Retailers: You’re the next media moguls

Until recently, commerce companies had shied away from advertising-based revenue streams in fear of tarnishing their brands and reputations with frustrating and sometimes irrelevant online ads. However, as companies like Amazon reportedly generate billions in profit from onsite advertising, C-level executives and digital business professionals throughout retail and commerce are now open to revisiting their anti-ad stances. Expedia now generates 10% of its revenue from advertising and media on its properties – a part of the business that has a higher margin and has been growing at a healthy rate for years. In addition, Forrester data reveals that consumers are open to ads from retailers. In a recent survey, online adults reported that they are more likely to pay attention to and least likely to ignore ads within a retailer’s store than anywhere else.

Commerce firms have experimented with different types of ad format in the past, but none became a prevailing standard. Why? Earlier experiments had few resources and often required substantial capital investments for hardware, such as TV screens in stores. Past initiatives also focused on traditional media and trade promotion, while often led by a skeleton team. However, with the prominent success of Amazon's ad network, retailers now realize their efforts must be more than an experiment or side project. As retailers shift their ad spend to digital and shopper marketing channels and invest more in their human capital, they will be able to elevate their media networks.

Amazon reportedly has a team of more than a thousand employees focused on its in-house media network. Walmart's in-house network has been growing as well: It acquired ad startup Polymorph Labs in 2019 and launched a self-serve portal in early 2020. While they have certainly grown their in-house teams (some more than others) that focus on this new business, retailers and commerce companies aren't launching media networks with all guns blazing by advertising on every possible surface to maximize revenue. Rather, they are gradually adapting their businesses to "publisher" mindsets by focusing on digital media first, prioritising store partners, and being scrupulous about safeguarding shopper data. However, retailers are still approaching media much too cautiously.

Ad revenue will be transformational for the US's largest retailers and represents a massive untapped opportunity. In order to stay competitive, retailers must seriously consider building their own media networks. Even smaller firms who do not have the scale can take part by partnering with technology vendors in the space and cultivating ad partnerships that are valuable for their customers and marketers. However, while the digital-first ad formats are compelling, retailers have even more traffic that is captive and open to impulse purchases in stores. The falling cost of touchscreens and large displays and the ability to manage and monitor ads through cloud-based interfaces make in-store screen-based ads (outside a shopper's mobile device) more accessible to retailers than ever before. By serving ads to their customers at relevant moments (i.e. in stores), digital business professionals and commerce companies deliver a superior customer experience while also cultivating a rapidly growing new revenue stream with healthy margins.

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