GUEST COMMENT The £750m retail opportunity you’ve probably never heard of

Retailers are investing heavily in their digital offerings. It’s an expensive yet unavoidable commitment, one that’s especially challenging for traditional brick and mortar retailers who are balancing their legacy business with growing a digital platform. As such, they are looking for cost effective ways to bolster their online returns and ease this transition as consumers continue to switch towards online purchasing.

One solution that can generate new revenue streams and also enhance the shopper experience is ‘digital retail media’. This is where a retailer monetises its website through advertising and branded content, adopting a publisher-like model. And it can be a very profitable business. When considering the pressures on a large retailer’s general sales, £1 million in advertising revenue could equate to the equivalent of £25 million in gross product sales. Advertising can be high margin and high profit, and if done properly (with the right partner), also increase engagement and increase sales. The scale of this opportunity in the UK has been estimated at £750m in a report by OC&C Strategy.

Valid concerns are often raised as to whether running an advertising business alongside your ecommerce channel will negatively affect conversion rates. The truth is, if a customer has visited your website to buy a certain product then yes, they may see and purchase another completely unrelated advertised product, but this does not mean the entire purpose of their visit has changed – you’ve simply increased basket size. This said, intrusive or low quality advertising may damage the retailer’s trust and credibility, and ultimately conversion. It is essential that the retailer retains complete control of the media campaigns running on their platform and makes sure that the message is clear, consistent and relevant.

Most retailers already work with their supplier brands to spend advertising budgets for the promotion of products, online. These budgets are allocated with the sole purpose of driving sales, with a particular retailer and managed by the national account managers who are responsible for ensuring those sales. But what about brand budgets, that are often planned and bought through media agencies? Product promotion is critical but so is brand awareness. Both of these budgets are executed with campaign messages aimed at engaging, educating and influencing the consumer. Therefore the retail environment is the perfect place to engage the consumer AND offer the opportunity to buy. As such retailers increasingly have the chance to open up branding budgets and unlock a new advertising revenue stream.

There are many similarities between the ecommerce and advertising markets, including challenges around innovation, competition, investment and rapid growth. But the differences between retail and advertising are also vast, so how does a retailer aim to develop a ‘publisher model’ without distracting from their core retail business? Of course, one solution is to partner with specialist agencies that have in-depth knowledge of both sides of the coin; they fully understand that retail is the core business and that an advertising business needs to be built and executed in line with the ambitions of the retailer, and with the customer at heart.

Ultimately, serving relevant and engaging advertising and content enhances the shopping experience. More immersive branded content such as video, shopping tools, and ‘how-to guides’ can really add value and increase product preference and brand loyalty. As such, the digital retail environment provides the perfect platform to reach and influence consumers and also encourage them to buy on-site. Developing a more sophisticated advertising platform allows retailers to tap into additional revenue streams and major retail players such as Asda, eBay and Walmart are taking advantage of this opportunity. In an increasingly competitive and fragmented space, retailers need to utilise every tool available to them especially when some of the more forward thinking players, are already one step ahead.

Nigel Ponder is UK MD at Triad Retail Media