’s rich(er) first party data instead.
This movement has already started. Last year saw several retailers, in the US in particular, invest heavily in their retail media networks. Walgreens Advertising Group in the US is an interesting example – personalisation through first-party data is their key lever, and when one delves into the stats behind their new proposition, the reasons for brands to invest are compelling.
The UK retail market is evolving in this direction too, albeit somewhat behind the pace of the US. Brands here will need to stay on the pulse with regards to which retailers have developed an effective first party data proposition, and invest accordingly.
An opportunity for a new or increased profit stream for retailers during tough times
Unsurprisingly, online shopping has been massively accelerated by COVID-19. Online retail sales grew by 42% in 2020, accounting for 27% of all retail sales.
The cost of operating an e-commerce retail business is often under-estimated. The margin retailers make through sales online is lower vs. sales made in store: it costs a retailer more to physically deliver an order, than it does for when someone fulfils their own order by shopping in-store.
Lower margins on large volumes over a sustained period will have a significant impact on a retailer’s profitability. This, combined with a variety of other factors, means that it is therefore crucial that retailers find new ways to plug growing profit gaps.
Commerce marketing offers a strong solution. Delivered well – and only if delivered well – retailers can unlock a significant amount of advertising spend from supplier brands. Given this spend is being invested in retailer-owned channels, it translates into a healthy profit stream for the retailer.
Beyond this, and importantly, this spend from brands also creates demand for the retailer. It drives sales at the point of purchase, it creates category growth and it contributes to delivering a great experience to customers.
And the up-side isn’t short term. As Threefold fast approaches a decade with one of our retail partners, we’ve been able to grow their commerce advertising revenue more than 10% every single year. This demonstrates that commerce marketing income is both sustainable and can be grown over time.
Although today most UK retailers have some form of commerce media proposition, and some perceive that there’s little incremental spend to go after, Threefold recently carried out in-depth market analysis, through which we estimate that there’s ‘A Hidden Billion’ in unrealized opportunity in commerce marketing in the UK today.
Now is the time to prepare for the demands of shoppers in a post-COVID world
Although online retail sales are in growth, it’d be a mistake to think that COVID-19 will prompt the death of bricks & mortar retail. £7 in every £10 are still expected to take place in a store by 2024. But in a post-COVID world, it is predicted that shoppers will have a completely different expectation of retail. The retailers that listen and modify accordingly are those that will be in the best position to survive the effects of the pandemic.
According to NBK Retail, when shoppers can freely return to in-store shopping, they will be attracted to stores that offer high-touch, sensory-driven, emotive-led experiences.
Commerce marketing has a significant role to play here. Think immersive retail theatre, bigger and better than ever. Think hyper-personalisation in-store, leveraging customer data in real time. Think blended retail experiences, where the lines become blurred between retail, music, dining and entertainment.
As the role of stores in the media mix is reimagined in the coming years, the retailers that concentrate on enabling brands to provide those experiences that shoppers want and cannot get through a transactional online shop, are those that will be in the position to win big.
2021 is set to be a seismic year for the commerce marketing industry. There are so many reasons why it should be high on the agenda for both brands and retailers, given both the short and long-term opportunities presented.
All parties would do well to remember one thing: that it’s a virtuous cycle – so the more seriously the brand takes it, the more seriously the retailer takes it, and the more seriously the retailer takes it, the more seriously the brand takes it and so on…
If ever there was a year for commerce marketing to prove its worth, to take its rightful place as a core part of brand marketing plans, and to deliver its true, multi-faceted value for the retailer, this is the year.
Ultimately, those that grasp the opportunities presented head-on, will be the ones in prime position to win.