The retail industry is increasingly investing in affiliate marketing and sees it as a cost effective marketing channel according to research from E-consultancy. Sponsored by buy.at, the UK’s largest independent affiliate network, the survey into how brands (merchants) use affiliate marketing found that 95 per cent of marketers using the channel consider affiliate marketing to be ‘very’ or ‘quite’ cost effective. The figures compare with 95 per cent of retailers respondents stating that paid search is ‘very’ or ‘quite’ cost effective, 42 of retailers who find display advertising cost effective and 88 per cent for email. 17 per cent of respondents from the retail industry also said they find mobile advertising ‘quite’ cost effective compared to 82 per cent who said it was not cost-effective.
The research reveals that retail companies spend 19% of their online budget on affiliate marketing, which is one per cent above the average of 18 per cent across all industries. This is more than travel marketers spend at just 16 per cent, but is less than financial services marketers who spend an average of 21 per cent of their online budget on affiliate marketing and behind the telecoms industry which spends almost a quarter of their online budget in the channel.
44 per cent of the retailers surveyed consider affiliate marketing to be a cost of sale rather than a marketing cost whilst a further 42 per cent say it is a marketing cost and for another 14% per cent it is seen as both. This compares with them being viewed as a cost of sale by a quarter of financial services companies, two thirds of travel brands, and 67 per cent of utilities surveyed.
The survey reveals a trend for increasing spend in affiliate marketing from the retail sector with 62 per cent of retailers saying they are spending more in the channel than two years ago. 27 per cent of these retailers have increased their budget for affiliate marketing by a up to quarter, a further ten per cent have increased it by up to fifty per cent and a further fifth per cent are spending up to 100 per cent more. This investment is set to continue with 71 per cent of the retailers surveyed planning to spend more in the affiliate marketing channel over the next two years.
Two thirds of the retailer marketers surveyed said that affiliate marketing drives a ‘high’ or ‘medium’ volume. This compares with a third of retail marketers who see a high volume from email marketing, 14 per cent who consider display advertising to deliver a high volume and just two per cent who see a high volume from mobile advertising. However, paid search is revealed as the most effective volume driver with 65 per cent of retailers finding it drives a high volume.
The survey reveals some major barriers to the success of affiliate marketing in the retail industry. Sixty per cent of retailers cite ‘a poorly converting website’ as a ‘major’ or ‘minor’ barrier preventing their organisation from being more successful at affiliate marketing. A further issue is ‘difficulty attracting affiliates onto the programme’ with 52 per cent of retailers claiming this prevent a problem, but a third of retailers have ‘good direct communication’ with the affiliates they do have on their programme. This is behind other industries such as gaming where 71 per cent of those surveyed said they have ‘good direct communication’ with their affiliates, 73 per cent of telecoms marketers, 38 per cent of financial services companies surveyed and 55 per cent of those in travel. 44 per cent of retailers see ‘problems with tracking’ as an issue for their organisation.
Kevin Cornils, CEO of buy.at explains, ‘The retail industry was quick to adopt affiliate marketing as a way to profit from the consumer increase in online shopping. In order to continue the growth the retail industry needs to address issues such as poorly converting websites and tracking online sales effectively which will then help with attracting affiliates onto their programmes. Retailers also need to improve their communication with affiliates and explain their products and offers to ensure their affiliates operate effectively as their online sales force and generate incremental sales. Affiliate networks should play and important role in helping their retail clients address these issues.’
David Walmsley, Head of Web Selling, John Lewis Direct comments, “Johnlewis.com had its biggest ever Christmas this year. The commercial success was driven by a great site and a great range, but also by smart use of our marketing budget. We’ve found that our affiliate partners have performed consistently well for us, driving traffic to our site with a great propensity to buy. In 2008 we are looking to strengthen and deepen our affiliate relationships, especially with sites that can add unique value to our shoppers’ online experience.”
Linus Gregoriadis, Head of Research at E-consultancy adds, ‘Retailers are continuing to benefit from the affiliate channel because of the extra sales they can get from these partners. The most high profile affiliates are in the price comparison and cashback or loyalty categories, but even outside these areas there is a wide range of high-quality affiliates which are relevant for a broad spectrum of retailers both mainstream and in particular niches.”
Other barriers to the success of affiliate marketing in the retail industry include, ‘lack of internal resource’ which is an issue a barrier for 64 per cent of retailers, behind 61 per cent of financial services companies, but beating the 67 per cent of charities, 68 per cent of travel providers and 80 per cent of respondents from the telecoms industry who see this as a barrier. A third of the retailers surveyed use two affiliate networks and 41 per cent consolidate their business on one network. Only four per cent of retailers don’t use a network to manage their affiliate marketing, but a further 8 per cent use more than five networks. Almost three quarters of retailers do not use an agency to manage their affiliate marketing.
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