The Gist
- The shift. The COVID-19 pandemic has caused a shift toward third-party digital commerce channels, leading to a proliferation of opportunities for digital marketing leaders.
- Delivering more growth. To maximize ROI and deliver growth, digital marketing leaders need to prioritize their investments and focus on the opportunities that will deliver the most growth in 2023.
- The assessment. By assessing the third-party digital commerce landscape and their internal capabilities, prioritizing key growth areas and must-win battlegrounds, and executing with channel partners using organic and paid tactics, digital marketing leaders can achieve digital commerce success.
Gartner research shows that three-quarters of digital commerce leaders report being forced to pivot into new digital commerce channels in response to the COVID-19 pandemic, leading to an explosion in digital commerce channels. The digital commerce landscape has been in a state of flux ever since, now driven by the joint forces of economic headwinds and evolving customer behaviors.
As a result, many took a hybrid approach by focusing on direct sales websites, plus increasing distribution through third-party digital commerce sales channel partners. And we have lessons learned to lean on from those that have experienced challenges in scaling their direct-to-customer/business. In most cases, digital commerce leaders have recognized that customers are shifting to third-party digital commerce channels, resulting in a need to adapt their strategy to ensure they show up where customers buy online.
Third-party channels include retailers, wholesalers, distributors, marketplaces as well as emerging channels such as quick commerce. They commonly offer greater reach and scale than direct-to-customer/business websites, which are more focused on value creation through increased margin and customer insight.
Many of these third-party digital commerce partners recognize that digital customer buying behaviors are now well-ingrained, so they’re building out their digital commerce capabilities to meet customers’ expectations. They are also investing in capabilities that enable brands to reach those customers through marketing, loyalty and promotion tactics such as retail media networks.
The proliferation of third-party commerce has led to marketing resources being spread too thin across too many channel partners. Furthermore, the execution capabilities of third-party commerce partners vary with some more sophisticated than others.
With so many third-party digital commerce opportunities, digital marketing leaders — now more than ever — need to prioritize their bets effectively to ensure their brands maximize ROI and deliver growth.
Here are three steps they can follow to rethink their approach to such and focus efforts on the opportunities that will deliver the most growth in 2023.
Step 1: Assess the Third-Party Digital Commerce Landscape and Your Internal Capabilities
Digital commerce marketing via third-party sales channel partners is a fast-growing space, with channel partners rapidly building their capabilities. Eighty-six percent of leaders believe that digital commerce will be the most important sales channel in the next two years.
The first step is to assess the current landscape, as well as your own capabilities. Judge all digital commerce marketing investment opportunities on revenue generation through questions such as:
- Where is the organization’s third-party digital commerce revenue and profit coming from today? Assess your current channels, retailers and distributors to determine where you are generating revenue and profit right now.
- Where will your organization’s revenue and profit come from in the future, as the third-party digital commerce landscape evolves? Marketplaces and pure plays offer opportunities to scale, which provide the next source of tomorrow’s revenue.
It’s important to recognize that every partner has a different digital commerce strategy, execution capabilities and growth projections. Ensure that potential third-party partners treat digital commerce as a strategic priority and demonstrate that they are putting strategic plans into action to develop execution capabilities.
By identifying the mix of channels available in the third-party digital commerce landscape, marketers can uncover what opportunities are available and can begin prioritizing their bets moving forward. Concurrently, conduct talent skills assessments to address capability gaps, review marketing processes to integrate digital commerce activities and assess your technology stack to identify gaps.
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Step 2: Prioritize Key Growth Areas and Must-Win Battlegrounds to Identify Potential Partners
Organizations must prioritize third-party digital commerce partners by constructively challenging pre-existing approaches and mindsets. This will determine the optimal third-party channels and partners to prioritize moving forward. More importantly, it will result in de-prioritizing channels and partners that do not help you achieve your present and future goals.
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It is important to balance your priorities through a short- and long-term lens, using a simple prioritization framework that maps the third-party digital commerce partners' landscape based on the assessment in step one.
First, consider each partner’s growth opportunity, or their ability to impact your brand’s digital commerce revenue growth. Second, evaluate each partner’s digital commerce execution capabilities. This focuses on people, processes, and technologies, plus alignment of culture and ESG values with your organization. This is an assessment of each prospective partner’s roadmap, customer innovation investments and infrastructure capabilities, as well as their ability to execute your sales channel plans.
Map each partner into one of three segments:
- Invest to grow today: Main revenue contributors and the primary focus for near-term investment.
- Invest to grow tomorrow: Emerging partners that are showing encouraging signs of growth.
- Watch and Selectively Act: Longer-term partner opportunities that could scale in the future.
Here's a sample framework to assess and prioritize strategic channel partnerships using predefined criteria across two dimensions — potential business impact and channel partners’ digital maturity: the green dot represents primary growth partners, the yellow dot represents secondary growth partners and the red dot represents the lowest-priority partners with the greatest risk.
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Step 3: Execute With Channel Partners Using Organic and Paid Tactics
After selecting your mix of third-party digital commerce partners, develop digital commerce marketing plans on a partner-by-partner basis. These plans should contain an appropriate blend of organic and paid execution tactics to deliver on commercial targets. These tactics can be broken down into two categories:
- Digital shelf optimization should be deployed to ensure that your products are displayed on partner platforms in an effective manner to drive organic visibility and conversion. Digital shelf optimization is similar in concept to physical shelf execution, in that both address questions like, “are my products easy to find?” and “are they being merchandized correctly?” Optimize product content, pricing and promotions, and stock availability to ensure maximum visibility and conversion opportunity.
- Commerce marketing utilizes paid tactics deployed to boost brand/product visibility and sales on partner platforms. It leverages partners’ performance marketing capabilities to execute both paid campaigns directly on partner platforms, such as paid search, and targeted promotion banners, and paid campaigns intended to drive traffic to partner platforms, such as social media advertising.
By following these steps to evaluate the landscape, prioritize opportunities, and execute effectively with third-party partners, digital marketing leaders can drive revenue growth and achieve digital commerce success.
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