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“As [retailers] are seeing more business shift to ecommerce, that's a more expensive channel for them, so they are really becoming dependent on the retail media revenue. So I think that the manufacturer or the advertiser holds the cards a little bit more than maybe they did in the past.” — Andrea Leigh, Founder and CEO, Allume Group
Trends that have defined the past year of ecommerce — like influencer marketing and artificial intelligence (AI) — offer hints about what the future of ecommerce might hold.
Allume Group, an ecommerce education consultancy led by Founder and CEO Andrea Leigh, tracks ecommerce trends and shares them in the “eCommerce Insider Quarterly (EIQ) Report.” Past iterations of this report are available on the Digital Shelf Institute’s (DSI) partner content page.
Leigh recently joined the “Unpacking the Digital Shelf” episode, “Unit Growth Strategies, AI, and Negotiating Leverage,” to discuss how changes in retail media, AI use, and more are impacting ecommerce.
Here are Leigh’s insights.
Retail media spend has been trending upward. As more and more brands dedicate a larger portion of their budget to it, Leigh reports that some are beginning to demand more for their dollars.
“The manufacturers are really applying a lot of pressure to the retail media networks,” Leigh says. “They’re “asking for better metricing, especially across different retail media platforms, as well as better targeting capabilities, larger audience reach, [and] more ad types.”
This growing pressure comes at a time when retail media revenue is on track to surpass TV ad revenue by 2028, according to Reuters.
Fortunately for brands, this growth means retailers are becoming more dependent on their retail media revenue, which gives brands more power at the negotiating table.
“As [retailers] are seeing more business shift to ecommerce, that's a more expensive channel for them, so they are really becoming dependent on the retail media revenue. So I think that the manufacturer or the advertiser holds the cards a little bit more than maybe they did in the past,” says Leigh.
Retail media trends also impact how brands drive unit growth. Recently, brands have searched for growth strategies that make sense for a tough economic climate but don’t rely too heavily on promotions.
Leigh suggests success could be found in targeted, personalized retail media, using “layering activities” that involve “a retail media advertisement paired with some kind of digital coupon,” for example.
With this method, brands can tie retail media dollars more directly to unit growth with targeted promotions.
Influencer marketing, a gateway for new brand loyalists, is only growing more powerful, according to Leigh. “Forty-nine percent of shoppers depend on influencer recommendations now,” she reports.
More noteworthy, the EIQ Report found that “influencers had just overtaken friends and family as the top source for product information.“
Influencers’ power depends on the product type and the demographic being reached. “It's a little bit disproportionate to women. Eighty-six percent of women use social media for purchasing advice,” Leigh says.
In addition, influencer marketing “is a little more challenging and a little less effective for some consumables, [and] a little more effective and driving greater activation in the fashion and apparel and accessory space, but also in hard goods and some other categories as well,” says Leigh.
Leigh explains that there’s a growing industry dedicated to helping brands form and leverage influencer partnerships. “Our suggestion to brands would be to look for those partners and look for those tools that really help you scale this type of a program.”
This is a great opportunity for brands that would benefit from more influencer support.
Few conversations about ecommerce trends would be complete without discussing AI. While the group of technologies referred to as AI has been around for a long time, Leigh explains that the arrival of user-facing applications like ChatGPT brought them more prominently into public consciousness.
There are a variety of use cases for AI in ecommerce, from virtual try-ons to inventory management. But one of the most promising, Leigh says, is AI’s ability to help shoppers find exactly what they want from product searches.
Rather than depending entirely on keywords, AI can browse unstructured data across the web to present users with options that match their unique requests.
“The thing that's so interesting about AI is it can take unstructured data, and it can create structure around it,” Leigh says. “And so when you think about that, you can start to think about the different ways that this is going to impact ecommerce … Some of those things that we've spent a lot of time hand-building taxonomy around … that's not going to matter anymore because generative AI will allow that unstructured data to become structured.”
This means there’s a possibility the future of ecommerce could involve far less focus on keywords and taxonomies. In this scenario, search might become “less about making sure that you have the right keywords on the page and more about truth” because “It's not just going to be scraping product information; it's going to be scraping other unstructured information across social media,” says Leigh.
However, “there's this counter tension” to integrating AI with online retailers, “which is, that the ecommerce retailers aren't going to be in a hurry to implement some of this until they can monetize it … So I think we might have to wait a little bit,” says Leigh.
“Some of those things that we've spent a lot of time hand-building taxonomy around … that's not going to matter anymore because generative AI will allow that unstructured data to become structured.” — Andrea Leigh, Founder and CEO, Allume Group
As a major powerhouse in the industry, Amazon’s focus on AI tells brands a lot about the future of ecommerce.
Leigh explains that this technology is not new to Amazon. “Amazon has actually been in the AI space for a long time within AWS. They invest in all parts of the vertical,” she says.
Now that user-facing AI apps are making waves, it appears that Amazon is going to create a marketplace these apps can perform on – just as it created a marketplace for its broader ecommerce business.
Leigh cautions that brands should be willing to experiment with AI and new technology, but not take big bets on unproven features.
“Make bite-size investments,” she says. “It's very tempting to want to be the first mover, and I think that can be a really good strategy. But … definitely consider them experiments,” she says.
In addition to its AI business, Amazon’s traditional ecommerce business is also thriving, especially on the third-party (3P) marketplace side.
Leigh says that brands should consider negotiating for more from Amazon’s retail media offerings.
“If you're spending millions of dollars on advertising on Amazon, and you go to that team and you say, ‘We may have to pull some of it back because of what we're getting from the commercial team or from the vendor management team’ … that definitely gets some attention on their side, and maybe forces them to work together,” leading to more opportunities for your brand, says Leigh.
The future of ecommerce is in constant flux, but being aware of omnichannel trends can help you not only stay ahead of new developments but benefit from them
For more insights into retail media trends, listen to the full podcast episode.
