{"id":3536,"date":"2019-01-10T07:13:15","date_gmt":"2019-01-10T13:13:15","guid":{"rendered":"https:\/\/reformingretail.com\/?p=3536"},"modified":"2019-01-23T05:30:03","modified_gmt":"2019-01-23T11:30:03","slug":"amazon-gobbling-marketing-spend-because-like-pos-companies-they-have-sku-data","status":"publish","type":"post","link":"https:\/\/reformingretail.com\/index.php\/2019\/01\/10\/amazon-gobbling-marketing-spend-because-like-pos-companies-they-have-sku-data\/","title":{"rendered":"Amazon Gobbling Marketing Spend Because, Like POS Companies, They Have SKU Data"},"content":{"rendered":"\n

A recent marketing survey<\/a> noted that Amazon has become the favorite DSP<\/a>, or Demand Side Platform, outperforming Google by 41% to 35% respectively. If you recall our earlier articles<\/a> you’ll remember that a DSP is an automated marketing engine that aggregates digital advertising channels into one interface for advertisers. Your POS will become a DSP for brick and mortar offline commerce, assuming the POS companies don’t screw it up by trying to monopolize it, that is.<\/p>\n\n\n\n

It seems Amazon would be the preferred choice if advertisers were forced to choose one DSP, too.<\/p>\n\n\n\n

Advertisers overall used an average of 2.8 DSPs over the past year, and often use different platforms for different purposes. But, if advertisers had to pick one platform, 24% said they would choose Amazon, 17% would choose DoubleClick (Google) and 12% would choose The Trade Desk.<\/p><\/blockquote>\n\n\n\n

Unsurprisingly most ad dollars are being spent by suppliers (who represent around 75% of total worldwide ad spend). Suppliers (i.e. the manufacturers of items like Nike, Ralph Lauren, or Budweiser) don’t need aggregate top-line sales data: they need specific SKU (stock keeping unit, or item-level) data. This explains precisely why Amazon’s ad platform is growing so dramatically: they have SKU sales data<\/strong>. Per the survey,<\/p>\n\n\n\n

The move is mostly occurring among consumer packaged goods brands, which are drawn to Amazon’s ability to link advertising closer to the point of sale and provide a more seamless shopping experience.<\/p><\/blockquote>\n\n\n\n

Here’s what crazy about all of this: 90% of commerce still occurs offline<\/strong>. Doesn’t it follow that 90% of ad spend should<\/em> be directed offline, assuming attribution\/lift could be measured?<\/p>\n\n\n\n

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Ecommerce as percent of total retail sales over time<\/figcaption><\/figure><\/div>\n\n\n\n

Of course it does.<\/strong><\/p>\n\n\n\n

Do you know why all those marketing dollars are not<\/em> funneled to offline commerce?<\/p>\n\n\n\n

Because merchants and the POS companies they partner with enjoy shooting themselves in the d*ck.<\/strong><\/p>\n\n\n\n

For starters, merchants have been slow to share their sales data with anyone… even if it’s in their own best interest. They don’t do the basics with shared data – like category management for supply chain – and as a consequence can’t reap the benefits had by their online counterparts who do<\/em> share this data. This has persisted for decades<\/a> yet offline merchants behave as if this whole “internet thing” is merely a passing fad. Seriously, could you be any more ignorant? It’s no wonder Amazon is kicking the absolute crap out of most of them.<\/p>\n\n\n\n

On a different side of the same coin are POS companies who make it extremely hard for their merchants (and ironically themselves) to participate in this sort of value creation. Whether its refusing to build APIs<\/a> or believing you’re so much smarter than everyone else that you attempt to monopolize everything<\/a>, these actions end up hobbling everyone in the value chain.<\/p>\n\n\n\n

Listen up: here are the doctor’s orders to remedy your (mental) illness.<\/strong><\/p>\n\n\n\n

Merchants:<\/strong> Give your POS companies access to all<\/em> of your data. Via partnerships, they will serve as your stewards of innovation<\/a> while you focus on running your business. When new opportunities arise, they will inform you of the benefits. Think about it: what downside exists if you have another party helping you innovate? Are not your two interests aligned? Doesn’t it stand to reason that they want offline commerce (i.e. your business) to succeed so they can grow? If you don’t believe this to be the case then you’ve chosen the wrong POS provider; dump them immediately.<\/span><\/p>\n\n\n\n

POS Companies: <\/strong>Stop pretending you’re superman. Are you growing 100% YoY organically? Of course not. You know why? Because POS is f*cking hard. Focus on your core business and draw a box around it. Everything else outside that box needs to be strategically sourced via partnerships. If you think you’re going to build something non-core ask yourself how long it will take to get that product to market. Is it longer than 3 months? Then you’re better off finding a partner that will create that market now because innovation doesn’t stand still.<\/span> You can worry about deciding if it’s inside your core after<\/em> a strategic partner has proven that the opportunity or market even exists. Don’t suffocate innovation because your core box looks like this:<\/p>\n\n\n\n

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Seriously people, get some self-awareness. Until you do brick and mortar will continue ceding ground to ecommerce.<\/p> \n\n