The world loves to shop, retail sales are forecasted, per Kiplinger’s, to rise by 4.1% in 2017 and ecommerce is expected to rise at an annual rate greater than 10% for the third year in a row.
This number will continue to rise as Gen Z is poised to have, per Forbes, the largest discretionary spend in history, making retail an attractive investment opportunity.
As the trend moves toward commerce, why wouldn’t publishers want to jump on the native commerce bandwagon? This monetization strategy has its pros and its cons.
Native commerce is the provision of end-to-end shopping experiences entirely on the publisher’s site, without having to be redirected to a retailer’s site to complete the sale.
Many publishers -- keen to develop ways to retain visitors on their site -- believe offering a shop front directly on their site is the best way to keep user engagement high, as well as earning greater margins on each product sold.
Native commerce has the ability to bring in more revenue per product sold, offering readers an opportunity to explore and purchase products from a single location (which can be easier when on a mobile device), and having purchased product posted directly or drop-shipped to the user.
Margins on products sourced wholesale and sold directly to users by a publisher are generally greater than what retailers can pay publishers on a referral commission basis. As publishers increasingly embrace commerce as part of their monetization strategy, it becomes very tempting to usurp the retailer entirely and become both the content *and* the commerce sides of the equation.
While all this seems like a logical extension for publishers on the path to embracing commerce, the reality is rarely a success.
The thing is… it isn’t easy being a retailer.
They battle daily with the growing power of Amazon, as well as the costs of manufacturing, storing and posting products in a profitable manner. It is incredible hubris to assume a publisher can be good at being a publisher AND better at being a retailer than a retailer can be.
First, the metrics each party focus on differ greatly. Do you focus on maximizing time on site or on driving them as quickly as possible towards conversion? On RPM or on net margin and CLV?
The pursuit of these metrics can often be conflicting. Subsequently, the cultures that are necessary to create great publishers and great retailers differ greatly. It also means that instead of just competing with other publishers and social platforms, such as Facebook, a publisher is now also competing against every retailer, especially Amazon, that has spent years building trust and preference to their brand.
Finally, while the gross revenues may be greater with native commerce, the costs and efforts involved are also greater. Fragmented focus and comparable net revenues may mean the benefits of doing native commerce are not outweighed by the holistic costs.
One just needs to look at the various publishers that have tried and inevitably failed at native commerce.
Refinery29 publicly went into commerce before declaring it a distraction with minimal net upside. Conde Nast’s much-hyped native commerce play with the style.com launch has quietly been downplayed as each title focuses on affiliate marketing or content as a utility.
In some cases, given the nature of affiliate marketing, in which a commission is paid on all purchases a referred user makes within 30 days, a publisher can earn more on referrals than the higher margin on a single product sold via native commerce.
Don’t misunderstand, there are cases when it can work well.
BuzzFeed is a great example of a publisher that excels at being a publisher first and foremost, but dabbles in commerce for a select subset of products that can sustainably source and ship directly. It is still committed to an affiliate strategy for products, but when it can source a product directly without compromising editorial integrity, it does.
And even if native commerce efforts fail, it still demonstrates how publishers accept the role commerce can play in driving incremental revenues and increasing user engagement to sites.
If the fallback after failed attempts is a heartier embrace of content-to-commerce monetization through affiliate links, it’s good overall for publishers and their audiences.