#trending: sector predictions for partner marketing in 2023
Written by Joelle Hillman on 11 minute read
With 2023 fast approaching, we've collated leading predictions for the affiliate channel across retail, travel, fashion and telecoms.
Make 2023 the year of partner marketing. 68% of respondents from the 2022 State of the UK Affiliate Industry Survey stated that affiliate and partner marketing will be increasingly important for the year ahead. With ongoing economic uncertainty and consumer confidence at an all-time low, brands and agencies can leverage the affiliate channel to develop digital strategy on a low-risk performance model.
- Measurement and control will grow in importance - Alex Parmar-Yee, UK Strategy Lead
Challenging economic conditions historically, haven’t been universally negative for affiliates and partnerships. In fact in 2008, the recession was credited with growing the importance and size of the channel partially as it supported publisher models designed to save consumers money. However, 14 years later we see a greater choice of partners and more sophisticated technology available to advertisers which means the channel doesn't depend on a new partner type to be the sole driver of growth.
KPMG’s Global CEO outlook survey in October found that 70% of CEOs were concerned about the next 12 month’s impact on growth, with 29% of multinationals intending to cut marketing spend in 2023 according to the World Federation of Advertisers. As such the increased scrutiny of spend will elevate the requirements for insights provided within channels like partner marketing, that can provide a full picture but also provide granularity when needed. This quality of insights will need evolve to go beyond tools for commentary and curiosity. We expect advertisers to require data that allows brands to exercise more control and fine tuning to their programme whether that be with margin optimised commission models or refocused priorities in wider programme operations. Complexity and control will be key to ensuring advertisers are able to continue to see partnerships as a key part of navigating uncertain times.
- The travel sector's resilience will see the return of a January peak - Joelle Mullin, Retail & Travel Client Partner
The travel industry has faced more than its fair share of crisis management, from 9/11, the 2008 recession, Bird Flu, SARS, and most recently - and most devastatingly - Covid-19. Despite the setbacks, the sector always seems to bounce back and return stronger. This year was no different. 2022 surpassed expectations with summer performance finally exceeding that of a “normal” summer pre-covid.
Awin travel data is up a whopping +137% year to date versus last year: airlines +446%, coaches +392%, airport parking and transfers +330%, travel agencies +202%, hotels +136%. As staycations didn’t experience restrictions at the same intensity as last year their performance increases YoY aren’t as significant as international travel sectors, though still impressive. Tourism and attractions up +88%, local holidays +65% and trains +62%.
In terms of partner growth, technology partners saw an impressive +358% growth YTD YOY, driving 15% of all UK travel sales on the network. Email and display partners also saw triple digit growth across travel. In fact, Awin saw +1000% growth for social rewards partners, testament to the continued consumer trust in travel influencers and the continued appreciation travellers have post-covid to be able to travel freely with friends and family.
In 2023, many factors will play into travel performance and trends are already tricky to predict as we are modelling off the unusual data patterns from the last few years. We cannot ignore the current cost of living crisis in the UK, which will naturally have an impact on consumer spending and disposable income for luxuries like family holidays. I predict that the staycation market performance will increase as families and travellers opt for local holiday destinations to cut back on additional costs such as flights and airport transfers.
That said, international travel may surprise us as customers are still wanting to make up for lost time after over two years without travel and place higher value on memories and trips with loved ones over materialistic items. We expect AOV and length of stay to increase, as travellers focus on their own carbon footprint and ensure their travel is mindful as well as experiential, embracing new and local cultures. Not to mention, the increase in remote and flexible working policies is enabling employees to travel without the limitations of annual leave days.
The big question is, will travel’s peak actually peak? My guess is yes, and I look forward to 2023, with the travel sector performance trend line kicking off with a mountain top view of January. - Diversity in the channel will subvert ongoing retail decline - Joelle Mullin, Retail & Travel Client Partner
As Alex reflected above it's been a turbulent environment for all sectors, and retail has fought the challenges of the economic crisis from the front line. IMRG reported retail online to be down -10% YTD, however Awin are seeing our retail portfolio up an impressive 12.4% YoY. Specifically clothing +14%, home & garden +6%, health and beauty up a substantial +33%, though electronics is tracking down at -5%.
It's unsurprising to note that as consumers purse strings tightened, we saw discount publishers driving 33% of these sales, cashback at 23%, and content just behind with 21% sales share. Looking at biggest growth across publisher types we saw CSS at an impressive +38% YoY across retail, technology partner growth +16%, content +11% YoY, and incentive based performance +3.2%.
What brands have learnt over the last few years, is publisher diversity is key, ensuring multiple levels to support customers in their decision to purchase, whilst also reducing the risk of relying on one partner type. In 2022 brands with a more diverse base benefited from the large growth that these partner types experienced and were able to protect themselves somewhat from the impact of many macro-factors surrounding retail.
As customers continue to seek honest product insights, retailer comparisons, and the best prices, I believe we will continue to see the affiliate channel buck the trend and stand out comparative to wider retail ecommerce. Similarly retail brands will be looking to secure sales, at a strong ROAS, and will be looking to the affiliate channel as a safe investment that is offers transparency and choice.
It’s going to be a tough year for retail overall, and customers will be focused on essential vs non-essential shopping. I am proud to be working within a channel that aims to support our brands and their customers through partnerships of all sizes in 2023. - Fashion to tackle lower AOV and high returns - Cameron Rooney, Account Director
Fashion brands have faced more than a fair share of challenges over the last year. Linking back to the overall economic conditions, some fashion retailers have unfortunately had to look at drastic measures such as closing high-street stores and laying off staff. In the worst cases, a handful of large brands sadly slipped into administration. To the customer, the main issues have revolved around increasing prices and Royal Mail strikes leading to longer delivery times. On the horizon, we’re expecting further supply issues across the sector due to the floods in Pakistan, which is one of the largest cotton producers in the world.
Despite these challenges, when we look at the affiliate sector for fashion at Awin, we see that fashion purchases are up +11% for sales YoY. Womenswear is up +14% for sales YoY with Menswear not far behind at +12% YoY.
2022 has seen a huge +55% increase in traffic mainly driven from subnetworks, comparison engines, CSS, discount code and editorial content. This links with Joelle’s point around brands actively diversifying their partnership base. It also highlights that there still is space to educate customers and further brand awareness by using editorial partners, even during these particularly tough economic conditions.
Black Friday, unsurprisingly, was the biggest peak for the sector in which we tracked a +190% increase in sales compared to any standard day. Cyber week is going nowhere fast, and we expect this to remain the biggest peak of the year for the sector going into 2023. It’s key to lock down trading offers in advance and communicate these with partners, along with booking relevant exposure slots, to gain maximum effect from the peak period.
Outside of Black Friday, we anticipate that fashion retailers will look at how they can help drive up AOV next year. When inflation is taken into account, AOV sits at -4% YoY in real terms showing that basket size has declined. Working with tech partners to upsell and cross sell products, implementing basket tiers on customer facing affiliate partners e.g. cashback sites, and offering bespoke offers on-site based on individualised behaviour are just a few ways in which advertisers can help to increase AOV within the channel.
High levels of returns are an ongoing problem for the sector and times like Black Friday elevate this costly issue further. Some retailers in the past 12 months have implemented measures such as charging for returns. In a market where free returns is still the standard, and an excellent way to attract new customers, retailers will look for ways they can harness the affiliate channel to reduce returns. Working with a tech partner who provides sizing recommendations to customers on-site within the journey, is one way of ensuring that the customer has the best chance of not returning the item. Retailers should always make the best-use of their merchant pages on partner sites to give the most accurate information prior to click-through, and any opportunity to return in-store where the margin is typically higher should be promoted.
Overall, we have an exciting year ahead for fashion... -
Telco to prepare for upcoming regulation changes - Tavy Stubbs, Account Director
The turbulence continues within telco, and with 83% of adults in the UK reporting a cost of living increase in March 2022 (ONS), energy price cap increases in April and October of 2022, and utility costs set to rise, many are looking to offset monthly outgoings with other monthly expenditures, impacting mobile and broadband contracts.
Whilst telecoms purchases are still considered an “essential” cost, the ways in which people are purchasing within the sector has changed over the last two years, with notable variances coming from the mobile space. We’ve seen the rise of Sim Only sales since the Covid-19 pandemic. The average contract handset share of sales has fallen from 46% pre 2020 to 40% in 2020, regularly dropping below 38% in 2022. This is partially due to a reduction in technology advances between handset generations, leaving users less tempted to upgrade their devices. With the cost of living crisis set to roll into 2023, we will likely see SIMO contracts continue to grow, unless there is a significant technological leap for a new flagship launch.
Within SIMO we are seeing larger data tariffs becoming more prevalent. In Q4 2022, on average, we have seen 75% of sales within 12M SIMO being over 15GB, up +25% YoY. 30D SIMO increased by +20%, from 40% in Q1 2021 to 60% in 2022. Within both contract types, one of the fastest growing tariff types has been 50GB+ or Unlimited, a trend we might expect to continue in 2023.
Within broadband, the name of the game is ensuring that you offer compelling pricing at the highest speeds. Gigafast speeds in 2021 averaged over £50 in cost per month, and in the space of a year the average price has dropped by over £5 per month, the largest price drop of any speed range. This indicates the intensity with which the key ISPs are competing for share within this market. The drop in pricing is reflected by share of sales for faster speeds, with over 30% of the market now purchasing broadband products over 100Mbs. This also reflects regulation changes introduced by Ofcom; the retirement of the copper network, ADSL switch off in 2025, and the FTTC switch off scheduled for 2027. Many brands are trying to prepare for these radical change ahead of schedule, and so a focus on FTTP in 2023 is inevitable.
With the increased desire for faster speeds, we have also seen a rise in the visibility of alt-nets, presenting ever bigger challenges to more traditional ISPs, and who continue to invest in their infrastructure. Those brands will be well placed to remain competitive in 2023, as typically they build full-fibre only networks, future proofing them against the ever increasing demand for speed.
Overall, we expect to see a “more is more” attitude within telco in 2023, with faster broadband speeds and higher data contracts within mobile. As always, having a diverse portfolio of offers will protect advertisers from external economic and market forces. Refurbished phones and social broadband tariffs are important elements to any campaign and work alongside premium handset sales and full-fibre gigafast services.
