British online retailers are among some of the most visited websites. However, placing paid-for or sponsored links to third parties on retailers’ website – a well-established practice for retailers in the US – is still being viewed with suspicion by the majority of retailers in the UK.
This has been the case for a number of reasons. Firstly, e-retailers have been concerned that advertising on their websites could potentially deflect consumers away from their site. They have also been worried by the effects that promotional messages on their website may have on consumer perceptions of their brand. Finally, retailers have also expressed some operational concerns around internal accountability structures – for many retailers it is not clear who in the organisation would own this revenue stream
OC&C Strategy Consultants’ report, Creating Value from Every Visit, busts some of the myths which have led to a lack of uptake on onsite advertising here in the UK.
Here, we list the top-five reasons as to why retailers should re-evaluate their position:
1. Retail websites have a huge potential audience
With an estimated 7.5 billion page views a month, British online retailers are among some of the most visited websites by consumers – consumers who are already there to shop. But the digital media revenues of British online retailers from selling search, display and trade advertising amounted to less than £150 million over the past year. By comparison, news websites made approximately £400 million in digital media revenues, despite receiving only 3 billion page views. There is a huge missed opportunity here, which many retailers are as yet not making the most of.
2. UK retailers are failing to tap into a substantial new revenue stream
Although the UK is one of the most advanced online retail markets in the world, British retailers are behind the curve when it comes to monetising shoppers as well as browsers on their website. Our research estimated British online retailers are missing out on an estimated £1 billion worth of advertising revenues by choosing to not sell advertising space on their own websites. And in the UK, only two of the top-10 retailers choose to sell media space on their websites compared to eight of the top-10 in the US.
3. On-site monetisation does not negatively impact the customer experience
Some UK retailers have shared concerns about deflecting traffic away from their own websites (and potentially to competitors) or putting off customers by advertising on the websites. However, our research shows that the presence of adverts on a retailer’s website has very little impact on consumers’ purchasing decisions. Only 3% of consumers referenced having no sponsored links as an important purchasing factor, ranking well behind value for money (56%), quality of products (43%) and free delivery (33%). In addition, recent analysis by Neilson of several US e-retailers revealed no significant changes in conversion rate after launching third party onsite advertising.
4. Many retailers are already doing it offline
Digital advertising is a natural continuation of practices many retailers are already undertaking offline. In fact, offline shops are already regarded as media platforms in their own right with supplier-funded promotions and product recommendations commonplace. It’s a natural transition for this activity to move online too. Offline or online, retailers are well positioned to provide adverts generating significant traffic from consumers with clear and valuable missions: they are there to shop.
5. Retailers can adapt the advertising solution to best fit their brand
There is no one-size-fits-all solution that will suit every retailer. There are a number of options available, ranging from less intrusive solutions that redirect a retailer’s traffic to other areas of their websites, to more profit-led implementations that are typically funded by third parties and lead traffic offsite. If retailers find a solution that suits their brand it could potentially improve the experience for their customers, by giving them useful recommendations.
In practice, each retailer needs to find a model that’s right for them and implement it in the right way. Crucial to this is assigning a clear owner for media revenues who is empowered to take decisions, and who will help define the scale of the opportunity and how they want to deploy the advertising solution– whether by partnering with a third party provider or developing in-house capabilities. The team should also be responsible for ensuring that clear rules and regulations are defined for on-site advertising and that trials are run to make sure the model chosen works for the brand’s customers. Iteration is critical here – you won’t hit the right formula first time, but retailers need to start at a level that they are comfortable with, and work from there.
By Anita Balchandani, Partner at OC&C Strategy Consultants.
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