The New Frontier of Ecommerce Advertising
Surging Online Sales
Even before the pandemic, large retailers were working to incorporate advertising into their online shopping sites. Now, as millions of customers have shifted to shopping online, those plans are being accelerated.
Target’s (TGT) online sales almost tripled during its most recent quarter. Kroger’s (KR) online sales surged 127% and Walmart’s (WMT) climbed by 97%. During the most recent quarter, COVID-19 restrictions were loosened across much of the country. The fact that online shopping remained so popular shows that these changes could be permanent. Especially during the early days of the pandemic, retailers struggled with the high cost of delivering groceries and making operational changes to meet customers’ needs. Now, they are seeing several ways to leverage their online sites to increase profits.
Keeping Up With Amazon
Companies are selling advertising space on their websites to suppliers, much like they would sell advertisements in a newspaper. These ads feature coupons or links to more information about brands. Retailers also have the ability to gather precise data about shoppers’ habits on their sites. This data makes it very easy for brands to track the efficacy of their advertising dollars on stores’ websites—easier than measuring the success of advertising on social media, Youtube (GOOGL), or other platforms.
Amazon has already seen rapid growth with this type of advertising, showing grocery stores and other retailers who are relatively new to the online sales landscape just how profitable this advertising could be. Amazon’s “other revenue” category, which consists mainly of advertising, climbed 51% to $5.4 billion in its most recent quarter, compared to the same period a year earlier.
Potential for Growth
Revenue from online advertising for companies like Walmart and Kroger is still far behind Amazon, but catching up quickly. A recent study predicted that Walmart’s ecommerce advertising revenue will climb 73% this year to hit $849.4 million. A survey of brands advertising through Walmart showed that 67% of them plan to increase their spending on these advertising strategies.
Analysts expect that Walmart will bring in about 7% of US ecommerce ad spending by 2022, equal to about $2 billion. Walmart’s overall revenue just in the US is projected to hit $364 billion this year, so the company’s earnings from online advertising are still a small percentage of its overall earnings. However, Walmart, Target, Kroger, and smaller companies see enormous potential for growth in the world of ecommerce advertising.
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