By Brad Moran, CEO and Co-founder, Citrus Ad
Online retail is amid a period of rapid growth, but no-one could have predicted the huge impact that COVID-19 would have on consumer shopping preferences. According to recent research online sales are now expected to grow beyond the initial predictions of 11% to 19% in 2020, reaching £78.9bn, that’s up from £66.3bn in 2019.
It’s been suggested that it would have taken up to six years to get to the levels seen in May 2020 if the growth continued a similar trajectory as previous years. With this accelerated shift in focus to online never has developing an effective online media strategy been so important.
With the fast increase in online sales brands recognise just how important prominent positioning on the digital shelf is and the impact it has on online and in-store sales. It’s where consumers go to research, browse and discover new brands and presents a huge opportunity.
Retailers must take advantage of this unprecedented growth. Occupying the best position on the digital shelf is the way to an even bigger, captive audience and along with it, huge growth opportunities in sales and brand awareness. The question is how can it be achieved?
CPC (Cost Per Click) has been a proven media sales model for mass merchants such as Amazon and Google for many years. Such is its success that that by 2021 Amazon is projected to reach a 50 per cent share in global online sales (STATISTA). But while CPC is perfect for retailers with millions of sellers it does require considerable brand oversight and doesn’t provide the desired results for less dominant players, so it isn’t right for every brand or retailer.
With budgets squeezed knowing what they’re buying in advance is imperative for brands and agencies. Competitiveness for categories and seasonal fluctuations make CPC unpredictable and difficult for profit and loss forecasting. This is difficult for retailers who are often managing budgets for over 100 brands. Not being able to accurately tell brands how much budget they must assign to CPC and continually having support, educate and re-sell to brands presents its own problems. CPC also needs constant monitoring making campaigns difficult to plan.
It’s clear retailers can’t rely on CPC but must find a solution that complements their CPC (Cost per click) strategy as they seek to occupy the best spots on the digital shelf and maintain advertising revenue. For them fixed price media is appealing as it’s what internal merchandising teams are more used to.
Acquiring the best spot
There is an alternative solution that brands, and retailers can both benefit from. It’s a blended model comprising a CPC auction approach with a Fixed Tenancy model and provides a guaranteed advertising position that helps retailers retain their advertising base and increase revenue.
The top two rows in any ecommerce platform are the digital equivalent of being shelved at eye-level in a bricks and mortar store. There are between six and eight positions and approximately 80 per cent of clicks and impressions happen here.
Fixed tenancy provides brands with a far simpler and effective digital advertising channel as they can be valued up to a Cost Per Mille (CPM) of a certain amount.
Generating a typical Return on Ad Spend (ROAS) of between 200 per cent to 400 per cent right at the point of purchase and this doesn’t include the additional sales that these positions influence such as in-store and favourites lists. We have seen some retailers reporting that up to 60 per cent of a product’s clicks online become an in-store sale within four days which illustrates the additional value these positions present.
The optimum route
For both brand and retailers, a blended fixed tenancy model offers considerable benefits. Big, active brands will have peace of mind that they are in the best positions and rather than being fixated on CPC prices their focus can shift to analytics. Furthermore, the cost is predictable and will outperform other digital advertising options.
For retailers, the fixed tenancy model enables them to concentrate on providing complete solutions for their bigger brands rather than wasting resources on campaign management. And because it’s a known quantity brands are far more willing to commit, and this provides retailers with the assurance of a fixed baseline revenue.
The sharp change in pace of ecommerce growth brought about by COVID-19 is an opportunity that digital advertisers should seize with both hands and should include a blended CPC and fixed tenancy, providing more options to their brands, whether they are big or small. The optimum route is a technology platform that blends both solutions and delivers on all levels.
This way retailers get to focus on their core business merchandising strengths and achieve a steady revenue stream, while brands are rewarded with a high-performing, innovative online advertising strategy at the point of purchase that guarantees the best positions and grows sales.