How are media owners embracing ecommerce?

Ecommerce has been around long enough for the experts to have formed firm views. There are great opportunites for both e and mcommerce, but sellers beware before you set up shop, advise leading operators. Karen Taylor reports.

The internet is a competitive marketplace, like a magnificent virtual bazaar, with newcomers setting up stall by the minute. But magazine brands have a clear advantage over unknowns, drawing loyal audiences to their shop windows to click and purchase. But once you’ve got their noses pressed against your page, you have to deliver. The products and service have to match the quality of your content.

Get it right and you have another string to your bow and one targeted at your very own niche audience. Equally important is managing expectations and overheads. But, with advertising spend stagnant – and the places to advertise growing by the second – and paywalls still far from universal, e and mcommerce is an exciting additional revenue stream that deserves serious consideration. Magazine World asked the experts.

Olaf Holzhäuser, director, Business Development Hubert Burda Media, Germany

M and ecommerce are being flagged up as exciting additional revenue streams, do you agree?
Absolutely! Actually ecommerce and increasingly also mcommerce are considered something quite normal in most of the markets we are active in and our target groups are already spending considerable amounts digitally. Therefore, it is a simple necessity to follow these changed behavioural patterns of our readers and users and make our own offerings more relevant and attractive by including ecommerce possibilities.

How successful are your own ventures?
Hubert Burda Media was one of the first media companies to explore this area and has done so in many different ways and fields. With this, our company has enjoyed double digit growth over the past years and today creates 50 per cent of its revenues digitally, the largest part of this through ecommerce transactions.

Would you say strong brands are key to success?
Not necessarily so. While a strong and well know brand might help to build trust and bring in traffic, there are many examples of successful ecommerce projects that started with a completely new and unknown brand name. Solely relying on an established brand name will not be enough to win this game.

Could you give example/s of money making ventures and ones that have been shelved?
The travel website HolidayCheck and zooplus (our pet supply retailer) are prime examples of highly successful Burda ventures in this field. However, there is a considerable number of further projects in various stages that have and are all contributing to Burda’s success and impressive development. For example Burda International recently invested in very interesting eCommerce ventures in Poland (Showroom) and Turkex (Lidyana). Of course, throughout this process there have also been failures and errors. Actually Burda employees are encouraged to work on a trial and error basis, as this seems to be the best way to embrace opportunities in this ever-changing environment.

Retail is a risky business. How do you best deal with this?
There is not one clear recipe to be successful in this field, and every business segment needs to be addressed individually. For many traditional print brands it seems best to venture into eCommerce through partnerships, thus avoiding the classical pitfalls of retail and bringing on board specialist knowledge in this field. However, this of course, also limits the upside potential of such projects. Therefore, it is our belief, that it is worthwhile to also explore investments beyond basic partnerships, and thereby significantly increasing business opportunities.

There is some formidable online competition. Amazon and eBay, for example. What can you offer that they can’t?
Amazon and eBay certainly are benchmarks, but we believe it is not impossible to compete successfully in this field, especially in specialised and niche areas, where publishers have very strong assets (brands, content, reach) to leverage. If put to good use, this is a combination that is hard to compete with, even for digital giants.

What advice would you give any publisher looking to test the waters?
The main advice would be to start testing immediately and don’t stop. There is no way to leapfrog this learning curve.

How do you see ecommerce evolving for publishers?
It will continue to grow in importance, and it will be a key to keep their brands and offerings relevant for readers and users.

Duncan Edwards, president and CEO of Hearst Magazines International, USA

M and ecommerce are being flagged up as exciting additional revenue streams, do you agree
Potentially yes.

How successful are your own ventures?
We have a number of projects around the world that range from the full scale e-commerce that we run with ElleShop in Japan (see box at bottom of article) to small affiliate deals in almost every country and every website and all points in between. Each approach has its own merits and challenges. In general we are happy with what we are doing and we will continue to test different ideas.

Would you say strong brands are key to success?
The key to success is audience. Somehow you need to have large numbers of consumers coming to your shop window in order to convert some of them into actual shoppers. Having highly popular consumer brands like Cosmo and Elle, with big web audiences is certainly a help. You also need to have brands in your inventory that people want to buy.

Could you give example/s of money making ventures and ones that have been shelved?
Our full ecommerce business in Japan is now profitable (as are most of our smaller affiliate arrangements as the costs are minimal).

Retail is a risky business. How do you best deal with this? Partners, perhaps?
You are absolutely right. For these reasons we are careful about investing too much of our resources in this area of digital activity. For us the priorities are building audiences on the freeweb, and mobile in particular, followed by developing paid for consumer digital properties; ecommerce is really our third priority in digital. We have been successful in Japan through a combination of having a very strong brand in Elle, excellent management who understand customer acquisition and stock selection and a willingness to make the necessary investments.

There is some formidable online competition, with Amazon, ebay, etc. What can you offer that they can’t?
If you compete head to head with these guys they will win, so you have to offer something else either in terms of what you sell or the service you offer (which is very hard to do!).

What advice would you give any publisher looking to test the waters?
Be careful.

Is there a key strategy to employ?
I would recommend lots of testing. Keep your costs low and be ready to move on if things don’t work out.

How do you see ecommerce evolving for publishers?
I suspect that some form of affiliate model will become easy to plug into websites and publishers will be able to earn modest revenue shares from these. It is possible that some publishers will go ‘all in’ but it is unlikely to be us.

Paul Keenan, chief executive, Bauer Media UK

M and ecommerce are being flagged up as exciting additional revenue streams, do you agree?
Yes – ecommerce is not just a way to drive new revenues for our digital businesses but also a way to deliver better experiences for our consumers. Media brands should be looking to not just inspire consumers but to inspire them to act…or to purchase. Helping consumers to not just choose but to purchase will ultimately drive a stronger consumer relationship.

How successful are your own ventures?
In our specialist brands (vertical/passion brands) we have had our best success by working with a single or limited number of retailers to create a product that integrates seamlessly with our content (rather than simply directing consumers off to another experience). Within our radio brands our approach has been to adopt a deals based strategy that has enabled a clear consumer proposition without the risk of getting fully into retail. In our development process we’ve tried several models from complete retail to price comparison to simple affiliate linking. Like for most publishers, this is a test and learn method.

Would you say strong brands are key to success?
Strong bands are key but simply putting a logo onto a proposition is not the answer. Using the brand strengths to execute something new for consumers is key – whether that’s unique products, unique services (search/postage offers etc) or unique pricing. If publishers just adopt a me-too approach, consumers quickly see through it.

Could you give example/s of money making ventures and ones that have been shelved?
Deals and partnerships within radio and specialist have seen the greatest win. Where we have created loose integration with a simple affiliate model – success has been more limited. Previously, we worked with Foundem to create a price comparison affiliate model in several Specialist markets – the lack of control in terms of conversion meant this model struggled to deliver the returns we were looking for.

Retail is a risky business. How do you best deal with this?
Partners are absolutely vital – and finding the right one should start with the unique offering the brand is looking to deliver. We have moved away from a multiple partner approach within our motorcycling portfolio to working closely with one supplier to create a new and unique product for the market and are really excited about what we are now delivering to the consumer. Doing this without a partner would be risky and time consuming and simply doesn’t play to our strengths. Merchandising is simply not the same as writing quality content that helps consumers choose product – assuming an editorial team can pick products is a risky (and probably flawed) approach.

There is some formidable online competition. What can you offer that they can’t?
Trust, independence, quality content and insight – all the qualities that already make strong publishing brands successful. Consumers do use Amazon and eBay, but they don’t trust those brands in the same way they do media. They are the facilitators of the purchase and their content (editorial and user reviews) support decisions close to the time of purchase … but they don’t inspire that purchase. That’s the role (a highly valuable one) of media brands, regardless of platform.

What advice would you give any publisher looking to test the waters?
As with any digital models that are new to your business – test quickly and quietly and learn fast. You may have to go through several iterations before you find a model that suits your market and your brands and your initial estimates will never play out in reality.

Is there a key strategy to employ?
In terms of business model – there is unlikely to be a one size fits all solution – and it doesn’t appear that if there is, any UK publisher has found it yet. The strategy should be to play to your business strengths and your brand strengths, take a few small calculated risks to learn quickly (and cheaply), work with suppliers who fit your requirements and be clear on the value you are delivering to the consumer.

How do you see ecommerce evolving for publishers?
The key will be closer relationships with retailers … potentially to the point of ownership where appropriate with retailers starting to use partnerships to launch new spin offs and products rather than just a route to market. These partnerships should be a starting point into new business models not the end point – ecommerce doesn’t have to just mean clothes and gear but the relationship can fuel a huge variety of services for brands.

Cliff Conneighton, senior vice president, hybris software, USA

M and ecommerce are being flagged up as exciting additional revenue streams, do you agree?
We just call it commerce – and it just means selling stuff. Magazines have two kinds of product to sell – they usually use the word “ecommerce” to mean selling their advertisers’ products or other outside products. But equally exciting is the opportunity to do a broader job selling their own products. Both represent huge additional revenue streams.

A magazine’s product is its content. In the print world, production and distribution cost realities means the product must be bundled into a weekly or monthly package that is the same for thousand or millions of readers. In the digital world, those restrictive realities are gone – a magazine can profitably sell one article at a time, or bundle articles into any number of topic-specific mini-zines, or sell collections of articles from back-issues. Economies of scale are not necessary. If one discards the model of a stack of paper stapled together once a month and distributed through the mail, the new revenue possibilities are endless.

Can you give examples of successful ventures?
I am not aware of anyone who has really exploited the possibilities – yet. I have spoken to several magazine presidents and CEOs who “get it” but they say their biggest obstacle is calcified organisational inertia. There are people in charge of selling ads, selling subscriptions, and producing content. There is no one whose job is selling other people’s goods or their own content in new ways.
 
Would you say strong brands are key to success?
In commerce, the most important brand a magazine needs to leverage is its own. I can’t think of any industry that “owns” their brand and an audience more than magazines. If your passion is fashion, or celebrities, or model trains, or gardening, your magazine that specialises in that topic is often the centre of that world for you. The reader has given you permission to not only convey content on the subject, but also products on that subject. Where better to buy gardening tools than from the same magazine that tells you how to use them? Accept that permission – give the readers what they want.

Retail is a risky business with low margins. How do publishers best deal with this?
Magazines must avoid the logistics of retail – distribution, stock and customer service. Your job is to make the connection between what the reader desires and what the market offers. The magazine should own the ecommerce engine to control and deliver the product information and recommendations, present the offers, cross-sells, up-sells, take the order and payment, then pass the order off to someone else to fulfill and worry about logistics. There are many companies eager to do that, from manufacturers to distributors or even other retailers.

There is some formidable online competition. What can publishers offer that they can’t?
That’s easy – context and content. Amazon is successful because it provides a great customer experience – they make it easy to find the product you want, order it, and it arrives on time. And they provide good product information. A magazine can easily beat all that. Want to buy the thing you just read about? Click here. You just beat Amazon on customer experience and information.

What advice would you give any publisher looking to test the waters?
Pick a category (don’t try everything at once). Find a trusted provider who can deliver the product on time. Pick a commerce platform that gives you the flexibility you need to try different things and adapt your strategy over time. And get started.

All the same holds true whether you are selling your own goods or others.

Is there a key strategy to employ?
Just start, and be prepared to adjust as you learn.

How do you see ecommerce evolving for publishers?
Selling your own content and related goods will replace advertising as the primary revenue source. It must. Here’s why:

The amount of content available on the web, written and video, which competes directly with magazines is exploding. Over 50 million new websites are launched every year, and a new picture is uploaded to Instagram every second. And most of this seeks to be supported by advertising. Meanwhile, the total spending by advertisers across all media is flat. There are just not enough ad dollars to go around. And new media is seeing all the growth – YouTube generated about $4 billion in advertising revenue in 2012, more than all the titles combined of Time, Inc. and a growth rate of 60 per cent over the year before. People are willing to pay for content that they are passionate about, that they find compelling, and that they can’t get for free elsewhere. Paid content is inevitable.
 
ELLE of a business
The ELLE Shop in Japan, launched nearly five years ago, is growing rapidly, accounting for half of the ELLE brand’s sales and 20 per cent of Hearst Fujingaho revenue and sales, according to Nicolas Floquet, managing director and COO.

“I can also mention that for a publisher, an ecommerce project can have benefits beyond the mere sale of products under our media brand. In our case, a significant share of our ELLE print circulation is achieved from our ecommerce site and also joint-promotion ELLE Shop/ELLE magazine subscription is a good success.

“Ecommerce business also enables us to strengthen the relationship with fashion brands who are also important advertisers for the magazine.”

Read this and more in the latest edition of FIPP’s Magazine World.

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