What you need to know

• According to new figures from Arktic Fox’s Digital, Marketing and Ecomm In Focus report, commerce channel proliferation is real and brands are starting to respond, with 2.4 channels on average now in play – but many more points of presence within each of those channels.
• For Teresa Sperti, the message is clear: Brands need to “fish where the fish are” and lead with an audience-first approach to commerce channel strategy and selection.
• Yet capability gaps, immaturity around content in a commerce context and resource pressure are all taking their toll on commerce investments and leading many brands to focus on core channels to deliver short-term gains. That’s a mistake, says Sperti, who says the rise of marketplaces, quick commerce, and social are all set to reshape Australia’s commerce landscape in the next 3-5 years.
• According to LÓreal CDO, Ryan Clark, it’s not just the sales conversion brands need to consider either: Commerce channels are increasingly influencing brand discovery, search, and salience. Take retailers, which were historically a conversion channel for brands like LÓreal. “Now, they’re becoming more an upper funnel, playing a discovery role, so we’ve started to unlock retail media more. One in three people are now discovering brands this way, through advertising on these retailer platforms,” Clark says. 
• With marketplaces doubling at the rate of overall commerce in recent years, and seven in 10 Australians now shopping on Chinese marketplaces like Temu, these third-party channels are also a massive area of focus for brands in this vein.
• The latest entrance to Australia’s marketplaces, Are Media, which debuted its Women’s Weekly and Home Beautiful commerce channels in May. The team there is citing customers frequently purchasing smaller home décor items valued between $80 and $120, and says 77 per cent of ANZ home brand readers have expressed interest in buying via marketplaces.
• Over at Adolpho Dominguez Australia, ecommerce lead, Kris Garrett, says getting onto more marketplaces is a balancing act between sales ROI and a marketing investment, but says brands have to be willing to try these channels if they’re going to continue to grow and tap new customer sets.

The industry has talked for years about media channel proliferation and the fragmentation of audiences. Well, guess what: It’s now the stark reality of ecommerce channels. And brands that don’t start better addressing the strategy and capabilities needed to not only sell through but tailor pricing, products, content propositions, and experiences to each commerce touchpoint risk losing out on growth, says Arktic Fox founder and chief, Teresa Sperti.

According to the consulting firm’s Digital, Marketing and Ecomm In Focus report, FMCG brands are using an average of 2.46 commerce channels today, while retailers are using 2.4. The growing list of options includes direct-to-consumer owned properties, specialist etailers, social commerce, marketplace platforms, conversational commerce, quick commerce platforms such as Uber and DoorDash, and in-store kiosks.

These top-line figures paint one story of proliferation. But they obscure the number of points of presence this can involve. Brands for instance, could be selling across two or three different marketplaces (think Amazon, MyDeal, Qantas Marketplace), plus two quick commerce channels, plus Instagram and Pinterest, meaning the actual number of commerce channel options being utilised is significantly higher.

“We've talked for years about media proliferation and fragmented audiences. What's happened from a media and audience point of view has basically now happened to ecommerce,” Sperti tells Mi3. “We have fragmentation of where people buy, which means it’s harder than ever for brands. To drive growth, you need to be fishing where the fish are. For a brand, that means you need to go beyond your core ecommerce strategy.”

From a retailer's point of view, the core ecommerce strategy is normally centred around owned channels. But in an FMCG or CPG space, core ecommerce strategy is not necessarily the same thing, Sperti says.

“Think about FMCG brands: their core channels are grocery channels. They're the Woolworths and the Coles of the world,” Sperti says. “If you are a toy manufacturer, your core channels locally – not globally – will be Kmart or Big W while globally, it’ll be Amazon. Your core channels really differ depending on what part of the market you're talking about.”

What this means is it’s foolish to just focus on core channels in an environment where shopping platform proliferation is now the norm, Sperti says.

“It’s particularly the case if we think about not just where we are now as a country, but where we might be in three to five years’ time,” she continues. “People will sit back and go, well, Amazon's not very big in Australia, marketplaces aren't big. But if you look at markets like the US and the UK, the makeup of that market is very different – marketplaces absolutely dominate that market. That’s not the case here today, but it is quickly changing.”

Just take the fact Amazon chalked up 22 per cent year-on-year growth in marketplace sales and is investing heavily in distribution centres as well as the supply chain locally, Sperti points out. 

“Quick commerce is also larger in the US and UK than here… we're still seeing DoorDash and Uber play and are quite focused on their efforts in building out the quick commerce industry and being major players within that industry,” she says. “Effectively, to remain relevant and maintain and maximise share, we have to be where the audiences are buying. And that does differ based on the category, and what it is I'm selling.”

What it takes to build a modern commerce channel strategy

In Arktic Fox’s report, 35 per cent of respondents are making commerce channel expansion a priority over the next 12 months. Investment plans are led by a doubling down on third-party channels such as social commerce marketplaces and aggregators, with roughly one in four brands stepping up investment in these spaces. A further 17.2 per cent and 16.1 per cent respectively, plan to start to trial and leverage these platforms over the next year.

Overall, DTC is the most common channel used (83 per cent), but 43 per cent also employ marketplace platforms, 41 per cent use social commerce, 28 per cent are on specialist etail sites, and 17 per cent are tapping quick commerce where it’s relevant. Conversational commerce is still very much in its infancy, yet even there, one in five brands are set to trial and leverage these options in the next 12-18 months.

“A lot of brands even on these platforms are still only starting to build capability and maturity. They're still trying to work their way through how to best leverage these platforms. It’s not necessarily how you sell through one channel that you necessarily sell through another,” Sperti comments.

This brings us to Sperti’s biggest concern: Brands simply are not putting enough emphasis on building a modern commerce muscle at a time when they should. She highlights capability building as a whopper shortfall.

“Think about grocery: The way I buy in a marketplace, my mission is often potentially a bulk stock up. In a quick commerce space, I might be looking for a meal solution. You can't just take a line and price SKU you'd have on a normal retail site and pop it onto Amazon, then onto a quick commerce platform, and expect you're going to see significant sales overnight. This is the capability piece - understanding the product platform fit,” she explains.

“What's the proposition we need to bring to market in order to best activate that channel? A lot of brands still haven't figured that bit out. Therefore, some brands might exit the channel because they think it's not effective for them. My counter to that is you're not activating it in the right way – that’s why it’s not successful for you.”

The content conundrum in commerce

The yawning gap Sperti sees within the commerce mix is the evolution of product content knowledge and sophistication when it comes to managing the digital shelf.

“The way FMCGs typically manage the digital shelf is all about how most products are showing up online. Because they don't manage the platform, they're not the owner of the ecommerce site. But they can influence through content. All of those platforms are algorithm-driven; that determines what products are surfaced, and it determines decision-making for consumers,” she continues. “How I often explain it to brands is content is the digital representation of your physical product. If you do not get your product content right, it impacts all of your performance outcomes on the digital shelf.”

Yet looking at Arktic Fox’s latest report, content is way down the list of priorities, with just 18 per cent prioritising improvements or enhancements to product or service content in the next 12 months. Sperti didn’t see this as a discrepancy in how brands are defining content either. Instead, she labels it a lack of understanding of how important different types of content are in the new world of digital commerce. Many organisations across Australia lack clarity around who even owns commerce content – “or a desire to want to own it”.

“When we're in talking to brands, one of the consistent issues we're dealing with is helping them work out who owns product content management, and how they’re going to be able to scale their ability to manage it in a way that isn't going to requiring adding five resources,” Sperti says. “If you're showing up on five, six, or seven platforms, and the shopper behaves differently on all of those platforms, and those platforms’ algorithms are all different in the way they surface product, you can’t just build one set of content to go off. You have to think about all those nuances and build content standards into the types of content being captured. Then you have to work out how to syndicate, manage and keep all of that content up to date for hundreds of SKUs.

“Herein lies the problem. Historically for an FMCG brand, yes, you needed some of that product information back of the pack, but you didn't need a full description, and you didn't need all the images. Ingredients, product information never had a role beyond being on the back of the pack and never lived anywhere. So it was never important to have a really robust set of product data in place. It never necessarily was as big an issue to have a centralised platform like a PIM [product information management platform] to manage all product content.”

It’s not even enough to just think digital asset management (DAM) will solve the problem – which many do, according to Sperti.

“Digital asset management is really great for all of your brand-based content and inspirational-based content, so often people go we're buying a DAM, we're solving the product information issue. You're not. A DAM doesn't solve that problem. You need a PIM to do that. So, that's one of the big issues,” she warns.

It’s not everyone of course. Sperti says certain verticals are better than others at recognising content in the commerce context. “Take fashion, which has really high levels of ecommerce penetration; they're really good at it. But other brands are still working through it. I would have expected that [content investment] to be higher, given its importance for the decision-making online by consumers.”

Then there’s that other critical P: Pricing. Again, resource mix isn’t helping brands here as commerce channels proliferate, Sperti says.

“If you're starting to manage across more platforms than ever before, and you're trying to manage brand experience across all of those and deliver a consistent experience, everything from have we got clear architecture around pricing to make sure we're not showing up inconsistently on all these different platforms, to how we're showing up consistently from a product information piece is key. How do you do that on your same resource base? That's a real challenge, particularly in FMCG, because normally ecommerce teams are really small. Some of them are one person,” she adds. “It’s also that mindset shift: When we are at the point of developing a new product, how are we playing online?”

LÓreal CDO: Commerce like marketing starts with the consumer

Speaking on the subject of managing a presence across the exploding digital shelf in a recent Arktic Fox webinar, LÓreal chief digital officer, Ryan Clark, said the brand’s work starts with the consumer.

“It’s about identifying platforms we’re winning not only in category terms, but platforms they’re engaging with,” he said. “It’s also about having that foresight to quickly adapt to new channels, tech, and consumer behaviours.

“We do know consumers are changing the way they shop. Take Amazon: Recent studies show when a person considers buying a product, 60 per cent start the journey on Amazon. Similarly, there’s the rise of social commerce, particularly with Gen Z: We’re seeing 60 per cent of Gen Z now being influenced through social media. So when it comes to buying products, how do you play in those platforms where your audiences are also building an understanding of your brand and products?

“There’s a shift in retailers and the way you play too: Retailers historically have been a conversion channel for brands like us. Now, they’re becoming more of an upper funnel, playing a discovery role, so we’ve started to unlock retail media more. One in three people are now discovering brands this way, through advertising on these retailer platforms.”

Profit versus growth impacts ecommerce investment

There’s a complementary trend impacting both resource allocation as well as perceptions of commerce channel investment Sperti points to: Profitability. In Arktic Fox’s report, profitability has gone from the eighth biggest priority around commerce to the third year-on-year. It’s worth noting about half of respondents cited current economic conditions impacting their ecommerce business plans over the last 12 months, resulting in budget and headcount reductions.

“What stops them investing point blank – retailers and FMCG brands – is it's not going to be the lion's share of my sales,” says Sperti. “What that does is embed repeat behaviour and a belief that if 80 per cent or 90 per cent of my sales are coming from my core channels, that's where my investment needs to be.

“You have to think of this as $1 I'm investing today as well as time to build capability for payback today and tomorrow. Because if I don't build the capability today, and in two years’ time, the market has shifted, and another 5 per cent or 10 per cent is going through those other channels, I'm going to be losing share. And I'm not ready for it.”

This short-sightedness is particularly apparent in an environment where retailers are all seeing a downward trajectory and pressure on profit and revenue growth.

“When ecommerce was in the stage of high-growth year-on-year, brands were focused on scale to keep growing their ecomm presences. But now that growth has started to flatline, and because brands are really struggling overall from a business point of view to deliver profit and margin, they’re asking: Where can we start delivering more profit? Hey, that ecommerce thing we were focused on for scale now starts to need to show more profitability. Therefore we're seeing some brands pulling back on ecommerce investment right now,” Sperti says. 

“You basically have 50 per cent of people saying they've got this big challenge around internal pressure from the economy, but at the same time, they have these emerging channels they need to focus on. That's going to create a fair bit of friction for businesses unless some play the longer game on some of these channel plays.”

Rethinking commerce reporting and measurement

Then there’s a broader argument around whether the reporting and metrics in play around modern commerce are really demonstrating just how much influence these channels do have on overall sales – as well as brand awareness, discovery, and salience.

As previously discussed in Mi3, the portion of customers researching online only to then buy in-store – a metric known as ROBIS, or research online / buy in-store (digitally influenced sales) – is significant. A 2021 Forrester report exploring 30 US retail categories found 59 per cent of total sales were influenced by digital – either they came through an ecommerce transaction, or they were influenced in-store. The analyst firm expects to see digitally influenced retail sales to grow from US$2.7 trillion in 2022 to $3.7 trillion by 2027, representing a compound annual growth rate of 7.2 per cent.

Yet Arktic Fox’s report showed only 16 per cent of retailers and 19 per cent of FMCG, manufacturing and pharma brands use ROBIS as a key metric to assess the effectiveness of ecommerce performance.

“Most brands today are still saying, if I spend $1 here, it turned into this much through ecommerce. But what we know is across many categories and data that comes out of the US, is that the portion of sales influenced in-store from online is high and growing,” Sperti says. 

“We all know ecommerce is not going to be 70-odd per cent of total sales. That means a significant portion of sales are being digitally influenced. That's the missing piece for most brands. If you can unlock and work out how much is being influenced, that will completely change the way you think about investment from an ecommerce and digital perspective. And that's why, at the moment, brands locally are struggling to garner the appropriate investment they need.

“It also means ecommerce is seen as an ecommerce job, and stays in the ecommerce department, rather than being seen a core driver of the bottom line of the business.”

Or, it seems, as a critical marketing mechanism for brand discovery, mental availability engagement, salience and consideration.

Clark brought back the criticality of ingrained consistency and integrity to LÓreal. The beauty brand now knows 80 per cent of the time, at least one transaction has been maintained online in the last month alone.

“Ecommerce is still really siloed in industry, considered a separate channel as opposed to the core part of the go-to-market strategy. It shouldn’t be thought of as tech, but as a growth strategy,” he said.  “For brands, is it about reaching new consumers, or about increasing revenue? Ecommerce taps into those overall objectives. Whether it’s wallet size or increasing lifetime value, it’s how ecommerce can directly support those objectives.”

Marketplaces momentum

As made plain in Arktic Fox’s report, marketplaces are one of the big drivers of commerce channel fragmentation and their dominance is increasing. As of 2023, marketplaces represented two-thirds of all online retail spent globally by growing merchandise value, with the top 100 online marketplaces expected to hit US$3.8 trillion in 2024. It’s a doubling in size over six years and shows marketplaces – at least globally – are growing twice as fast as normal retail online, according to Miraki’s Enterprise Marketplace Index.

“As an Australian brand, you may not be seeing growth in sales by moving on to marketplaces right now. But that doesn't mean consumers aren't using them,” Sperti comments. “It means they're potentially buying goods from overseas providers on marketplaces and using overseas marketplaces, right? Don't assume behaviour or sales performance today is a true indication of what's happening from a customer shift point of view.”

Other figures back up Sperti’s assertions. In a recent Omnisend report, seven in 10 Australians said they shopped in Chinese marketplaces over the last year. That list is led by Temu, which has only been available in Australia for a year but is seen by one in five respondents as the main competitor for Amazon. Omnisend’s report means Temu is the fifth most popular ecommerce platform in the country. More than half (56 per cent) of Omnisend’s survey respondents were also found to have shopped in more than one marketplace.

One of the newest homegrown marketplaces comes from Are Media. Executives cite steadily increasing sales since launching the first The Australian Women’s Weekly and Home Beautiful marketplace offerings in May. These were made possible by Are Media’s acquisition of ecommerce platform, Hard to Find, in 2022.

Across Home Beautiful and the New Zealand-based Your Home and Garden (NZ) marketplaces, customers are frequently purchasing smaller home décor items valued between $80 and $120, Are Media tells Mi3. It’s a trend the publisher believes reflects the current economic climate, where customers opt for more frequent purchases of smaller items to refresh their homes.

Are Media General Manager, Homes, Lisa Hudson, says 77 per cent of Home Beautiful’s audience expressed interest in shopping from a marketplace, with 86 per cent keen on purchasing homewares and décor. Six in seven have indicated they’d spend up to $150 on such items.

“We’re delighted Home Beautiful marketplace sales have steadily increased since launch, so we know that our consumers have an intent to shop,” she says. “Of all the homeware products in the marketplace, more than 5,000 in total, are chosen and curated by the Home Beautiful editorial team. This ensures the complete content lifecycle for customers – from print, digital and social to marketplace.”

Are Media General Manager, Lifestyle and Food, Nicole Byers, is similarly optimistic. “The Australian Women’s Weekly has been a trusted fashion advisor and friend to women across the country for decades and the launch of the new marketplace is a natural extension of this relationship,” she says. “Every story we create now, we’re thinking, ‘How can we help the consumer by adding shopping links and recommendations?’ Our audience is responding, and we can see this revenue stream growing every month.”

Adolfo Dominguez Australia gets in on the marketplaces act

One of the first brands on Are Media’s marketplaces is niche handbag brand, Adolfo Dominguez Australia. Ecommerce manager, Kris Garrett, says the brand has experimented with several marketplaces over recent years and is in talks with The Iconic and Qantas Marketplace as additional commerce channels.

Previously, Adolfo Dominguez Australia tried the Westfield marketplace during Covid lockdowns, along with ShopIndy – the latter of which failed to deliver double-digit sales. It’s also in the Afterpay Directory.

“We might get invited to be part of another marketplace, so we'll look at that line as it’s literally just going out there to see if anything's worthwhile for us,” Garrett says. “Generally, they don't cost us any additional fees, just commission usually.”

Often, Adolfo Dominguez Australia isn’t expecting to see significant revenue coming from these marketplaces, and Garrett positions them more as an advertising channel allowing the brand and its products to get discovered. “If we get our name out there in regions we probably wouldn’t have targeted normally, that's fine for us,” he says.

A challenge Garrett cites is a lack of data and insights from these marketplaces besides direct sales. “We don't get a lot of the demographics and analytics. We have our customer personas built up for our brand, so they're the ones we can target through our advertising, SEO and things like that. With the marketplace, it's almost about just seeing what happens,” he continues.

“We've been on other marketplaces, like ShopIndy, and had a direct connection to our ecommerce platform. So there was very little work for us to do to have those products there. But the number of overall sales were single digits over a year. Same with Westfield – we had a fee involved and there were ok transactions, but again, nothing amazing.”

ROI is the ultimate measure for Garrett, and if something is not delivering the return, there’s no point having it there.

Meanwhile, the initial investment to be on a new commerce channel is one of the stumbling blocks the brand comes across “as it’s an unknown”.

“Whether or not it’s worth the time to invest to get it to work, and there are no results, at what point do we decide to cut it?” Garrett asks. “Obviously, there is a period of time where it needs marketing to get started. That is just more risk. That’s our challenge.

“This is why a lot of those other marketplaces [like Are Media], which don’t have an onboarding cost, are attractive. There is a commission to them, and if it got to a point where there were some sales, but the commission made it unprofitable, we have to ask ourselves if we still keep it and do it because it’s advertising.

“We have these discussions with one of our other brands on TVSN – we sell a lot of products on that, but the revenue and amount of time and energy we put into that means it’s almost zero net value to us. But we do it for the advertising – people see us on TVSN and search for us because of that.”

Even with these concerns, Garrett agrees brands have to be open to trying more commerce and social channels more broadly.

For example, with a customer sweet spot of inner-city women aged 35 – 65, Garrett points out the brand has discovered influencer and social commerce have been less effective on direct sales, but they’re playing an important role up the funnel.

“Even with TikTok for example, we knew it wasn’t really going to be a demographic, but we have to try because we never know. We originally thought Instagram would be our best social channel, but we actually just found Pinterest is six to one over Instagram. So you never really know until you try it.”

Adolfo Dominguez Australia gets in on the marketplaces act

One of the first brands on Are Media’s marketplaces is niche handbag brand, Adolfo Dominguez Australia. Ecommerce manager, Kris Garrett, says the brand has experimented with several marketplaces over recent years and is in talks with The Iconic and Qantas Marketplace as additional commerce channels.

Previously, Adolfo Dominguez Australia tried the Westfield marketplace during Covid lockdowns, along with ShopIndy– the latter of which failed to deliver double-digit sales. It’s also in the AfterPay Directory.

“We might get invited to be part of another marketplace, so we'll look at that line as it’s literally just going out there to see if anything's worthwhile for us,” Garrett says. “Generally, they don't cost us any additional fees, just commission usually.”

Often, Adolfo Dominguez Australia isn’t expecting to see significant revenue coming from these marketplaces, and Garret positions them more as an advertising channel allowing the brand and its products to get discovered. “If we get our name out there in regions we probably wouldn’t have targeted normally, that's fine for us,” he says.

A challenge Garrett cites is a lack of data and insights from these marketplaces besides direct sales. “We don't get a lot of the demographics and analytics. We have our customer personas built up for our brand, so they're the ones we can target through our advertising, SEO and things like that. With the marketplace, it's almost about just seeing what happens,” he continues.

“We've been on other marketplaces, like ShopIndy, and had a direct connection to our ecommerce platform. So there was very little work for us to do to have those products there. But the number of overall sales were single digits over a year. Same with Westfield – we had a fee involved and there were ok transactions, but again, nothing amazing.”

ROI is the ultimate measure for Garrett, and if something is not delivering the return, there’s no point having it there.

Meanwhile, the initial investment to be on a new commerce channel is one of the stumbling blocks the brand comes across “as it’s an unknown”.

“Whether or not it’s worth time to invest to get it to work, and there are no results, at what point do we decide to cut it?” Garrett asks. “Obviously, there is a period of time where it needs marketing to get started. That is just more risk. That’s our challenge.

“This is why a lot of those other marketplaces [like Are Media], which doesn’t have an onboarding cost, are attractive. There is a commission to them, and if it got to a point where there were some sales, but the commission made it unprofitable, we have to ask ourselves if we still keep it and do it because it’s advertising.

“We have these discussions with one of our other brands on TVSN – we sell a lot of products on that, but the revenue and amount of time and energy we put into that means it’s almost zero net value to us. But we do it for the advertising – people see us on TVSN and search for us because of that.”

Even with these concerns, Garrett agrees brands have to be open to trying more commerce and social channels more broadly.

For example, with a customer sweet spot of inner-city women aged 35 – 65, Garrett points out the brand has discovered influencer and social commerce have been less effective on direct sales, but they’re playing an important role up the funnel.

“Even with TikTok for example, we knew it wasn’t really going to be a demographic , but we have to try because we never know. We originally thought Instagram would be our best social channel, but we actually just found Pinterest is six to one over Instagram. So you never really know until you try it.”