Retail’s Not Dead: But Finding Your Customers Has Never Been More Crucial

Physical retail is not going to completely die off, but it’s currently going through a rebalancing as sales move online. Many of the major store closings we read about are not driven entirely by the shift towards online shopping, but rather by massive debt incurred from over-expansion. Within this trend, we see a sub-trend emerging: a strengthening bond between retail, social media, and location-based advertising.

According to research firm Adthena, Google receives over 76% of retail ad spend, with Facebook quickly gaining ground. The driving force is the amount of time people spend using mobile apps, specifically social media apps. Advertisers go where their users are, but the traditional method of building audience segments with tracking pixels and cookies doesn’t function within mobile apps. This factor explains the rapid rise in location-based advertising, with location data frequently being referred to as the next cookie. Advertising networks and social media sites are all building segments for mobile app advertising that are derived from anonymized and opted-in location-based audiences.

The commanding share of ad spends that Facebook earns today is impressive. According to Facebook’s 2017 fourth-quarter earnings call transcript, their mobile ad revenue was $11.4 billion in 2017, up 57% from last year, and contributed to 89% of their total ad revenue. Facebook-owned social media platform, Instagram, currently has two million active advertisers and 25 million business listings, meaning there is plenty of room on the platform available for positive growth opportunities.

The way social media, location data, and retail intertwine is both simple and complex. Simply, it makes perfect sense for retail advertisers to use the sophisticated targeting capabilities on social media in order to reach their desired audience. The complexity arises from how that’s actually achieved, and what this means for the overall retail landscape.

The mechanics of a retailer reaching a location-based audience on social media typically comes in the following forms.

  • Geofencing – the practice of distributing ads to people based upon their current location. This casts the widest net with location-based targeting and can be an effective campaign strategy. However, advertisers should be careful since proximity to a business location does not equal interest.
  • Home location targeting – Facebook and Instagram enabled advertisers to reach a target audience based upon where they live. This can be a great tactic for driving foot traffic to specific locations and increase the relevance of a campaign.
  • Campaigns based on store traffic – Facebook recently launched the ability for store owners to build audiences based upon people who visit their actual store locations. Using their existing ad platform, store owners or a group of stores can build these audiences on a per store basis. While this approach is appealing, it also has its challenges and limitations. First, for most small advertisers, the audience will not be large enough to create an effective campaign. Second, the platform provides no ability to target visitors to competitive locations, known as geoconquesting. Third, you must be the owner of the store. If you’re a brand sitting on the shelves at specific retail locations, you can’t reach that location-based audience. Finally, this approach becomes unmanageable if you own hundreds or thousands of locations.
  • Uploading your own or other data as “Custom Audiences” location-based campaigns – Social media sites let advertisers upload additional data sets to create custom audiences. By building location-based audiences tied to the anonymized mobile advertising identifier, advertisers can reach visitors to their locations and competitor locations. Ecommerce pure plays can reach shoppers who visit their retail peers, and brands can find shoppers visiting the retail locations carrying their products.

When looking at the overall retail landscape, we see a new trend: the emergence of the retail microbrand. These are small companies, typically selling a few items through their ecommerce website, but leveraging social media advertising to drive their sales. Despite the size of the company, their teams frequently make better use of the same sophisticated targeting capabilities that major retailers also have available. By choosing criteria of interests, demographics, and location, they’re scaling up quickly and creating a new “long tail” of retail that no one has seen or understood its implications.

With the continued rise of time spent using social media and other mobile apps, and the growing use cases of location-based advertising, expect to see more advertisers shifting their digital and mobile ad spend to social media sites, and building campaigns derived from location-based insights.

This post originally appeared on MarTech Advisor.