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This has been an unexpected silver lining, but it also comes when darker clouds are gathering for retailers looking to sustain and build upon this growth. While it is positive news that retailers and consumers have embraced e-commerce, simply having an online presence isn’t enough. Retailers now have to find a way to tap into the digital zeitgeist with cost-effective ways of acquiring new customers.
The storm clouds
The alpha tech titans are one of the key storm clouds looking over retailers’ heads. Globally, Google and Facebook gobble up somewhere between 80 to 90 per cent of all digital advertising spend, and within Southeast Asia, they still command the lion’s share of ad spend, despite some stronger local players.
This was already problematic for retailers forced behind walled gardens to reach consumers, with customer acquisition costs continuing to rise to the extent that costs are outpacing consumer lifetime value (LTV). However, it’s about to get a lot worse. Google will phase out third-party cookies by the end of the year, and Apple is effectively getting rid of them altogether by giving consumers more control when iOS 14.5 is introduced.
Given that digital advertising has largely been built upon third-party cookies that track the way a person shops online, it will significantly impact the way brands execute digital marketing strategies. Indeed, Kantar’s 2021 media predictions report that more than half (58 per cent) of marketers doubt they can provide key performance metrics without cookies, and 64 per cent of media owners and publishers are worried about the impact of a cookieless world.
Yet, the imminent demise of the cookie isn’t the darkest storm cloud facing retailers. The largest cloud is the continual erosion in consumer trust and tolerance for digital advertising. This has been a slow burn over the past decade or so that has recently become more acute as the initial promise of online advertising lost its shine with consumers. Intrusive banner ads that disrupt page load times and obscure content, relentless retargeting (we’ve all been followed around the internet by a pair of sneakers we once looked up), and concerns around consumer privacy raised by General Data Protection Regulation (GDPR) and the high-profile global enquiries into Facebook and Google have further damaged consumer trust.
This distrust, combined with the digitised ability for consumers to create their own content on YouTube, social media, blogs, and most recently, platforms such as TikTok, has fundamentally changed how consumers are influenced on their path to purchase. Increasingly, they are more likely to be swayed by peer reviews and digital recommendations from (often digital) sources they trust and have a personal connection with. Today, people go online for three things: entertainment, information and connection with others. No-one opens a browser tab to be sold to or bombarded with disruptive pop-ups, banner ads and sales pitches.
The new consumer path to purchase
This new user-empowered way of communicating puts first-hand information before the impersonal data collected by third-party cookies. These category experts and tastemakers established trust with their audience and spoke for brands in a more authentic voice. As social media platforms evolved, it became clear that when a content creator recommends a brand in their authentic voice, the audience connects with that content more profoundly. It establishes a level of trust that brand-generated ads simply can’t.
Nowadays, most customers — particularly millennials and younger generations — prefer to research, vet brands for value-alignment, or visit trusted publishers and content creators for recommendations. This means retailers have to rethink their marketing activities to create authentic, purposeful, and helpful content that aligns with what customers seek out online (entertainment, information and connection) versus disrupting it.
And smart brands are finding that performance-based partnerships are an effective and lucrative way of forming these authentic connections.
The rise of the partnership channel
Partnerships are hardly a new concept, particularly in retail, which has a long tradition of affiliate activity. Indeed, the concept of two people or groups working together for mutual benefit has probably been around since the dawn of time.
What has changed is that today’s modern partnerships offer unique opportunities for business growth that simply didn’t exist even 20 years ago. This is because as technology has evolved, the partnership channel has evolved with it and expanded its definition.
Nowadays, partnerships can take many forms, including influencers, loyalty programs, coupon sites, mobile app integrations, social media influencers, B2B, key opinion leaders, publisher partners, charities and social responsibility, and so on.
And as the list continues to expand, we see the emergence of partnerships as an entirely new channel that’s distinct from marketing or sales. One that enables businesses to expand their revenue channels, evolving beyond sales and marketing and creating unique experiences for the customer and sustainable growth.
The partnership growth opportunity
The exciting news for retailers is that the partnership channel is driving meaningful incremental revenue for brands. We know from Forrester Research that brands that are actively engaged in building mature partnership programs have seen their overall revenue grow by 28 per cent and that they enjoy two times faster revenue growth than competitors with no or low partnership maturity.
For example, Lenovo drives 25 per cent of its revenue through the partnership channel; more than the average 20 per cent of revenue generated by retailers from paid search.
For companies that have fully invested in the partnership channel, we know it can drive a 314 per cent ROI on average with a payback window that takes less than six months. Little wonder we saw so many retailers look to the partnerships channel to provide accountability and attributability when the impact of Covid-19 hit.
Further, brands are also able to use the partnership channel to boost brand awareness as well as actual sale numbers due to the halo effect of being connected with authentic and trusted influencers. Customers will consequently be more likely to convert into paying customers, driving customer acquisition and retention metrics.
But the really exciting part for retailers is that whatever success metrics you wish to achieve via partnerships, the technology now exists to track, reward and optimise them. The Impact Partnership Cloud allows retailers across Southeast Asia, including Razer, Decathlon, Love Bonito and Lenovo, to find, recruit, contract, manage, reward, optimise and report on their partnership activities. Gone are the days when influencer campaigns could only be measured via likes and clicks. Instead, retailers can work with them on a performance basis, so there is a clear ROI, and they know exactly how many sales these influencers are driving — or where their influence is felt along the sales funnel.
For retailers looking for sustained growth, it’s impossible to ignore the dynamic and evolving world of the partnership economy. Miss out at your peril.
This article was originally published in the Asian Retail Outlook, powered by Salesforce. You can download the report here.