It’s common understanding that the pandemic made years of expected eCommerce growth take place in just a matter of weeks.
As consumers stayed home, delivery services for every product ranging from staple groceries to office supplies became the norm.
Now that 2022 is almost here, we see that there simply is no going back to “normal” shopping patterns. People are accustomed to ordering their retail items online and want them delivered quickly, cheaply and sustainably.
As our shopping behaviors continue to depend on eCommerce, customer acquisition costs are growing. Our data shows that programmatic spending from retail brands has increased drastically. Not only that, but companies are building out their own eCommerce platforms and omnichannel advertising services.
Programmatic Spending from Retail Brands is Increasing
According to Shopify’s 2021 Future of Commerce Report, ten years of eCommerce growth took place in just 90 days last spring. As retailers closed and people stayed home, a record 16.4% of global purchases took place online.
As more shoppers went online, global wholesalers like Walmart and Costco ramped up their online capacities, making the digital marketplace increasingly difficult to enter for new competitors.
“eCommerce as a percentage of total global retail sales will also continue to grow over the next five years,” write the authors of the report. “This trend is not only a tailwind for digital brands, but also a headwind as the world of eCommerce becomes more crowded and competitive than ever.”
This translates to higher ad prices, increased customer acquisition costs and higher pressure on brands to build out their omnichannel strategies.
According to MediaRadar research, in 2021:
- 43 thousand companies have spent $6.6 billion on programmatic retail advertising so far.
- Retail programmatic spending is up 136% YoY (January – October), an increase of $3.8 billion.
Top advertisers—Target, Walmart, Harbor Freight, Michaels and Menards—have spent $1 billion together (accounting for 15% of all spend from programmatic retail advertising this year.)
Increased Ad Spending Isn’t Enough—Retailers Get Creative to Drive Value
Increased spending on advertising from top retailers isn’t the only retail trend we’re seeing.
We’re seeing companies like Saks and potentially Kohl’s split their “bricks and clicks.” In order to focus more on their digital strategy and grow faster, retailers are separating their brick and mortar stores from their online stores.
“It is the most logical thing for a retailer to do at the moment. You get fresh capital, a chance to invest in a high-growth digital business, money to hire new people, and you expand the business, and can still invest in the slower growth store business.” explained a retail expert about Kohl’s .
Another creative move came from Lowe’s. The home improvement retailer recently announced its debut of Lowe’s One Roof Media Network, a platform offering omnichannel advertising services for brands in the home improvement and home furnishing category.
According to Marisa Thalberg, Lowe’s executive vice-president, chief brand and marketing officer, “Lowe’s deep understanding of the home lifestyle customer and real-time trends” helps brands “develop custom, comprehensive approaches designed to deliver on their business goals.”
Top brands in the beta testing have already seen positive results from their ad campaigns. Lowe’s reported that one kitchen and bath brand saw a 700% return on ad spend.
With retail giants building out their own ad services, they are bringing in programmatic ad revenue on top of their traditional earnings. And partner brands have more ways to attract customers in this highly competitive digital environment. With this shift, we expect to continue to see increased programmatic purchasing in the retail category.
For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.