A Bird’s Eye View Of The Commerce Agency Landscape

Consumer habits and changes among retailers themselves have reshaped the agency landscape around a new form of commerce media.

 Sure, the ratio of ecommerce to in-store sales have rationalized since quarantines, when people pushed piles of shopping carts online. But the growth in online grocery orders and investments by retailers themselves in ad platform businesses and buy-online store pick-ups show a sustained rise that exceeds even optimistic pre-pandemic forecasts.

The trend also wasn’t as obvious a few years ago, when online retail media opportunity looked scattered with an emphasis on discounting: think cash-back apps and the heady days of Groupon sales, or CPGs on Amazon Fresh.

Now, a brand that sells online faces a different landscape and an entirely different team of partners helping them.

There are different flavors of companies that are all scrapping to earn a share of retail marketer media plans, as long-time in-store spenders shift more and more to online commerce media. First, they can work with the biggest agency holding companies, which have “commerce” leads for entire creative and media practices and first dibs on platform testing. Or they can turn to indie performance marketing agencies.

There are emerging portfolios of companies that either acquire or offer up their expertise in marketing and fulfillment. Another class of agencies promise expertise in online marketplace dynamics, including warehousing and fulfillment. And, finally, there are retailer-owned media businesses connecting directly to store sales and loyalty programs.

AdExchanger took a look at the kinds of companies trying to fill the gaps in a new retail marketer landscape, and how each plans to get a share of commerce media budgets online.

  1. Reshaping the hold co.

Agency holding companies are clearly all-in on commerce media because they’ve shoved the word “commerce” into every restructuring.

WPP launched VMLY&R Commerce in 2020, packaging the commerce agency Geometry with creative shop VMLY&R. WPP also has Wunderman Thompson Commerce. In 2019, Omnicom launched its Omnicom Retail Group.

Last year, Publicis acquired CitrusAds, Criteo’s closest competitor. It also has Epsilon’s consumer data business and the Sapient customer experience agency, all of which contribute to the Publicis Commerce Exchange, which launched this year.

The holding company pitch to big CPG brands is comprehensiveness. Big CPG retail marketers may have consultants working on experiential store marketing, online shopping campaigns with the likes of Criteo or CitrusAds, television, social media, search and programmatic shops.

Each brand doesn’t need every agency service, said Amy Lanzi, COO of the Publicis Commerce Exchange. “But you’re still managing against a single, brand-owned budget, and how those things work together in an integrated agency fashion is really hard right now without a comprehensive partner.”

And big agencies get first crack at testing important retail media partnerships. Lanzi said Publicis was a pilot partner for a measurement deal between Kroger and Roku, which attributes CTV campaigns by connecting known Roku accounts to known Kroger loyalty accounts.

The Amazon clean room service, which is in beta, connects Amazon DSP campaigns to store sales. Tests are starting with big agency partners, not Amazon-native agencies.

Big brands need a comprehensive agency to straddle the crazy number of walled gardens they face in retail media, said Gila Wilensky, president of Xaxis US. Every advertiser knows the social walled gardens like Google, Meta and Amazon, she said. But for shopper marketers each retailer that carries its products is another walled garden in the mix.

Is a cereal brand spending on Instacart to steal its own shoppers from Kroger? Is it increasing search spend on Walmart to capture customers who would have purchased from the brand anyways?

Ecommerce-native shops are built to drive sales, Wilensky said, but not to parse results from across so many different channels that they don’t have visibility into, including in stores.

  1. The indie agency-tech angle

Agency holding companies are restructuring around commerce. But aircraft carriers can’t turn as nimbly as a motorboat.

A new breed of hybrid retail ad tech and performance agency pivoted on a dime to seize the commerce media opportunity.

Take WITHIN, which started seven years ago as a performance agency that worked with DTC startups, but made its way upmarket and now works with larger CPG brands and retailers (Rite Aid, Hugo Boss and Nike are blue-chip clients).

New “Bigger brands want digital-first agencies to do their digital marketing for them,” said Sam Appelbaum, Within’s VP of integrated media. “They don’t want their traditional agency who tacked on digital or commerce as an add-on. Not just looking at things through the lens of an individual marketing channel or silo.”

Nowadays, for instance, digital ads could drive someone to purchase at a nearby Rite Aid rather than online. The attribution is less clear than an ad that drives an online sale, but the store purchase is more profitable.

“Just because the sale doesn’t occur online, doesn’t mean you don’t need a digital expert to run the marketing,” Appelbaum said.

Traditional agencies, particularly publicly traded or private equity-backed companies, focus on getting clients to spend more now with the account. As the agency convinces the client to spend more, the commission goes up. But Appelbaum said commerce teams at big brands that often sell online and in a mix of stores they own and don’t own, are focused on maximizing profit and ensuring their budget drives incremental gains not just “on paper” ones.

He said an independent firm like WITHIN can prioritize long-term account metrics, like using a Net Promoter Score rather than incentivizing only more spend in a particular channel, without upsetting Wall Street or a PE investors because a client spent less quarter to quarter.

Swiftly sprang into the commerce media and agency category in 2017. The founders previously co-founded Symphony Commerce, an ecommerce management platform for big CPG brands. In 2017, after Amazon acquired Whole Foods, retailers began reaching out about creating their own commerce tech, and Swiftly filled that gap, said co-founder and CTO Sean Turner.

Similar to Within, Swiftly’s pitch isn’t the traditional ad tech or agency promise of marketing spend leading to store sales. Often, the idea is to strengthen the retailer’s loyalty program, so the store can later bridge phone numbers connected to the program to online shoppers.

Amazon and Walmart have millions of site visitors and high-ranked apps, but smaller or regional chains must find ways to turn in-store traffic and data collection into digital engagement.

Hang around the checkout of your local grocer and you’ll be amazed how often people link their phone numbers to get discounts, Turner said. “But retailers aren’t able to engage those customers digitally or convince them to visit the site or download the app.”

Retail trade marketing is a revenue source for grocers. But the whole category is colliding with the retailer’s own ad investments – collecting ad revenue from brands but also spending money to drive web traffic or app downloads. Turner said the digital tacticians who know performance marketing and mobile customer acquisition will have an advantage against legacy retail media.

  1. Commerce as a playbook

Some new entrants to commerce media come from the brand side. These expert Amazon sellers and DTC companies realize they’ve built a winning commerce playbook, and can put their own marketing and fulfillment capabilities to use for other brands as well.

Take Anker, a Chinese manufacturer of tech accessories and a powerhouse Amazon seller of phone cases, chargers and the like. In 2020, it launched an agency called Oceanwing in the US to sell those skills to brands in other categories.

In some cases, Oceanwing is working with a brand’s agency, not replacing it. They’re tapping into Oceanwing for specialist work on Amazon, but also for Anker’s shipping and fulfillment system, said Alex Ai, Oceanwing’s director of marketing services.

But Oceanwing can take its pitch a step further than other agencies, Ai said. Other performance agencies channel potential shoppers to an Amazon product page or another retailer that handles the fulfillment. But with Anker handling deliveries and returns, the company can own the sale and customer relationship without taking on fulfillment.

Aterian, a consumer product aggregator on Amazon, has a marketing solutions business that packages commerce media and fulfillment. Other Amazon aggregators like Thrasio and Heyday take on marketing expenses and agency services … but only if they take the business as well.

Heyday acquires brands under the promise that it can scale them up based on Heyday’s data and advertising expertise, said CMO Reema Batta.

“Our strategy is to leverage Amazon as a giant launchpad to create durable addressable households,” she said.

Thrasio, the largest Amazon brand aggregator, likewise doesn’t offer commerce media services to third parties. It just makes third parties into first-party owned brands, and takes the advertising and analytics from there.

“The data that we use for targeting acquisitions in the marketplace and the data we use to monitor our own brands’ performance on the platform [are] flip sides of the same coin,” Thrasio VP and head of data Dan Parker told AdExchanger earlier this year.

A growing ecommerce consumer brand that’s considering an agency might instead sell a stake or the entire business to Thrasio or Heyday, based on the promise that the aggregator will exceed what the brand can do with an agency.

  1. Marketplace masters

Amazon aggregators aren’t the only Amazon natives.

Momentum Commerce was founded two years ago by John Shea, following stints at Criteo and the Amazon ad tech startup Teikametrics.

Momentum Commerce is a consultancy, so it doesn’t take a cut of media or sales, like other agencies or ad tech, he said.

“It’s not the same mentality as a holding company agency, for example,” Shea said. Online marketplace specialists (Momentum also plugs into Walmart, Target and Instacart’s ad platforms) are more focused on data extraction and non-advertising factors that affect the cost of a sale.

Momentum and other Amazon natives understand how pricing, shipping costs, return policies and reviews and ratings are each levers that affect profit margin and performance. Advertising is a lever too, Shea said, but it’s the only lever a traditional agency understands well.

Whitebox started as an Amazon agency and added a warehousing and delivery fulfillment business. Last year, it tied those services together, so brands it works with can holistically track media and fulfillment.

For instance, some retail advertising channels may lead to sales with high rates of returns. The return rate should impact how the agency views that media source. But agencies who only sees the sales would optimize more and more into that channel, according to CEO Marcus Startzel.

Brands that would otherwise be disadvantaged in the retail media category can use Whitebox’s physical infrastructure to open up opportunity.

For example, bulky or heavy products or frozen goods are penalized by Amazon’s system because they’re difficult to store and ship. Amazon will make onerous demands for those companies if they use Amazon fulfillment, and the fulfillment challenges are tied to Amazon advertising. The result is hard-to-ship items are pushed down shopper search results and less often have the “Prime” icon many shoppers default to.

Small items with low margins also struggle to make ecommerce work, but represent an opportunity for commerce media companies to fill a vacuum left by Amazon, Startzel said.

Ricola, a Whitebox client, must sell a small bag of cough drops online when shipping fees may cost almost as much as the product in a store. If the ad tech is connected to warehousing and fulfillment, the brand can identify how large a pack it can sell at what price that can still be delivered at a profit.

  1. Retailers want in

Retailers have swallowed up agency and ad tech businesses. Literally.

Albertson’s launched an in-house advertising business last year, letting go of its longtime ad platform provider Quotient.

Walmart in-housed the retail advertising agency business that previously went through Triad, which GroupM shut down in 2020. Now packaged as Walmart Connect, an end-to-end retail ad platform, Walmart also acquired the supply-side ad tech business Polymorph Labs in 2019 and the ad server Thunder last year.

The rationale is clear. If the retailer cuts out the middleman, it’s a significant bump in ad platform profitability.

Commerce media budgets are also finding new middlemen. Instacart already runs ads in its own app for products carried in grocery chains, and last week launched its first product to serve ads directly to grocery store’s sites (with an undisclosed revenue share).

Instacart Advertising at times replace ad vendors and agency services. But more often, it’s an entry point for a smaller retailer. Most of the chains using its ad platform for their own sites are showing ads for the first time, so there is no incumbent, ad sales VP Ryan Mayward told AdExchanger.

But Instacart also works with brands directly. If more CPG and retail media advertisers can operate Walmart or Instacart ad platforms themselves, the case for the agency becomes weaker, especially for marketers with in-housing tendencies.

What is clear, for retailers and for everyone else, is that big CPG brands will cascade budgets into commerce media in the coming years. They will test many options: new performance agencies, fulfillment options, CTV measurement integrations, even ads on in-store freezers.

Not all will pan out. But the winners will win big.


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