New digital storefronts shake up online retail—and advertising

Last month, Walmart and Netflix launched a hub on offering an assortment of themed merchandise from Netflix hit shows available exclusively through the retail giant. It’s Netflix’s first “digital storefront” with a national retailer and an example of how e-commerce is shaking up the $650 billion global advertising industry.

Marketers in business-to-consumer and business-to-business markets alike have been buffeted recently by regulations intended to safeguard customer privacy and end intrusive tactics like stalking customers online through the use of third-party cookies. In true Silicon Valley style, those restrictions are now unleashing a wave of marketing innovation that Boston Consulting Group recently called “a once-in-a-generation sea change, not unlike the move from traditional to digital media.”

Retail media networks are springing up like daisies, turning e-commerce sites into boutique advertising venues. BCG estimates they could rake in as much as $100 billion annually within just a few years. That’s a windfall for an industry with notoriously tight margins and a potential bonus for customers who could see lower prices as a result.

All about data

Here’s how it works: Most retailers, airlines, and other businesses that do a significant amount of business online have memberships and loyalty programs that they’ve used to gather a lot of data about customer behavior and preferences over time. This is entirely legal because customers opt into these programs.

That data is gold to businesses that sell through retail channels—like firms that sell consumer packaged goods—or that have complimentary products like car rentals and hotel rooms. By advertising through customer-facing partners like e-retailers, they can take advantage of the opt-in data those businesses collect without running afoul of regulations.

Copyright © 2021 IDG Communications, Inc.

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