Major brands, responding to a lift in consumer buying online, are putting more of their advertising budget into achieving short-term sales.
According to research by the World Federation of Advertisers research and Dentsu International, the pandemic-accelerated growth in ecommerce is pushing advertising spending to performance commercials rather than brand messages.
The study shows 71% of major multinationals saying ecommerce is either “critical” (51%) or “very important” (20%) now, but the figure rises to 93% over the next two years.
That sense of growing priority is not surprising, given that 59% of WFA members also claimed double-digit growth in ecommerce share of sales compared to 2019.
Brands that apply greater importance to ecommerce are spending 59% of media budgets on driving short-term sales.
This compares with those who regard ecommerce as important (or growing in importance) at just 37% on driving immediate sales.
This latter group is more in line with the 60:40 brand: performance ratio recommended in studies by Binet and Field.
Global advertising groups have been building ecommerce consulting capabilities. WPP acquired Cloud Commerce Group (CCG), a technology company that helps brands market, sell and deliver their products across ecommerce platforms and marketplaces globally, such as Amazon, eBay, Etsy, and Wayfair.
The move is part of a theme across the major advertising groups, seeking to offer major clients the tools of the pandemic-boosted switch to online sales.
Nick Broomfield, global director, Transformation Consulting, at Dentsu International: “The COVID pandemic was responsible for triggering a step-change in the growth of an already fast-growing eCommerce marketplace, and these consumer behavior changes are here to stay.
“Organisations cannot simply continue with business as normal; they need to reimagine the consumer experience, develop new go-to-market strategies, and innovate how they connect through media.
“At the same time, organizations will need to integrate their internal operating models across functions better to deliver the required changes cost-effectively. We hope this report provides the advice and recommendations needed to accelerate that journey,”
The latest study, Developing a Successful Strategy for Global ecommerce and Marketing, is based on responses from 41 major multinationals, across 13 sectors, with 46% in media roles and 48% in sales/ecommerce roles.
The total combined global ad spending of respondent companies represents more than $50 billion.
For most respondents (73%), ecommerce represents less than one-quarter of total sales. For 44%, it stands for less than 10% of all sales.
Among FMCG, this rises to 53%. In companies that attach high importance to ecommerce, the difference is even starker, and two-thirds of non-FMCG respondents are delivering 25% of total sales via eCommerce channels.
Part of the challenge of adapting to seize the ecommerce opportunity is structural. Most respondents said that ecommerce is managed in specific siloed teams, normally within the sales function (37%) and occasionally within the marketing team (16%).
Only one in five combine ecommerce into a single function that manages sales and margin across ecommerce and traditional channels.
Matt Green, director of global media at WFA: “The inter-departmental integration needed by the multinational business to make eCommerce work can be hard to achieve. With both traditional and emerging businesses, a plethora of partnerships is required.
“Ideally, sophistication with emerging market tactics, including influencer marketing, shoppable media, social commerce, and others, are needed.
“A key barrier for many in making these changes is that they will have to be made before it’s clear how profitable the ecommerce proposition will be for brands, and when it may pay back.”
