By Todd Crawford, co-founder, Impact.
Originally published in Digital Commerce 360. “The Future in Retail Technology during the Coronavirus Disruption” edition.
The COVID-19 pandemic has taken us into uncharted territory when it comes to economic uncertainty. But if we look at the current retail environment and back at prior downturns, a pattern emerges that has implications for the future of retail and retail technology investments.
In a nutshell: When the economy is in crisis, we see an increased reliance on performance-based partnerships.
History repeats itself
When the dot-com bubble burst in 2001, a marketing and business mind shift led retailers to a then undervalued channel called affiliate marketing. With their ability to drive revenue on a performance basis, those partnerships gave retailers safe ROI when they were in no mood for risk.
Jump ahead to the recession of 2008, and it was consumers who experienced the mind shift. With homes lost and savings decimated, coupons, deals, and cashback became essential, and so did the referral partnerships that promoted them for retailers.
As the COVID-19 pandemic has unfolded, these forces have collided. Retailers are looking for immediate cash and ROI, while anxious, house-bound consumers need extra motivation to spend. Partnerships are meeting those needs, providing a safe, performance-based business model, and the ability to incentivize buying with deals and loyalty perks.
What do we mean by partnerships?
Partnerships encompass a full array of partners that serve as an indirect sales force and marketing arm for retailers to expand footprint across new markets and audiences. Partnerships today include:
It’s hotter than paid search
At some organizations, partnerships are a bigger growth driver than paid search, which generates 18% of revenue for the average business (Wolfgang Digital’s 2019 KPI Report) vs. 28% from partnerships at companies with mature programs, according to Forrester Consulting.
But how do partnerships perform during lean times? Here’s where things get interesting.
The protective powers of partnerships
Partnerships offer four unique characteristics that make them a lifeboat during a crisis:
- CPA = lower costs and lower risk
With partnerships, retailers pay only for performance, ensuring measurable incremental revenue and clear ROAS when it matters most.
- Partners motivate consumers to spend
With demand suppressed by homebound living, massive job losses, and unprecedented uncertainty, most consumers are spending as little as possible, and they want deals when they do. Content partners, review and how-to sites, and deal-based partners alike can promote retailers’ coded discounts, free shipping, flash sales, and double points to encourage buying and provide consumers with a reason to spend.
- Pivot toward high-demand products
Consumer focus changes during crises, which can leave retailers out in the cold. A partner can help harness the attention of their audiences in high-demand categories so retailers can increase market share and customer loyalty in new areas.
- Inventory liquidity
Physical store closures have not only hurt revenue, but many stores are also stuck with stagnating inventory housed in stores not designed for fulfillment. Deep-discount partners and deal sites specialize in turning idle, aging inventory into cash, fast.
The partnership automation factor
The value of mature partnership programs as growth drivers is well documented. But maturity requires technology investment. Partnership automation is required for retailers to scale partner discovery, recruitment, onboarding, engagement, and optimization to a level where they can fully exploit partnerships as a growth channel.
Partnership automation is the path to retail’s future
For resiliency under duress, retailers need to invest in partnerships and comprehensive tools for partnership automation. Just as Salesforce brought automation to the sales channel, and Hubspot and Marketo brought automation to the marketing channel, technology is a vital component of partnership management. Partnership automation will be a core enabler of the resilient retail models of the future.