Retail Industry remains the Largest Spender in US Digital Advertising

The US retail industry’s advertising spending on paid digital media will hit $9.42 billion in 2013 and rise to $13.50 billion by 2017, for a 10.5% compound annual growth rate (CAGR), according to a new eMarketer report, “The US Retail Industry 2013: Digital Ad Spending Forecast and Key Trends.” While gains in digital outlays have slowed over the past several years, retail remains the top spender among US industries and will retain this lead for the duration of the forecast period.

However, eMarketer also expects the retail industry’s share of the total US digital advertising pie to decline slightly, from 22.3% in 2013 to 22.0% in 2017.

Whether on desktop or mobile, direct-response campaigns will continue to take the lion’s share of digital ad spending by the retail industry. Marketers in the retail industry—led by online and multichannel retailers, but also including catalog retailers and restaurants—will invest 64.6% of their paid digital dollars in direct-response efforts this year, according to eMarketer estimates. Brand-focused campaigns will make up the remaining 35.4%.

Various types of search and display continue to command the largest chunks of digital spending across the category. Mobile and local marketing are also seeing increased investments from retailers, as they race to keep up with smartphone-toting, tablet-using consumers who consult their devices at various stages of the purchase cycle. At the same time, targeted advertising in mobile, local and social channels is growing rapidly as retailers attempt to forge direct and personal relationships with their consumers across multiple screens and platforms.

Search engine marketing (SEM) is one of the most important components of direct-response retail industry ad spending. Online, multichannel and brick-and-mortar retailers have historically relied on paid search and SEO to drive traffic to websites, store locations and toll-free phone numbers. Having an effective SEM program is becoming even more important as retailers find themselves competing directly online with manufacturers of the products they sell.

While most retail marketers rely on direct-response ads to drive more immediate actions, brand advertising is experiencing a renaissance in the industry. Industry marketers report today’s brand-advertising mix is evolving fairly rapidly from standard banner units—for which investment is expected to remain flat—to richer and more dynamic units, such as video, as well as social display and hybrid formats that can integrate more tightly with traditional branding workhorses like TV and print.

Brand-focused campaigns appear to be more popular at certain times of the year and in different sectors of the industry. Retailers tend to do bigger brand buys, including more video, during seasonal pushes. This differs from their investments in search and other types of direct response, which run more continuously throughout the year. And while retailers of higher-value products and those with longer sales cycles often weight their spending mix more heavily toward search, those selling lower-ticket, impulse-based purchases may make larger investments in display campaigns that build awareness and favorability and encourage multiple, repeat purchases.

Courtesy of eMarketer

 

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