Retail Advertising in a New World of Commerce

Posted on 25. Jun, 2012 by in Digital Marketing



Social-commerceI read an interesting article recently about Pinterest & the role it might play in the social commerce sphere. There’s no denying that Pinterest has become an instant phenomenon, crossing the 10 million monthly visits mark in the US faster than any site in history, so the idea that it might become a major social commerce player in the not too distant future doesn’t seem that ridiculous. This got me thinking; what would the implications of this be? Are traditional online retailers becoming less relevant?  What will take their place? And what might all this mean for online advertising?

Shopping is almost unrecognisable today compared to just 20 years ago, with up to 40% of all purchases nowadays being made online. This alone can’t be held responsible for the ‘death of the high-street’, but it has certainly been a contributing factor. In the battle of clicks versus bricks, all too often the clicks have won out & as a result we have seen the emergence of successful e-tailers such as ASOS dominating the shopping landscape.

So why have there been such a big changes in our shopping habits? The internet of course! Consumers now have access to a once unimaginable world of goods & services, the world of e-commerce. We can now find exactly what we want quickly, easily & at the lowest price. We are spoilt with more choice than is really necessary, 24 hours a day & can even get a second opinion before we buy. Plus, since online retailers have started offering free returns, they have all but removed the main advantage of physical retail, trying before you buy. Shopping is no longer a stand-alone activity, involving planning & a good few hours out of our busy schedules. Instead it is about taking a moment to shop & find out from friends how they shop. This has signalled bad news for our high-street retailers but great news for us working in the digital media!

But the digital world doesn’t stay still for long & the traditional online retailer has faced challenges from new players, with a major source of competition coming from the mobile phone. Mobile has been ‘the one to watch’ for a good few years now & over 50% of the UK population now own a smartphone handset. And with this we have seen the birth of m-commerce, similar to e-commerce in its basic functions (getting goods from vendor to consumer via the internet) but unique in many ways. Consumers can now shop entirely on their mobiles, from the initial search through to the final purchase, wherever they are & whenever they want. The development of near field communications (NFC) has meant that we can pay for items directly with our mobile phone, in effect removing the need for that once essential accessory, the wallet. Whilst many brands have been slow to build mobile optimised websites, limiting the functionality on a mobile compared to a desktop, m-commerce is considered by some to be the next generation in shopping.

Another new player in the game is s-commerce. We all know how important social media is & I don’t need to repeat stats about how many people use Facebook around the globe. Safe to say social is a big deal. As a result, we have witnessed the monetisation of users’ social activity, which has come to be known as s-commerce. Shopping is an inherently social activity; we like to ask friends for their recommendations & opinions before making a purchase. For a long time we have had access to these recommendations & opinions online through forums, blogs & review sites. And, in more recent years, brands have been launching stores on Facebook – the likes of ASOS have their entire catalogue for sale on the site.

It makes sense that a social platform such as Facebook, which is all about sharing & conversations, would both become equally popular with shoppers and retailers. Pinterest may not be quite there yet, but it’s surely only a matter of time before the platform becomes focused on monetisation & direct selling. Even Twitter has a role to play – maybe not in the direct s-commerce sense, but certainly in that it allows individuals to share their views on brands, offering recommendations or negative feedback. A cool example of this is the Twitter Tug of Store. S-commerce has emerged as a result of users spending increasing amounts of time on social media sites and being influenced by the brands their friends recommend and, whilst it isn’t huge, it’s certainly an emerging player in the commerce world.

So what does this mean for those of us working in digital advertising, planning campaigns to target these consumers & drive them to make a purchase? These days you can’t just assume that an increase in advertising spend will sell more products. Consumers are instead more influenced by personalisation, interactivity & what their friends are in to.

There is no doubt that we will see mobile included on an increasing number of media plans & advertisers will need to make sure they have a robust mobile advertising campaign. As more & more people turn to mobile it is key that digital advertisers do not miss out on these potential customers by neglecting to consider mobile in their plans. The main characteristics of desktop display advertising do apply to mobile display advertising, in terms of the inventory available, targeting opportunities & functionality of a campaign. However, mobile ads have also evolved to take advantage of the unique interactivity of a phone such as the touch screen, camera & being on the move.  There are also additional targeting opportunities such as network, handset & individual location.

We have seen a few nice examples where advertisers have worked with network providers such as O2 to geo-target consumers with SMS-based advertising containing offers as they pass by the very store. Some brands are also targeting consumers directly through mobile apps, which can generate purchase intent & so replace the role of the traditional banner ad. There will definitely be a shifting of spend from desktop to mobile but whilst this new channel may represent a challenge to conventional display advertising we still have a while before mobile ad spend is likely to overtake that of desktop.

How well social networks lend themselves to commerce is up for debate but the existence of the term suggests that social is being monetised & where there is money to be made, there is usually a role for advertising. For Pinterest there are currently no direct advertising solutions & the inclusion on conventional ads would probably disrupt the user experience – affiliate links have been tried in the past. Pinterest is extremely subjective & it is about general topics such as the arts rather than specific brand names.

Facebook on the other hand has been relatively successful in its pursuits of advertising spend, opening itself up with a number of native formats including Sponsored stories, which act as a social recommendation & have higher response rates than standard ad formats. But this idea of personalisation is not new to Facebook & has been used in display media for a long while, becoming more & more advanced all the time. Whilst personalised re-targeting ads, for example, don’t act as recommendations from friends they still increase purchase intent by acting as a reminder of those goods you wanted but didn’t get round to buying. Plus, brands selling directly on or via Facebook rarely do so at the expense of their own website. Social sites no doubt give brands the opportunity to directly engage with loyal followers which builds relationships that can be converted in to leads, but a brand’s own website is still their biggest revenue driver and grants the advertiser more control than Facebook ever will. Direct display advertising will continue to be highly relevant to retailers for the foreseeable future and networks and Demand Side Platforms will still offer the most cost-effective and scalable way drive users and sales through to a site.

Another trend we are also witnessing is the growth of interactivity, for example the virtual store. Online & offline are becoming increasingly blurred & it is sometimes difficult to differentiate between an ad & a product itself because they can be purchased at the touch of a button & arrive almost instantly. Consequently, the likes of Channel 4 have developed new ad formats, such as the Ad Link, that enable a consumer to order a product direct from the advertisement itself. So the increasing challenge for advertisers is to make it as quick & easy as possible for a consumer to see an ad, decide they want the product & purchase it there and then. Videos also aid this interactive experience – brands themselves have seen that adding a video to a site means that visitors are less likely to abandon the purchase process. This is also the case for videos ads, which account for an increasingly significant proportion of online advertising spend. Shopping behaviours might be changing, but it is still a visual hands on activity, & this is reflected in changes to online advertising.

There is no doubt that the world of shopping is changing. The increasingly dominant online world has given rise to many new players, in response to our online preferences & behaviours. However, s-commerce is unlikely to take the place of well managed e-commerce strategies – only a relatively small number of brands have launched shops on Facebook & virtually none have relocated completely, whilst the role and future of Pinterest is still uncertain. M-commerce is arguably the one to watch and will become an increasing focus for advertising campaigns whilst the lines between desktop and mobile become ever more blurred.

However, even mobile domination of the retail space is some way off – consumers are still nervous about purchasing on mobiles & mobile sites won’t have the full functionality of the desktop site for a long time. Instead, brands should focus on including videos, reviews, and personal elements to their site – just as Amazon have been doing for a long while– and developing strong mobile optimised experiences. Online display advertising will need to reflect this ever-changing landscape wherever possible, but the requirement for well managed, sophisticated display campaigns won’t be disappearing any time soon.

 

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