What we know about e-commerce and social commerce?
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The ubiquity of smartphones has accelerated the evolution of e-commerce and social commerce. More brands are keen to adopt an ‘always on’ approach and try to facilitate seamless online purchases at every opportunity, directly connecting marketing communications with the opportunity to purchase.
Definition
E-commerce describes the trading of goods and services online. Social commerce describes online retail which uses social networks or peer to peer communication to drive sales.
Key insights
1. COVID-19 has dramatically accelerated e-commerce growth globally
In the US, e-commerce as a share of total U.S retail sales increased 11 percentage points in an eight-week period thanks to COVID-19, surpassing the total growth seen over the previous ten years. Online grocery in particular saw a huge jump. In China, e-commerce is expected to grow 34% in 2020, up from the pre-COVID-19 forecast growth of 26%. Marketplaces such as Amazon and Alibaba have seen exceptional growth, omnichannel retailers like Walmart and Target are expanding their online offering and platforms like Shopify and Instacart have risen in prominence. Brands in sectors such as FMCG have seen rapid e-commerce growth. E-commerce growth shows no sign of abating with half of consumers saying they will shop online more frequently post-pandemic, particularly GenZ and higher earners. The growth in e-commerce has prompted brands such as Budweiser to look at DTC offerings and has accelerated digital transformation for others as well as partnering with traditional omnichannel retailers, major online marketplaces and pure-play operators to drive brand growth. Existing platforms like Amazon allow brands to begin selling at speed and scale and offer a strong ROAS for sponsored listings. Brands looking to build their own e-commerce offering should use data to identify customer pain points, align every component and use a 'test and learn' approach.
2. To be effective in e-commerce, brands need to address the marketing basics
Effectiveness in the e-commerce age requires a rethink of the 5 P marketing fundamentals - product, pack and price, proposition, people and place - to see how they can flex for the online world. For example, brands such as Mondelez and Hershey are offering bigger packs and multi-buy options, at different price points, as they look to boost profitability out of online retail.
Delivery is now a new 'moment of truth' for online brands, with packaging a key touchpoint. The moment when the customer receives a package is an opportunity for a brand to showcase its creativity and enhance the brand experience. And unboxing is a moment that marketers can capitalise on.
Research into the psychology of online shopping found that mental availability matters more than ever. Online shopping is perceived as risky, even by risk takers, but strong mental availability helps shoppers feel confident and in control. As well as mental and physical availability, brands need to plan for digital availability too. In other words, marketers need to have a strategy for how and where they show up online.
In addition to the basics, like visibility in search, brands should also prioritise influential factors like strong online reviews. A recent report by Google and The Behavioural Architects shows that social proof can influence consumer decision-making and therefore help win the ‘digital shelf’. Getting on consumers’ digital shopping lists where goods are ordered on auto-pilot, or repeat, will be a key objective for online brands.
3. Shoppable formats are driving the convergence of e-commerce and media
The shift to e-commerce is transforming performance marketing. Where previously search engines commanded most of the budget for bottom of the funnel conversion, today e-commerce platforms offer a better return. Amazon has seen record growth in the face of the COVID-19 outbreak with significant increases in ad revenue, according to the latest company reports. This contrasts with the performance of Google Search where revenue dropped 9.8% year-on-year, according to the latest company reports.
E-commerce platforms like Alibaba in China offer a range of advertising options to capture as much of the purchase journey as possible, from awareness and engagement right through to purchase. This promises a seamless customer journey, with no need to leave the site to make the purchase. Unsurprisingly, other platforms such as Amazon 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 e-commerce by developing shoppable formats and storefronts within their platforms.
Omnichannel retailers like Walmart and Target are getting in on the action too. They are becoming advertising and media destinations by ramping up their e-commerce capabilities.
4. Ramping up e-commerce should not lead to a short-term mindset
The rise of shoppable formats and e-commerce media, compounded by recession, is likely to accelerate the shift toward short-termism identified by researchers such as Les Binet and Peter Field. A global study by Ebiquity found 62% of brands will decrease their investment in brand advertising while 32% report more spending on e-commerce. Brands such as Adidas and Expedia have been upfront about the lure of short-termism, and have taken steps to course correct.
There is evidence that a strong brand is key to driving traffic, boosting performance of direct-response ads and maintaining price premiums online. Strong brands also signify trust, which is especially important in difficult times, and especially important in e-commerce - not just in the brand but in the entire end-to-end experience. A balanced approach is key – it’s not a question of investment in either brand or activation, but a smart blend of both.
5. In Asia, live commerce is the next big thing in online shopping
Livestreaming is an e-commerce format and marketing and sales method. It integrates live product demonstrations, live Q&As, time-limited price promotions, live negotiations, and instant ordering through online streaming services hosted either by an influencer studio, or online store. Livestreaming as an e-commerce format has been booming in China since the beginning of 2020, accelerated by store closures and consumers spending more time at home in Q1 due to the COVID-19 crisis. According to BCG 30% of consumers say they are shopping more via short-form video platforms like TikTok and via livestreams like Kuaishou - and that they will continue to do so. The number of livestreaming users reached 560 million in China as of March 2020, representing 62% of the country’s total number of internet users.
While livestreaming is focused on driving short term sales, it can enable improved marketing efficiency by combining brand marketing and performance marketing. To do so it needs to be viewed as content not just sales. While Chinese consumers say the main reasons for attending livestreams are “instant coupons, irresistible gifts and discounts”, inspiring, educational and helpful content is appreciated - research has found that well-appreciated content has a 72% correlation with a better perception of a retail brand.
Livestreaming has become increasingly popular in Western markets since the COVID-19 lockdown, mainly for entertainment, though brands such as Bobbi Brown have had success using it for commercial purposes.
6. Social commerce is helping brands convert engagement into effectiveness
Winners of the Effective Social Strategy category in the 2020 WARC Awards, particularly those in the QSR sector, show how brands can engage people throughout the funnel and convert engagement into effectiveness. For example, Burger King achieved a sales uplift by promoting its new product through a campaign based on ‘creeping’ on social media influencers’ pages. KFC Arabia saw a significant uptake in online food delivery from its Scroll-Thru campaign, which effectively engaged a millennial audience at all stages of the funnel, with Facebook content that entertained, engaged and then converted. Success was due to a carefully crafted user experience, clever use of shoppable ad formats and smart programmatic targeting.
To capitalise on social commerce, brands are advised to do five things:
- Create better mobile social commerce experiences, especially on mobile-specific social media platforms
- Become more visually driven, relatable and authentic so content stands out from fast-rolling mobile news feeds - and encourages shoppers to click to find out more and then buy
- Build trust and consumer confidence with online experiences which demonstrate the clear value – and security – of browsing and shopping via social channels
- Test and measure the effectiveness of any investment instead of, and as well as, in-store promotion
- Constantly optimise the continually evolving customer journey to reflect online behaviour
7. Winning instore increasingly requires winning online first
Currently successful brands need to face up to three key challenges created by the shift to e-commerce. Firstly, it is causing the retail shelf to shrink - the digital shelf on desktop only displays 6-12 SKUs for consideration, the mobile shelf only 2-3 SKUs and the voice-assisted shelf only 1 SKU. So despite the virtual aisle with millions of choices, the nature of the digital shelf is one of greater curation, personalisation and recommendation to limit choice and drive conversion - if a national brand is not winning there, it ultimately ceases to exist to the shopper. Secondly, e-commerce has enabled the rise of multiple kinds of challenger brand competition to national brands – DTC and digitally-native brands, specialty channel brands, private label and retailer exclusive brands – as well as giving agile smaller brands a new route to growth. Thirdly, digital leadership increasingly influences instore stocking decisions. So winning online with strategic retailer partners will give national brands the greatest competitive edge to not only capture disproportionate share of growth in the #1 growth channel, but also in the omnichannel marketplace as retailers make increasingly difficult decisions about what they carry in their physical stores.
To be successful in e-commerce particularly on Amazon, brands should consider ten principles:
- Promote strategically with bundles or unique items rather than price reduction which can erode pricing and profitability long-term
- Invest in subscription programmes that promote loyalty as the positives outweigh the costs
- Prioritise online retailer order fulfilment because being out of stock in e-commerce is much more damaging
- Prioritise investment in category keyword search rather than branded terms as its is more likely to produce incremental business
- Focus on increasing engagement through improved content on the display page – rather than SEO - to increase conversion which in turn drive better search outcomes
- Treat consumer reviews with the utmost respect
- Protect the brand equity by monitoring pricing and enforcing pricing policies
- Consumer demand, not price incentives, drives increased retailer demand
- Retailers value post-promotional lift rather than in-event ROI in evaluating the success of a promotion – and so should brands
- The incrementality of e-commerce is hard to measure but is the leading indicator of long-term omnichannel success
8. To make the most of e-commerce holidays non-destination brands need to be “retail ready”
Black Friday, Cyber Monday and Amazon Prime Day are now hugely important e-commerce occasions for brands. Non-destination products (think toilet paper, shampoo, coffee, etc) don’t benefit from the retailers’ limelight or shoppers’ wish lists. These brands must work much harder to drive traffic – via aggressive promotion before the event, targeting loyal shoppers during the event or retargeting after the event. Whatever approach they take, brands must ensure they are “retail ready” to convert the maximum sales from all traffic by getting product availability, pricing, page content and search elements right.
9. Digital marketplaces are overtaking search as the key source of online product information
According to a digital advertising benchmarking report by SaaS, brands are increasing their e-commerce ad spend by up to 40%, with Amazon the key beneficiary. While search engines used to be in pole position for online shoppers, Amazon is becoming the go to place for product information. Two-thirds (63%) of online shoppers start their product searches on Amazon and additional research shows that most turn this into a purchase. This compares to less than half (48%) of online shoppers saying they start their product search on search engines. Other marketplaces like eBay, Rakuten and Etsy also score highly on product search and attract more customers than many retailer and brand sites. Marketplace or Amazon optimisation may become as important as SEO. Search is in decline particularly amongst the under 24 age group, while Gen Z is more likely to go straight to a brand website.
Some report that digital marketplaces account for half of all global online retail sales. For brands it is therefore increasingly important to control and orchestrate their brand story on these platforms. To win, brands must communicate their distinctive value at the point of sale by bringing brand messages into the commerce experience. Adapting and embedding brand content to create emotional connection or more engaging mobile experiences are ways to do this. Marketplace experience dashboards and digital twin technology are tools that can help brands tailor and manage their experience across multiple marketplaces.
10. Voice and visual search are increasingly important in e-commerce
Voice commerce and voice advertising are also set to grow with the increased penetration of smart speakers enabling consumers to shop by just asking. As smart speakers usually present only a limited and curated choice of products, they pose a potential threat to big brands unless they get their branding and advertising right on the channel. However, voice commerce might prove a big opportunity for smaller businesses, such as local services, which currently have a limited online presence.
Visual search adoption for shopping and product research is also growing. E-commerce giant Alibaba launched its visual search engine ‘Pailitao’ in 2014 and by mid-2017, it was already averaging over 10 million daily unique users. eBay receives an estimated 1.8 million visual searches monthly and speculates total monthly visual searches top one billion. Leading visual search platform Pinterest reports that visual searches grew from 250 million to 600 million from February 2017 to February 2018. By embracing visual search brands can:
- collapse the conversion process, taking the consumer from image to purchase in seconds
- be retail-ready on visual platforms like Pinterest and Instagram
- enable consumers to search more effectively, particularly when they don’t know the name of the item they’re looking for.
- increase sales through increased conversion and conversion value
11. US retailers are looking to imitate Amazon’s online ad business
Multichannel US retailers such as Walmart, Kroger, Target and Wayfair are exploring combining previously underutilised online customer data with instore purchase insights to create an ad business. This would enable them to offer packaged goods companies opportunities for personalised digital marketing campaigns delivered at the moment of purchase. Availability and reach of data-driven advertising within online retail environments will grow as a result. As ad platforms these retailer offerings may not be as sophisticated as Facebook and Google but they do provide a more unified in-store and on-site experience for advertisers that digital-only platforms cannot provide.
12. Engagement and e-commerce are converging
On e-commerce platforms, where shelf-space is not an issue, brands are building elaborate zones where consumers can engage and buy at the same time. While, in the real world, people increasingly use smartphones when shopping, giving brands the opportunity to engage with the shopper. China is at the forefront of this convergence. Alibaba and Tencent have created ecosystems which integrate content and commerce seamlessly, use Unique User IDs to track consumers and deliver brand-building as well as sales-driven messages, and have easy payment which shortens the gap between brand communication and transaction. In this converged world, brands need to plan branding and e-commerce together against a single outcome – sales – with an end-to-end approach.
13. The evolving direct-to-consumer business model offers challenges and opportunities for brands
Direct-to-consumer (DTC) is a form of e-commerce that involves a direct transaction between manufacturer and buyer, often enabled through mobile and digital channels, that allows brands in sectors such as FMCG and food to cut out the retailer ‘middlemen’. DTC brands are also sometimes known as v-commerce brands, or digitally native vertical brands. Some DTC brands control more of their upstream supply chain, as razor brand Harry’s did by buying a 100-year old blade factory in Germany outright. Other similar subscription models such as Warby Parker, Glossier, Birchbox and Ritual are fast establishing the direct-to-consumer model as one of the most popular with consumers today – because of a focus on high quality products and excellent customer service. Established brands are fast-adapting to new and growing direct-to-consumer challengers.
Source: warc.com
