Retail 5.0 and the New Battleground for Shoppers

Edge by Ascential CEO Deren Baker casts an eye over the new generation of retail, Retail 5.0, and what that means for brands. 

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The Onset of the Fifth Generation

Since the beginning of the century and the early days of the internet, retail has had to evolve in line with the emerging drivers of industry growth. As digital marketplaces gained traction with shoppers, consumer packaged goods’ companies (CPGs) had to figure out how to manage transparency in a digital world. They had to work out how to allocate their advertising budget effectively, product innovation and fulfillment strategies for a world of clicks as well as bricks. Then came the fantastic rise of algorithm-driven commerce and the development of the technologies that we are seeing scaled today. The big challenge for CPGs over the past decade or so has been speed to market. Now, we are heading into a new era of retail, what we at Edge by Ascential, call Retail 5.0. 

Mastering Personalization at Scale

This new generation of retail is characterised by marketplaces mastering personalization at scale and leveraging big data to win. For the most well known marketplaces today, commerce is just one spoke of an integrated ecosystem with shopper data at the core. Amazon has a loyalty program, entertainment services through Prime, cloud computing through Amazon Web Services among other service lines that make the shopper experience “sticky”. In 2020, Amazon spent almost USD $43 billion on research and development. We have seen estimates that by 2025, marketplaces could spend as much as USD $60 billion on R&D. CPGs will simply be unable to compete with the capital availability that these marketplaces have at their disposal for innovation and advertising to increase shopper loyalty and grow new customer markets and segments. In addition, the death of the cookie means data management platforms (DMPs) won’t offer brands an alternative personalization option.

 

Global, Growth in ad spend on Amazon (non-DSP), Year-on-year % change

Amazon Graph
Source: WARC *Excludes demand side platforms

Effective Marketplace Strategies Will Be Key to Future Growth

Our Retail Insights analysts predict that by 2025, five marketplace giants will generate two-thirds of global ecommerce sales. This underscores the urgency of CPGs to master a defined set of priority e-tailers, tiering them and then targeting them methodically. Brands must focus resources on learning the dynamics and mechanics of these global marketplaces based on category and geographical coverage to drive sales share and optimize revenue in mature markets. This means really understanding the individual levers that power each marketplace and consistently managing these variables at scale, across multiple retailers and regions. The fundamentals of shopping and driving sales have not changed: ensure your products are available, easy to find and are compelling enough to drive conversion. In the world of scaled ecommerce, we believe this translates to managing inventory in line with the rules of the marketplace, mastering the search algorithms to rank high in the results and using content, rating and reviews to improve the shopper experience and boost conversion.

Shift Your Ad Spend

Finally, we recommend CPGs move their advertising and marketing spend away from more generic search and social marketing and allocate it to on-platform marketplace marketing because that’s where your customers are already buying your products. Retail 5.0 is a big shift in how most brands and manufacturers currently operate and could require a new organizational structure as well as new business and marketing priorities, but doing business like its 2010 is simply not an option in the 2020s and beyond. To explore these issues - and the opportunities for brands in the age of marketplace-based retail - download our whitepaper Retail 5.0 from the Edge website.

Winning on a digital ecosystem is like learning a new video game… first, learn the rules, then play until you figure out how to win” - Xian Wang, VP, Retail Insight, Edge by Ascential

Edge by Ascential helps global and local brands to win in digital commerce in a new and complex era of omnichannel retail. To find out more about how our unique combination of industry-leading data, analytics, and expert consulting solutions can help drive your business success, please fill out the form below.

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Article by:
Deren Baker
CEO, Edge by Ascential
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