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What Drives Increased Spending on Retail Media?

The world of marketing is now experiencing a drastic shift as online competition heats up. Sellers are looking for better and scalable advertising channels

By now most businesses are well aware of the consequences of the global COVID-19 pandemic: faltering offline sales, options to work from anywhere, fluctuations foottraffic because of the mandate lockdown, and e-commerce is becoming a channel that many brands expect their infrastructure to build faster.

As consumers in Southeast Asia move from malls to Shopee, Lazada, Tiki and Tokopedia with soaring record, advertising costs naturally follow. Retail media in emerging markets was finally born.

Amazon started this in North America in 2018 with the launch of Amazon Advertising, a marketplace bid-and-buy first. BCG estimates, there are $100 trillion a business opportunity that can be grabbed by retailers - if they are able to pursue it.

Old Marketing Tool

To understand why retailers can achieve greater ad spend, it's important to first evaluate the developments in today's marketing world.

What are the ads at the bus stop? Bidding on Google keywords or Clubhouse sessions? Or a viral TikTok video? As the world becomes more connected and the boundaries between online and offline become more “fluid,” today's world of marketing is a composite of multiple channels tied together in key performance metrics (key performance metrics).

The main purpose of marketing, whatever the medium, is to highlight a business or product to the right consumers to increase the potential for that product/service to be sold. And as with most things, there are bad, good, and much better ways to do things.

Traditional marketing channels consist of linear TV, radio, and print, as these mediums were popular in their time. But with the birth of the internet, platforms such as websites, streaming, and email were born, followed by the rise of social media and apps that rocked the advertising landscape. This shift shows something constant: businesses will continue to move, following where their customers are.

So when traffic and revenue sources change for the umpteenth time, say because of a pandemic, the marketing mix (marketing mix) will also follow. Even in the next 12 months alone, many marketers are already planning to reduce cinema, print, and out of home (OOH) advertising and increase budgets on social media and search. Money will flow where consumers are.

Source: 2021 Nielsen Marketing Report: Era of Adoption

Searching for the right advertising channel

As ad spend decreases on channels that are no longer relevant, which channels are now reaping the benefits? The answer can be found in advertising revenue trends in mature markets such as the United States. While Google and Facebook are still the dominant players, Amazon is starting to break up this duopoly and expand its share from 7.8% to 10.3% in one year.

How could that be?

Because the most valuable advertising channel is the channel that has the most touch point or measurable lines of communication with consumers.

Source: eMarketer March 2021

TV, radio, and print will lose customers after the first contact, while websites and email can follow your clicks, even if they disappear once you leave the medium.

advertising network (ad networks) and social media have become industry giants because they not only monitor consumer interest and movement in various mediums, but are able to retarget (retarget) these consumers with a variety of personalized advertising content to pursue conversions.

While many of the effective advertising tools are available to reach buyers, many do so through cookies third parties, which are now increasingly extinct due to increasingly stringent digital surveillance. System crash tracking cookie-based means limiting the ability of advertisers to retarget, build similar audiences, and create personalized ads.

As competition increases and performance marketing becomes more prevalent, the ability to track return on ad spend (ROAS) is very important for a business to grow and make a profit. In 2021, nearly 50% of the world's marketers are still not confident in measuring ROI because 1) they see metrics like awareness and reach or 2) the conversion occurs outside of the advertising channel, making accurate attribution an oxymoron.

Source: 2021 Nielsen Annual Marketing Survey

Whatever the reason, a lack of ROI transparency results in slower executive decision making, wasted advertising spending, and potential losses.

New advertising giant

The emergence of Amazon as a dominant e-commerce player is not a new thing, but its emergence as a advertising giant has been clouded by the shadow of Amazon's success as a logistics and cloud company. Ecommerce as an advertising channel is unique because it reaches all consumers from start to finish, from interest to purchase on one platform, especially now that the marketplace continues to steal the search portion from search engines.

Source: Wunderman Thompson Commerce 2020 Survey

Marketplace knows what shoppers want, how often the product is purchased, average spend per category, location, and can regularly communicate with end users via email, notifications, games, chat, live streams, and delivery updates. Digital retailers are very rich in first-party data.

With on-site marketing tools, a brand can place its products one step before checking out to the targeted consumer profile. From the feedback obtained, the brand can also determine the most effective keywords to drive sales, at what price point, on what days of the month, and what product thumbnails make a difference. click through rate (CTR) increases.

This is why even streaming platforms like Netflix recently launched online store. More and more touchpoints with available consumers, the channel will become even more valuable.

The challenge to succeed in retail

The pressure for businesses in Southeast Asia to adopt new e-commerce increased during the COVID-19 pandemic, which then create increased recruitment digital talents. Lockdown regulations implemented in Singapore, Malaysia, Thailand, Vietnam, and Indonesia more than a year later made the ability to first-mover advantage in the world of retail marketing become increasingly needed to accelerate online success.

Along with the formation of e-commerce into a dream marketing channel, reaping the benefits of retail marketing can only be achieved if the marketplace provides brands with the right tools and data. In Southeast Asia, Shopee, Lazada and Tokopedia have created marketing solutions such as bidding keywords and sponsored products for sellers (example: MyAds and Sponsored Search), but all of these solutions are still in development.

Source: Epsilo Research July 2021

Sellers in Southeast Asia are also struggling to grow, unlike their Amazon counterparts in the West. This is because this region has nine top marketplaces strong in their respective local markets. To win e-commerce in Southeast Asia, sellers must exist in all retailers.

“We understand the challenges that shop owners in this region face. Unlike other markets where Amazon dominates, merchants here [Southeast Asia] sell in more than three or four marketplaces across six different major markets. With a large portfolio, busy campaign calendar, but inadequate tool features, clients often tell us that their marketers are overwhelmed,” said Quang Tran, Founder & CEO of Epsilo, a provider of funded ecommerce marketing SaaS solutions Surge Accelerator from Sequoia India.

Source: Webretailer, 2021

“We built Epsilo to give store owners control over growth. Our clients may range from Unilever to SMEs, but our technology enables merchants of any size to manage their stores and grow their GMV across major marketplaces, across multiple geographies and users.”

In Amazon-dominated markets like Europe and America, businesses like Epsilo - Helium10, Stackline, Jungle Scout - are commonly adopted by companies to automate advertising, increase ROAS, gain competitive intelligence, and unify ecommerce analytics data under a single platform. These SaaS companies have raised over $300 million in funding as VCs recognize their popularity and potential in the global marketplace.

In order to enter the next wave of marketing in Southeast Asia, there are three key ingredients needed to leverage retail media:

Technology - what tools can help businesses execute faster and provide customized reports with metrics that can make decisions faster? While many technologies out there provide the same service, look for software that is customizable and rich in features.

Data - what data can be obtained from the marketplace? Have the right KPIs been measured in order to continue to understand how to improve campaign performance, or are KPIs measured simply because those indices have always been measured? GMV and ROAS are important, but CVR (conversion), CTR, IS (items sold), and others are equally important.

Talent - are the right people in the right place to assess insights and make changes if performance isn't up to the mark? If talent is too expensive or too difficult to recruit, can technology be used to automate manual tasks?

The COVID-19 pandemic reignited the ecommerce fires as shops and malls were forced to close, forcing non-believers to move to online platforms. But only players who can adapt to technology and data quickly can make the $100 trillion world of retail media a reality.

- Disclosure: this article was created by Cynthia Luo, Head of Marketing at Epsilo.

Epsilo is a leading ecommerce marketing SaaS solution provider that brings together online campaigns from across SKUs, marketplaces, and countries to optimize sales, marketing and operations. Epsilo technology grows GMV and return-on-ad-spend (ROAS) through onsite marketing automation for effective keyword bidding and targeting.

Cynthia can be contacted at hello@epsilo.io

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