Retail media networks, digital wallets and live commerce are three digital trends that have been around for awhile but have risen in prominence over recent years. Let's take a deep dive into why that is.
Everyone knows that trends can come and go, and when it comes to the digital world, this fact rings especially true (Remember NFTs? Neither do we). But some online retail trends, which have been simmering steadily on the back burner, are now shooting up in popularity and are primed to ignite: Retail media networks, digital wallets and live commerce.
All three have seen a huge growth in adoption by retailers, emerging as pivotal tools transforming how businesses function in the digital world and how consumers engage in shopping experiences. But what's propelling these three specific trends to such heights? Why do they strike a chord with businesses and consumers alike?
In this blog post, we unveil the essence of each trend, decoding their significance, unraveling the reasons behind their meteoric rise and illuminating the profound benefits they offer both businesses and their clientele.
Retail media networks
Ever noticed those flashy end-of-aisle displays at the supermarket trying to entice you into grabbing that last-minute chocolate bar or those shiny new gadgets? Well, think of retail media networks as the digital version of those eye-catching promotions, but on steroids! Let's say you're perusing an online marketplace for a new set of speakers. Those "sponsored" items you spot at the top of the page? They're not just random finds; they're carefully placed ads that a vendor paid to have placed right in your line of sight. It's the online shopping equivalent of those checkout aisle temptations, strategically tailored to fit into your browsing experience.
Back in 2012, Amazon decided to revolutionize online shopping by taking those in-store advertising tactics and turbocharging them for the digital era. And voila — the birth of what we now know as a retail media network, which Amazon defines as “a type of advertising platform that allows retailers to sell ad space on their digital channels to third-party brands.”
In straightforward terms, retail media networks are the advertising opportunities, aka product placements, that online retailers offer to other companies on their digital commerce channels, be it their website, mobile app or even in-store digital display. These virtual billboards give advertisers a direct line to the retailer’s customers — which can expand their audience exponentially.
The idea is to get your attention while you’re in the midst of your online retail therapy. In some cases, retail media networks offer advertising opportunities to non-competitive brands. For example, you could be shopping for new pillows and an ad from a mattress company might pop up. Or maybe you’re shopping for new jeans and see an ad from a boot company — the possibilities are endless.
Retail media isn't confined to just Amazon and other retailer websites. It's branching out to various platforms and websites, spreading its influence across the digital landscape. Today airline websites feature ads promoting hotel and rental car brands, while cooking sites showcase companies that sell tableware and cookware. This expansion isn't just a trend; it's reshaping how brands reach out to consumers online. Projections suggest that by 2026, retail media could command a whopping 25% slice of the entire digital media spending pie, highlighting its skyrocketing importance and effectiveness.
Implementing retail media networks offers online retailers multifaceted benefits. Beyond traditional product sales, retailers can monetize their platforms by offering advertising spaces. This diversification creates an additional revenue stream, bolstering profitability. Furthermore, these networks foster deeper collaborations between retailers, brands and vendors.
By sharing valuable consumer insights and analytics, retailers empower brands to refine their advertising strategies, creating a mutually beneficial relationship. This synergy results in increased ad revenue for retailers and more effective, targeted advertising for brands within the shopping ecosystem, enhancing overall customer engagement.
The concept of retail media networks has evolved, with Amazon's "Amazon Advertising" platform, being the pioneer in popularizing and leveraging retail media networks to monetize their eCommerce platforms by offering targeted advertising spaces. Over the years, numerous retailers and eCommerce platforms have followed suit, developing their own iterations of retail media networks to offer advertisers opportunities for highly targeted placements within their digital storefronts.
2022 marked a significant milestone for retail media networks, witnessing a staggering USD 40 billion spent on advertising in the United States, as reported by eMarketer. This impressive figure is projected to soar to USD 52 billion in 2023 and further to USD 61 billion in 2024, according to their estimations.
McKinsey's forecasts are even more optimistic, indicating a potential advertising spending surge to reach USD 100 billion by 2026. The consultancy firm emphasizes the transformative impact of this technology on the advertising industry's value chain, projecting over USD 1.3 trillion of enterprise value in the United States by 2026. Notably, amidst retailers' quest for diversified revenue streams, retail media networks are offering lucrative operating margins ranging from 50% to 70%.
Digital wallets, akin to a sleeker version of your traditional wallet residing right within your smartphone, represent a transformative leap in the realm of online transactions. These virtual repositories securely house payment information, transforming the once-arduous process of online payments into a seamless, user-friendly experience.
Emerging from the tech renaissance of the early 2010s, these digital saviors swiftly reshaped the landscape of financial interactions. This evolution has been powered by giants like Apple Pay, Google Pay and PayPal, spearheading the digital wallet revolution with innovative functionalities and robust security measures.
At their core, digital wallets serve as custodians of sensitive payment data, employing encryption and sophisticated security protocols to safeguard your financial information. This digitization of payment methods not only assures users of enhanced security but also streamlines the checkout process, shaving off precious seconds during online purchases. It's not just about convenience; it's about a shift toward a safer, more efficient online payment ecosystem.
Digital wallets wield significant advantages within the online retail domain. They serve as an antidote to cart abandonment concerns, streamlining the checkout process and fostering a frictionless payment experience for customers. As a result, retailers observe a marked increase in completed transactions and a reduction in transactional complexities.
Moreover, digital wallets function as reservoirs of valuable consumer data, capturing intricate insights into consumer behaviors and preferences. This data becomes a catalyst for retailers, enabling them to tailor their marketing strategies more precisely, aligning offerings to resonate with customer needs and preferences.
The evolution of digital wallets has been remarkable, with a value estimated at USD 54.01 trillion in 2023 which is expected to grow at a compound annual growth rate (CAGR) of 10.5% over the forecast period, GlobalData reports. This meteoric rise underscores a fundamental shift in consumer payment habits toward digital convenience and security. Notably, successful companies leveraging digital wallets have observed significant upticks in completed transactions and improved customer satisfaction rates.
In the competitive landscape, industry leaders like Apple Pay, Google Pay and PayPal stand out for their strategic implementations. They've achieved success by offering seamless, secure and user-friendly payment experiences:
Apple Pay's integration of biometric authentication and contactless payments has set a standard for convenience and security.
Google Pay's focus on simplicity and compatibility across devices has garnered a widespread user base.
PayPal's versatile platform, catering to both online and offline transactions, has established it as a frontrunner in the digital wallet domain.
These companies' relentless pursuit of user-centric innovations and commitment to enhancing the payment experience have contributed significantly to their success in the digital wallet landscape.
Live commerce isn't a newcomer to the digital shopping scene — it's been a sensation in East and Southeast Asia for years, particularly during COVID-19 lockdowns, setting the stage for its recent surge in popularity in the West. Originating in countries like China, live commerce emerged as a powerhouse by marrying live streaming and online shopping, captivating audiences with real-time product showcases. Its arrival in the West in recent years has marked a paradigm shift in how consumers engage with online shopping.
Imagine tuning into a live video on your favorite social platform, watching a host passionately demonstrate the latest gadgets or fashion pieces while chatting with viewers in real-time. That's the essence of live commerce — a dynamic fusion of live video streaming and eCommerce that creates an immersive shopping experience. This interactive trend gained traction globally with the rise of social media, evolving into a retail spectacle that combines entertainment and engagement with the convenience of online shopping.
Live commerce heralds a new era of engagement and profitability for online retailers. One of its foremost advantages lies in fostering profound connections with customers. Through real-time interaction, retailers transcend the screen, engaging audiences in a dynamic dialogue that goes beyond traditional eCommerce interactions. This direct engagement not only humanizes the shopping experience but also cultivates a sense of community, forging stronger bonds and nurturing enduring brand loyalty.
The real-time nature of live commerce serves as a dynamic feedback loop, allowing retailers to swiftly adapt to customer preferences. This agility allows them to fine-tune product showcases, promotions and offerings on the fly, creating tailor-made experiences that resonate with individual tastes. As a result, customers feel valued and heard, enhancing their satisfaction and likelihood of returning.
Moreover, live commerce isn't merely about showcasing products; it's about creating an immersive shopping experience that triggers impulse purchases and conversions. The interactive, captivating environment generated during live sessions transcends the passive scrolling of traditional online shopping, prompting viewers to act on the moment's excitement. This immediacy cultivates a sense of urgency, driving conversions and elevating average order values, thus transforming the digital storefront into a lively, revenue-generating marketplace.
Beyond these immediate benefits, the data harvested from live commerce sessions becomes a goldmine for retailers. Insights gleaned from real-time interactions and viewership behaviors provide invaluable information for refining future strategies, optimizing product offerings and crafting targeted marketing campaigns. This wealth of data allows retailers to fine-tune their approaches, ensuring that each live commerce event is more tailored and impactful than the last.
The exponential growth trajectory of livestream commerce is nothing short of huge. According to The Tech Report, with USD 20 billion spent on livestream commerce in 2022 alone globally, this innovative approach to online sales is swiftly gaining traction. Projections indicate a meteoric surge to an estimated USD 31.7 billion in 2023, showcasing a remarkable upward trajectory.
What's even more striking is the forecasted figure of USD 55 billion by 2026, signifying the escalating significance and adoption of livestream commerce as a formidable sales channel. These figures, combining high website traffic with impressive conversion rates, paint a compelling narrative of the transformative power and immense potential that livestream commerce holds for reshaping the future of online retail.
Industry pioneers like China's Alibaba's Taobao Live and the emergence of Facebook Live Shopping more recently have redefined the rules of engagement. Platforms like Taobao Live seamlessly integrate live streaming with interactive features, enabling direct in-stream purchases. Similarly, Facebook Live Shopping capitalizes on social interaction, transforming viewers into active shoppers with real-time queries and purchase options. These trailblazers continue to set new standards, showcasing the unparalleled potential of live commerce in reshaping the future of online retail on a global scale.
If you're interested in implementing a retail media network, digital wallet or live commerce into your eCommerce platform, contact us today.