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Ideas Strategy2021-01-27

The Commerce Universe: How media is powering the expansion of retail

Harrison Awe

The colloquial “world of retail” fails to communicate the vastness of the industry today. Perhaps a “universe” would be a more apt metaphor for the chaos and complexity of modern commerce. Here we draw a few parallels between ad space and outer space as we explore some of the key media platforms, experiences and technologies that will continue to fuel the rapidly expanding commerce universe. 

Last year was a wormhole

2020’s effect on global commerce cannot be understated. Not because it brought about some unforeseen new future, but because it exponentially accelerated a future that was always coming. The retail industry saw nearly three years worth of ecommerce growth in a single quarter. In other words, retailers are now confronted with digital shopping behaviors and adoption rates that were supposed to still be years away.

The principal benefactor of this acceleration, ecommerce, accounted for an astounding $4 trillion. US ecommerce increased by 32% YOY, elevating online’s penetration of total retail sales by nearly three and a half percentage points. While ecommerce growth may level the competitive playing field in select situations, the retailers dominating total and offline sales are the same ones capturing the bulk of online revenue. Amazon captured nearly 40% of total ecommerce sales in 2020. The next closest retailers, like planets in a galaxy, seem millions of miles away. Walmart, eBay, Apple, and Home Depot round out the top 5, collectively capturing only 15% of total sales.

The Law of the Conservation of Mass (Commerce) applies

While ecommerce is a clear winner, it’s important to contextualize that growth within total retail sales. The spike in online sales last year was enough to offset the losses of brick-and-mortar retailers in the US, but not enough to create net new growth YOY. As an industry, available share of market has been trending down for the last 25 years.

The same way our own universe expands without creating new matter, the commerce universe expands without creating net new share. Said another way, more ways to purchase and more brands to purchase from does not equal more purchases. This distinction is important, because it means that the emerging media formats highlighted below - and their associated purchase mechanisms - will likely continue to eat into existing market share. Not create anew. 

At the edges of the commerce universe, media and retail platforms collide

It’s becoming harder than ever to separate media platforms from commerce platforms. And not only because Amazon and Alibaba have become two of the largest sellers of paid media in the world. Below are three areas where the lines are becoming increasingly blurred:

Social Commerce

Instagram (199MM monthly users) overhauled their platform in November of 2020 to make commerce a central component of the UX experience moving forward. Social commerce is projected to hit nearly $40B by the end of next year, and nearly a third of all social users purchased directly through their social feeds in 2020.

Live Streaming Commerce

Twitch, the live stream site purchased by Amazon in 2014, is now one of the country's top 50 most trafficked digital domains with over 45MM monthly unique visitors. Live stream commerce is expected to drive nearly $190B in annual sales in the China market alone by 2027.

Voice Commerce

While it’s fair to say the technology has yet to live up to the hype, as a purchase vehicle or marketing channel, there is still plenty to be bullish about. Digital audio consumption rates continue to rise, powered by top brands like Spotify (320MM monthly users). While the ubiquity of smart speakers also persists. Over 87MM adults (or 1 in 3) now own a smart speaker, with each smart household averaging 2.6 devices per home. If those numbers aren’t compelling enough, consider this: Nearly half of every dollar spent in advertising is spent on search, but half of all digital searches in 2020 were done by voice, and 30% were done on a device without a screen.

The mission for marketers and retailers in the new commerce universe… 

By treating emerging media as a leading indicator for where future commerce activity may occur, marketers can better equip themselves to deal with the proliferation of purchase mechanisms available to consumers (and rival retailers) today. Here are three themes to consider each with some suggested questions to get you started: 

Get into orbit. Today’s hottest platforms, like planets, have a gravitational force to them. The bigger they are, the faster they grow, the more likely commerce will fall into their orbit. Make the effort to understand, embrace, and isolate unique opportunities with emerging platforms early and often. So when those commerce opportunities do arise, your brand has the historical learnings and relationships needed to capitalize. 

  1. How quickly can your brand and/or agency move with partners? 

  2. What legal, budgetary, creative or brand challenges might be slowing you down? 

  3. Are things like brand safety or measurement standards steering you away from newer media platforms in favor of legacy environments? 

Don’t ignore, explore. On the surface, the impact of these emerging digital platforms on total commerce may make them seem like insignificant or distant priorities. But the brands that incorporate these purchase mechanisms into their communications and campaign strategies now will be exponentially better off over the next 10 years. Like the Hubble constant, the brands operating at the edge of the universe will always move faster than those in the middle. The brands that don’t start now may never catch up. 

  1. How might your driver and destination strategies change to accommodate this multi-platform-purchase reality? 

  2. Which products are most compelling or best suited to convert a consumer in visualless environments like audio? 

  3. How might your messaging priorities, product curation, or media optimization strategies shift to accommodate voice-enabled formats? Which purchase mechanisms are most profitable to your business?

  4. What tweaks do you need to make to your test and learn strategies, or media benchmarks, to ensure your team can stay committed to being a leader of commerce innovation? 

Segment for the future. Consider how these emerging platforms may provide access to new consumer segments that may have previously been unavailable to your business. As purchase mechanisms proliferate, so too do the opportunities to invite and immediately acquire new customers into your business. The audience purchasing from you tomorrow could potentially look less and less like the one that purchased from you yesterday. Embrace predictive, not historical, audience profiles.

  1. How might the purchase propensities of various segments start to guide marketing decisions, from comms and messaging strategies to CTA tests and audience planning? (For example, affluent households over index for smart devices. Which could make voice commerce uniquely suited for stay-at-home parents) 

  2. How can you weaponize your 1PD to ensure you’re learning from previous purchasers without excluding future buyers? 

  3. How important is current customer vs. non customer targeting when the funnel is being compressed and purchase touchpoints are omnipresent? 

In the commerce universe, fringe technologies and platforms burn brightly and move fast. Some may fade before they matter, but others will pull consumers and ad revenue into their orbit indefinitely. This new reality favors the retailers and marketers brave enough to explore it. And in the words of the late Gene Cernan, “curiosity is the essence of our existence.”