As Walmart and Microsoft make moves to by TikTok, Lena Roland, managing editor, WARC Knowledge at WARC, sets out how businesses can navigate the challenges and seize new opportunities in the world of shoppable media

The ecommerce wars intensify in 2020

Ecommerce has seen exponential growth globally. Covid-19 and the subsequent increase in online shopping have accelerated the growth of the major players like Amazon and Alibaba. But what’s also interesting is the pandemic has also accelerated the growth of other providers such as Shopify, Instacart and Shopee. And with the likes of Walmart and Kroger developing their online offers in the US, some omnichannel retailers are a force to be reckoned with.

WARC chart 1

The shift to shoppable media 

The shift to ecommerce and shoppable formats is transforming performance marketing. This is the aspect of marketing that is very data-driven, focusing on short-term metrics like lead generation and conversions/sales. 

“In the previous decade of search engines commanding the bulk of the budget for bottom-of-the-funnel conversion, Google and Baidu may have reigned. In today’s world, ecommerce platforms offer much more return on conversion investments,” says Alex Zhang, APAC head of strategy at ad agency VCCP.

Amazon has seen record growth in the face of the Covid-19 outbreak, according to the latest company reports. Total net sales reached $88.9bn in the second quarter of 2020, the highest level ever recorded. This is also a year-on-year increase of 40.2% ($25.5bn), the second-quickest rate of growth ever.

WARC chart 2

Revenue from the online stores segment has rocketed, reaching $45.9bn in Q2 2020. This is a year-on-year increase of 47.8%, the quickest rate of growth ever and double the rate of the previous high (24.3% in Q1 2020). Revenue from third-party seller services like fulfilment and shipping grew 52.1% in Q2 2020, the highest rate ever and taking the total to $18.2bn.

Advertising revenue also grew rapidly in the second quarter, rising 40.6% to $4.2bn. 

This contrasts with the performance of Google Search, its revenue dropped 9.8% year on year, according to parent-company Alphabet. 

Ecommerce platforms like Alibaba in China offer a range of advertising options to capture as much of the purchase journey as possible – from awareness, engagement right through to purchase. This promises a seamless customer journey, consumers do not have to leave the site to make the purchase. Unsurprisingly, other platforms are following suit. 

Shoppable ads are now a key trend in digital advertising, very recently social platforms such as Facebook, Instagram and YouTube have extended their reach into ecommerce by developing shoppable formats and storefronts within their platforms. 

“As firms map their path to recovery, marketers have a broader range of platforms available for them to sell through”

As mentioned above, omnichannel retailers like Walmart and Target are getting in on the action too. They are becoming advertising and media destinations in their own right by ramping up their ecommerce capabilities. 

As firms map their path to recovery, marketers have a broader range of platforms available for them to sell through. They should assess all options available and give careful consideration for how a brand “shows up” on e-commerce sites, and understand the trade-offs on these platforms.

The rise of shoppable formats and ecommerce media is likely to accelerate the shift toward short-termism identified by researchers such as Les Binet and Peter Field. Brands such as Adidas and Expedia have been upfront about the lure of performance marketing, and have taken steps to course correct. 

Our research shows that brand-building (the aspect of marketing that focuses on emotion, storytelling, purpose, brand experience and building memory structures) remains crucial in the ecommerce age. Strong brands have multiple benefits including justifying a price premium in online marketplaces. A strong brand also signifies trust, which is especially important in difficult times, and especially important online.  

With this in mind, marketers should take a balanced approach to long- vs short-term marketing investment. It’s not a question of investment in either brand or performance – it’s a smart blend of both.