Retail Industry Outlook 2014: Opportunities for Branded Video Content

The retail industry has been and will continue to be the single largest spender on digital advertising in the United States. According to eMarketer, the retail industry spent $9.54 billion on digital advertising in 2013. The market research company predicts that this year the industry will spend $11.05 billion and by 2018, will spend $17.39 billion for a compound annual growth rate (CAGR) of 12.8%.

Retail Industry Digital Ad Spend

eMarketer has found that the retail industry is heavily skewed toward direct-response advertising. Retail brands allocate 70% of their digital advertising budgets ($7.7 billion) to ads designed to trigger sales. The other 30% ($3.3 billion) is spent on boosting brand awareness with formats including online and mobile banner ads, rich media, online video, paid social placements, in-game ads, content sponsorships and native ads.

The increase in mobile usage amongst U.S. consumers is contributing heavily to the retail industry’s shift to digital advertising. In Q4 2013, smartphone penetration reached 65.2% of the U.S. mobile subscriber market (comScore). This growth directly affects retail mcommerce, which includes products and services ordered on mobile devices, including tablets. In 2013, retail mcommerce increased 70.0% to reach $42.13 billion. This year, eMarketer predicts that this figure will increase another 37.2% to total $57.79 billion, or about one-fifth of all retail ecommerce sales and 1.2% of total retail sales.

Retail mcommerce

It’s understandable, then, that the U.S. retail industry is expected to use 37% of its digital advertising budget for mobile in 2014.

“With an investment of $4.09 billion expected for 2014, retail will be responsible for 23.1% of US mobile ad spending this year, the largest share among industries tracked,” claims eMarketer.

Retail Digital Ad by Device

The retail industry is catering to consumer behavior by investing heavily in digital advertising. However, the rise in online video viewing continues to demand the attention of retail brands. In a joint study from e-tailing and InVodo, 52% of consumers noted that they watch a video before buying a product and 69% said they watch the video two or more times if the product is information-heavy.

In Q1 2014, audiences watched online videos from retailers more than 55.5 million times. Year-over-year, video views for the retail industry increased 81%, and retail was the fourth most viewed vertical after CPG, Automotive and Electronics. Walmart, Foot Locker and RadioShack led the retail pack with the most number of views in Q1 (Visible Measures).

Upcoming Video Marketing Opportunities for Retail Brands

Back-to-school season is here. CEO of J.C. Penney Ron Johnson perfectly sums up the retail industry’s relationship with this time of year: “Back-to-school, that’s our Olympics.” Of course, Christmas is the biggest season for consumer shopping, but back-to-school doesn’t fall far behind. In Q3 2013, people watched retail brands’ online videos more than 76 million times. Foot Locker, Walmart and Kmart were the top three retail brands of the quarter, earning more than 50 million combined views.

A new study from eMarketer forecasts that digital sales for the back-to-school season will increase 16.0% in 2014 and 15.8% in Q3.

Back-to-school spending

To reach and engage your target market, you must have a mobile advertising strategy. An October 2013 survey conducted by Hart Research Associates found that smartphone penetration amongst U.S. teenagers ages 13 to 17 is 64%—67% for tablets. Interestingly, according to December 2013 data from Nielsen, 12 to 17-year-olds spend the most time each month watching videos on mobile phones.

Nielsen Data Teenagers Mobile

Mobile video advertising will also help your brand reach the Millennial market. A report from YuMe found that Millennials watch web videos more frequently on smartphones than any other device. The 2013 College Explorer Study from re:fuel reports that smartphone penetration amongst college students is 69%; tablet penetration is 36%. Combine mobile video ads with college students’ purchasing power of $404 billion ($287 billion allotted to tuition, room & board and school supplies; $13.1 billion for apparel) and you have yourself a recipe for retail success.

Regardless of where your target market is watching, online video content designed for the back-to-school season is an essential marketing tool for retail brands. Let’s take a look at a few standout campaigns from last year’s back-to-school season.

Though the original videos have been taken off of the brand’s YouTube Channel, Kmart produced these hits last year:

To reach and engage the Millennial market, Target launched a digital campaign that allowed online shoppers to interact with five YouTube personalities as they spent four days in dorm rooms decked out in Target merchandise. The company streamed live video of the stars living in a faux LA dorm set for four days. Viewers could interact with the hip personalities via social media and mobile technology to win prizes or even purchase featured items in the room.

Walmart, on the other hand, targeted moms with its back-to-school campaign from JWT. The company used four television spots and nine digital videos to showcase different mom personas as they shopped for deals at the retailer. We’ve included a couple of the spots below.

After you’ve decided to incorporate online video into your back-to-school marketing strategy, the next step is to determine when you should start promoting your content. Luckily, Google has compiled back-to-school market research into this handy infographic.

Google infographic shopping data

Take advantage of consumer behavior and launch your back-to-school campaign no later than July 1. A majority of shoppers are completely finished with their back-to-school research by the end of July and are shopping by August. Time your campaigns accordingly.

The next big branded video opportunity for the retail industry is the Christmas shopping season. In Q4 2013, people viewed branded retail videos 147.7 million times. From Q1 to Q4 last year, the retail industry saw a 382% increase in video ad viewership. In Q4, the average retail campaign generated more than 273,690 views, which is 22% higher than the overall brand campaign average for the quarter.

Again, mobile video advertising should play a huge role in your campaign. Celtra, a cross-screen advertising platform, recently released its Mobile Display Ads Performance Report; it found that mobile video ads saw the highest play rates (20.4%) in the retail industry. When it comes to actually remembering your brand, YuMe and IPG Lab discovered that tablet video viewers are 26% more likely to correctly recall the brands they saw advertised compared to TV viewers.

Producing online videos for the holiday season is incredibly important, especially when you consider the fact that 188.2 million Americans watched 35.2 billion video ads last December (comScore). In Q4 2013, retail brands Kmart, John Lewis and Amazon saw viral video success with their holiday-themed campaigns.

Kmart & Joe Boxer “Show Your Joe”: True Reach 22+ million views

John Lewis “The Bear and The Hare”: True Reach 21.7+ million views

Amazon “Amazon Prime Air”: 16.5+ million views

Many U.S. consumers are sensitive when it comes to the timing of Christmas-related campaigns. When Kmart launched its first holiday ad in early September of last year, 93% of viewers responded negatively to the video. Sixty-six percent said that September was generally too early to start running Christmas commercials (Crimson Hexagon). However, when the retailer released its Fab 15 Holiday Toy List advertisement on September 18, 57% of users generally praised the commercial or stated that they understood the intentions behind it.

“According to the NRF, 12% of consumers begin their holiday shopping before September, 6% get started in September and 20% start in October. The winter holidays account for nearly $580 billion in sales,” states an Ad Age article.

In an Experian Marketing Services report, 49% of marketers noted that they would launch Christmas campaigns before Halloween. However, the survey also found that the most popular time to launch campaigns overall is the first 15 days of November, right after Halloween but before Thanksgiving. To avoid angering consumers over the timeliness of your holiday ads, we suggest you launch your Christmas campaigns during the aforementioned period.

Taking the information above into mind, below is our 2014 outlook for the retail industry.

The retail industry will continue to invest heavily in digital advertising. Reaching consumers on their preferred platforms is of the utmost importance, and therefore, in order to mirror consumer behavior, we predict that retail brands will continue to increase spending on mobile, specifically mobile video advertising.

To establish themselves as thought leaders in the space, retail brands will focus on offering consumers more valuable information in their online video ads. For example, instead of a video simply showcasing a product, retailers will produce how-to and DIY videos. This shift comes at a time when consumers seem to be focused on one question: “What can your brand do for me?”

In order to adequately answer this question with promotional materials, retail brands will have to work on delivering personalized, omnichannel experiences to consumers.

“Understanding how your customer expects to be “spoken with”—whether through an app on her smartphone as she shops in your store or via an instant chat on your website—will continue to challenge retailers well into 2014,” said Alison Kenney Paul, vice chairman and U.S. Retail and Distribution leader, Deloitte LLP.

When it comes to online video marketing, we expect retailers to invest heavily in programmatic ad buying. This will ensure that the right ad reaches the right consumer at the right time. People are constantly using mobile devices to search for coupons, store locations and other retail information—if retailers have access to this data, they can serve relevant ads to hyper-targeted audiences, maximizing the potential for conversion.

Due to the success of last year’s back-to-school and holiday viral video campaigns, many retail brands may create video content with only one goal in mind: get as many views as possible. Though this may generate an impressive YouTube view count, it is not the best promotional strategy. Retail brands must keep their target markets’ wants and needs in mind when they produce online video ads. Design online video campaigns specifically for your audience and make it a priority to serve these video ads to the right consumers at the right time across their preferred channels and devices.

Additional Industry Outlooks:

Automotive Industry

Entertainment Industry

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