Last month, Walmart and Netflix Center launch on Walmart.com offers a wide variety of themed merchandise from hit Netflix shows only available through the retail giant. This is Netflix’s first “digital storefront” with a national retailer, and an example of how e-commerce is shaking up the $650 billion global advertising industry.
Marketers in the business-to-consumer and business-to-business markets have recently been disqualified by regulations aimed at protecting customer privacy and ending intrusive tactics like stalking customers online through the use of third-party cookies. In true Silicon Valley style, those constraints are now unleashing a wave of marketing innovation The Boston Consulting Group recently called “A once-in-a-generation sea change, no different from the transition from traditional to digital media.”
Retail communication networks are springing up like chrysanthemums, turning e-commerce sites into storefronts. BCG estimates they could rake in up to $100 billion annually in just a few years. That’s a boon for an industry with notoriously tight margins, and a potential bonus for customers who can see lower prices as a result.
All about data
Here’s how it works: Most retailers, airlines, and other businesses that do business online in significant numbers have loyalty and membership programs that they’ve used to collect lots of data about customer behavior and preferences over time. This is perfectly legal as customers opt into these programs.
That data is gold for businesses that sell through retail channels — like companies that sell consumer packaged goods — or have free products like car rentals and hotel rooms. By advertising through customer-facing partners like e-retailers, they can take advantage of the opt-in data businesses collect without breaking regulations.
This deal is essentially a digital version of the store-in-store concept that has been so popular with retailers lately. Similar to how Samsung buys space in Best Buy’s retail stores to sell devices, online sellers can do the same with the brands they sell in their stores. Relationships can span many digital and even physical properties. Brands get detailed data on how their ads translate into sales, and retailers get a much-needed additional revenue stream.
Marty Kahnle, US corporate sales manager at InfoSum, a secure data sharing platform. “Every brand is trying to find every opportunity to make money from the consumer.”
Flywheel effect
Retailers have been making their own media for years, making businesses like Home Depot and Lowe’s prime destinations for self-employed people looking for advice on how to fix leaky faucets. or drywall hanging. But in the past, “the whole idea was to drive consumers to the store,” says Kahnle. “That changed post-pandemic to become a more communicative wheel,” where advertising partnerships yield insights that marketers can use to refine their messaging. and bring more revenue to the retailer.
Amazon.com was the leader in this field and still an amazing 89% control of the retail media advertising market. However, BCG estimates an additional $75 billion from its non-Amazon ad business and other segments is rapidly turning to cash. BCG estimates that a single airline can generate up to $100 million more in media revenue with an average profit margin of 75% through such programs. That bonus revenue stream could even translate into lower fares for customers.
Many professional bodies have sprung up around this burgeoning industry, including Criteo, Promote IQ (recently acquired by Microsoft), and Quotient technology. Several major retail brands, including CVS, Walmart, Amazon and Walgreens, have also launched wholly-owned outlets, many of which offer self-service features that allow marketers to target target their retail advertising with the same precision they expect in search engine marketing.
Advertising buyers trust
Ad buyers seem to like what they are seeing. ONE survey of digital marketing firm Merkle found that 85% of packaged consumer goods companies are channeling more marketing dollars into retail media networks, and 95% say their spend on advertising in retail media is increasing for existing trade shows and shoppers. The same study also found that half of retailers said finding the right partner was a problem, and an equal number said internal organizational barriers and data repositories prevented them from doing so. they make money from opportunities.
That’s typical of a new market, but the confusion isn’t likely to last long. “The top three companies in each sub-market will dominate, while the others will largely shut down,” BCG writes. “Time is short for those who want to play.”
If your business spends money on search engine marketing or traditional advertising, retail media opportunities are worth considering. In some markets, they are said to provide the best source of data on what informs purchasing decisions. And in marketing, that’s what it’s all about.
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