Ad money moves to retail media as brands vie for attention online

November 4, 2021

By now, most businesses are familiar with the consequences of the Covid-19 pandemic: faltering offline sales, fluctuating foot traffic, and lockdown mandates that make many brands wish they built an ecommerce infrastructure sooner.

As consumers in Southeast Asia shift from going to shopping malls to buying essentials on Shopee, Lazada, Tiki, and Tokopedia, advertising dollars naturally followed, giving birth to retail media in emerging markets.

In 2018, Amazon paved the way in the US by launching Amazon Advertising, which became the first bid-and-buy marketplace. Boston Consulting Group now estimates that retailers have a US$100 billion business opportunity to capture – if they can keep up.

The old marketing tools

The main goal of marketing, no matter the medium, is to highlight a business or product to the right consumers to score a potential sale. And like most things, there is a bad, a good, and a much better way of doing things.

Traditional marketing channels consisted of linear TV, radio, and print because these mediums were popular at the time. But with the birth of the internet emerged newer platforms such as websites, streaming, and email. Then came the rise of social media and apps that shook up the advertising landscape once more.

The shifts have proved one thing: business went where the consumer was. So when sources of traffic and revenue once again change – let’s say due to a pandemic – the marketing mix will undoubtedly accompany it.

In the next 12 months alone, many marketers are planning to decrease spending in cinema, print, and out-of-home advertising, while the majority will increase budgets earmarked for social media and search engines.

The search for superior advertising channels

As money flows out of outdated buckets, which channels stand to gain? The answer lies in ad revenue trends in mature markets like the US.

While Google and Facebook remain the dominant advertising players, Amazon has cut into the duopoly’s ad revenue pie, growing its share from 7.8% to 10.3% in a single year.

How was it able to do this?

That’s because the most valuable advertising channel is the one that has the most measurable touchpoints with the consumer.

TV, radio, and print ads lose the consumer after the first point of contact, while websites and email ads track clicks but then lose customers once they’re off the medium.

Ad networks and social media became industry titans because they not only monitor a consumer’s interests and movements across multiple mediums, but they can retarget that consumer with various personalized ad content to chase a conversion goal.

While many of the above advertising tools continue to be highly effective in reaching shoppers, some work via third-party cookies, which are becoming obsolete thanks to the heightened skepticism around digital surveillance. The downfall of cookie-based tracking means advertisers are further limited in their ability to retarget, build look-alike audiences, and personalize ads.

With competition heating up and performance marketing becoming more common, the ability to track return on ad spend (ROAS) is crucial to reaching scale and profitability.

In 2021, almost 50% of marketers globally are still not confident in measuring return on investment (ROI) mainly because of two factors:

1. They’re either looking at metrics like awareness and reach

2. The conversion takes place off the advertising channel making accurate attribution an oxymoron

Whatever the reason, the lack of ROI transparency leads to slower executive decision-making, wasted marketing dollars, and a loss of potential sales.

The new advertising titan

Ecommerce as an advertising channel is unique because it encapsulates the consumer’s entire journey – from being interested to making a purchase – especially as marketplaces continue to steal market share from search engines.

Marketplaces know what a shopper wants, how frequently certain products are bought, the average spend per category, and can regularly communicate with the end user through emails, notifications, games, chat, livestreams, and shipping updates.

In other words, digital retailers have become rich with first-party data. With on-site marketing tools, a brand can finally place its products to a target customer profile one step before the checkout point. Based on the feedback they receive from the platforms, brands can also determine the best keywords, price points, time, and product thumbnails to use.

The hurdles in striking retail gold

The pressure on businesses in Southeast Asia to adopt ecommerce increased following the start of Covid-19. Newly imposed lockdowns in Singapore, Malaysia, Thailand, Vietnam, and Indonesia over one year later make it even more important to gain a first-mover advantage in retail marketing to accelerate online success.

That said, reaping the benefits of retail marketing is only possible if the marketplace equips brands with the right tools and data sets. In Southeast Asia, Shopee, Lazada, and Tokopedia have already made marketing solutions such as keyword bidding and sponsored products available for sellers, but these solutions are still works in progress.

Southeast Asia sellers also struggle to scale unlike their counterparts in the West. This is because the region boasts nine top marketplaces each with strengths in local markets. In order to win ecommerce in Southeast Asia, sellers need to be present on all of these retailers.

“Unlike other markets where Amazon is dominant, merchants [in Southeast Asia] sell across more than three to four marketplaces in six major markets. With large portfolios, busy campaign calendars, and feature-poor tools, clients often tell us their marketers are overwhelmed,” says Quang Tran, founder and CEO of ecommerce advertising SaaS provider Epsilo.

To tap into the next marketing wave in Southeast Asia, three key ingredients will be required to leverage retail media:

1. Technology: What specialized tools can help a business execute faster and provide customized reports? While many technologies perform the same tasks no matter the client, look for positional software that is customizable and feature-rich.

2. Data: What data is available from the marketplace? Are the right key performance indicators being measured to understand how to improve campaigns? Gross merchandise volume and ROAS are important but so are conversion rates, click-through rates, items sold, etc.

3. Talent: Are the right people in place to assess the insights and change course if performance isn’t up to standard? If talent is too difficult or costly to secure, can technology be used to automate manual tasks?

The Covid-19 pandemic reignited the ecommerce flame, but what will turn retail media into a US$100 billion reality are the players who adapt quickly to a tech- and data-driven world.

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