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With a pair of announcements this week, Netflix is introducing more commerce-friendly components to its business.
Through an immersive retail experience and new ad-supported tier, the streaming platform is set to become a player in the movement of goods.
Here’s a look at the news:
A pop-up brings Netflix to the store
On Thursday, Oct. 13, a new store Netflix at The Grove will open in Los Angeles.
Located in shopping and entertainment district The Grove, the store will be designed as an immersive experience that brings fans closer to characters from shows on the platform, and allows them to buy merchandise from the series.
The 10,000-square-foot pop-up store is set to feature a “broad range of limited edition items” from shows including Stranger Things, Bridgerton, Squid Game. This includes apparel, collectible Funko figures from Squid Game and Stranger Things and a book on Bridgerton written by creator Shonda Rhimes. Children’s merchandise will also be available, including the dollhouse from Gabby’s Dollhouse, and activity books from Ada Twist, Scientist and Cocomelon.
Along with merchandise, the store will have life-size likenesses of characters including Vecna from Stranger Things, the Young-Hee doll from Squid Game, Queen Charlotte’s throne and more. In December, the second floor of the store will transform for the holidays with interactive and social-media-ready moments from shows like Guillermo del Toro’s Pinocchio, Slumberland, Enola Holmes, The School for Good and Evil, Matilda, and Emily and Paris, as well as new holiday shows debuting this year.
This isn’t the first time Netflix has opened a store around its shows. It has launched retail experiences before that were centered around specific titles like Stranger Things and Bridgerton. It also opened an ecommerce store with merch from many of its shows last year.
“Following the incredible success and excitement from our fans for our immersive experiences around the globe, this felt like the most organic next step to continue our growth and bring Netflix’s most beloved shows together in a completely new way,” said Greg Lombardo, head of live experiences at Netflix, in a statement. “Celebrating our fans and giving them the opportunity to put themselves in the world of the stories they love is at the heart of what we do, and we’re thrilled to bring this experience to life at The Grove.”
With the store, Netflix is taking characters and worlds that are seen on the screen, and bringing them to the physical world. The fact that fans can own a piece of popular shows only deepens the connection with the viewing experience it offers.
The move comes at a time of new experimentation at the intersection of content and commerce. Disney, long a master of merchandise crossovers, is reportedly set to offer commerce as part its Disney+ platform, allowing viewers to purchase a product that ties in with a show while watching. Roku and Walmart are also partnering on shoppable ads. Netflix hasn’t revealed any plans for shoppable content to this point, but putting the merchandise in place and creating excitement around it figures to be one step it will need to take to get there.
The exterior of Netflix at The Grove. (Courtesy photo)
An ad-supported tier will bring more brands to Netflix.
Come November, Netflix viewers will have the option to pay less, but receive ads.
Netflix said it will launch a new, lower-priced plan called Basic with Ads on Nov. 3.
Available for $6.99 a month in the US, the plan will air 4-5 minutes of advertising per hour, with ads running 15-30 seconds each before and during shows and films. The content will mostly be the same, with exception of “a limited number of movies and TV shows won't be available due to licensing restrictions, which we’re working on,” Netflix said.
Netflix said it will offer “broad targeting capabilities by country and genre” to advertisers. It will also collect date of birth and gender at signup as it looks to improve targeting over time.
"We think this is a big win for advertisers, and a big win for our members. If people are going to choose that they want to be in the ad-supported tier, it's important that we show ads that are relevant to them, said Jeremi Gorman, president of worldwide advertising at Netflix, adding that the data will not be used to build profiles on other services.
Netflix has a host of partnerships in place for its advertising tier. It previously announced a partnership with Microsoft to put the technology in place. On verification, Netflix will start working with DoubleVerify and Integral Ad Science to verify the viewability and traffic validity of ads starting in the first quarter of 2023. It is also using Nielsen’s Digital Ad Ratings in the US to help advertisers understand how they can reach a target audience.
“The switch from linear is happening at an ever increasing speed, with streaming now surpassing broadcast and cable in the US,” wrote Netflix Chief Operating Officer and Chief Product Officer Greg Peters, in a statement. “We’re confident that with Netflix starting at $6.99 a month, we now have a price and plan for every fan.”
The ad plan has been widely reported as a move to help Netflix access new revenue streams as it faces a slowdown in subscribers, and has had to make layoffs. There’s no question that that’s a key factor. In the second quarter of 2022 alone, it lost nearly one million subscribers, marking the second straight quarter that paying members declined.
Yet the streaming service is also moving into a market where there is opportunity for growth. Connected TV, or CTV, is gaining increasing traction with advertisers following the streaming explosion of the pandemic. Despite the losses, Netflix remains a leader in the streaming area, and it should be an attractive option for advertisers. The service’s executives apparently recognizes this, as it set out to price the offering at $65 CPM and eventually charge up to $80, which is far higher than other platforms, the Wall Street Journal reported.
Netflix said it has nearly sold out all inventory for launch, and executives spoke of a diverse group of advertisers, including automakers, CPG, travel and retailers.
In the months since Netflix said it would introduce ads, there has been some speculation that the service will also be able to innovate in the way ads look, especially given the way it has brought new features to the way we watch overall (remember life before binge watching?). But, at least at launch, it doesn't appear that Netflix ads will look all that much different from other ads. Demos for L'Oreal and NYX spots that were played during a press call on Thursday revealed an experience that looks similar to other video-based TV ads, albeit with only brief ad playing in between the content as opposed to a block.
There were hints of more to come. Gorman said that Netflix sees "magic" happening when the content and ads are complementary. The data that is collected at signup could also support more behavioral ads in the future.
The ad tier’s rollout is happening within a swift six months of the initial announcement, and Gorman said the roadmap is "TBD" from here. From the foothold that is being built with the announcements this week, it’s a fair bet that commerce will play a bigger role in the platform.
“What we do at launch will not be representative of the long-term opportunity of what the product will be,” Gorman said of the ad product.
Trending in Marketing
On the Move has the latest from Amazon, Lovesac and more.
This week, leadership is changing at GameStop, Sorel and Beautycounter. Meanwhile, key executives are departing at Amazon, Wayfair and Lovesac.
Here’s a look at the latest shuffles:
GameStop CEO fired
GameStop announced the termination of Matthew Furlong as CEO on Wednesday. A brief statement did not provide a reason for the firing.
With the move, Chewy founder and activist investor Ryan Cohen was named executive chairman of the video game retailer. Cohen will be responsible for capital allocation and overseeing management.
It came as the company reported a 10% year-over-year decline in net sales for the first quarter. Meanwhile, the company’s net loss improved by 62%.
In an SEC filing, GameStop further added this “We believe the combination of these efforts to stabilize and optimize our core business and achieve sustained profitability while also focusing on capital allocation under Mr. Cohen’s leadership will further unlock long-term value creation for our stockholders.”
Cohen was revealed as GameStop's largest shareholder when he disclosed a 10% stake in the retailer in 2020. GameStop went on to become a leading name in the meme stock rise of 2021.
Sorel president steps down
Mark Nenow is stepping down as president of the Sorel brand in order to focus on his health.
After rising to the role in 2015, Nenow spearheaded a transformation of Columbia Sportswear-owned Sorel from a men’s workwear brand to a fashion-focused brand that led with a women’s offering of boots, sandals and sneakers.
“Mark led the brand to sales of $347 million in net sales in 2022,” said Columbia Sportswear CEO Tim Boyle, in a statement. “His leadership has been invaluable to this company, and we wish him the very best.”
Columbia will conduct a search for Nenow’s replacement. Craig Zanon, the company’s SVP of emerging brands, will lead Sorel in the interim.
Beautycounter appoints interim CEO
Beautycounter appointed board member Mindy Mackenzie as interim CEO, succeeding Marc Rey. According to the brand, Rey and the board “mutually decided to transition to a new phase of leadership for Beautycounter.”
McKenzie, a former executive at Carlyle, McKinsey and Jim Beam, will lead the company as it conducts a search for a permanent CEO. Additionally, former Natura & Co CEO Roberto Marques will join Beautycounter’s board as chair.
As part of the transition, Nicole Malozi is also joining the company as chief financial officer. She brings experience from Tatcha, Nike, and DFS Group Limited.
Amazon’s North America fulfillment chief departs
Melissa Nick, a VP of customer fulfillment for North America at Amazon, will leave the company, effective June 16, CNBC reported. Nick joined the company in 2014, and oversaw a region that included nearly 300 fulfillment centers. After doubling its supply chain footprint during the pandemic, Amazon recently reorganized its fulfillment operations to take a regional approach, as opposed to a national model that often resulted in items shipping across the country.
Wayfair’s chief commercial officer to retire
Jon Blotner (Courtesy photo)
Steve Oblak will retire from the role of chief commercial officer at home goods marketplace Wayfair. With the move, Jon Blotner will be promoted to chief commercial officer.
"Steve has served as a critical part of our leadership team and played a pivotal role in Wayfair's growth, helping us grow from a $250 million business when he joined to $12 billion in net revenue today,” said Wayfair CEO Niraj Shah, in a statement. “He oversaw countless milestones, from helping to launch the Wayfair brand as we brought together hundreds of sites into a single platform, to launching new categories, business lines, and geographies while overseeing our North American and European businesses, to leading our debut into physical retail.”
Blotner previously oversaw exclusive and specialty retail brands, as well as digital media at Wayfair. Before joining the company, he served as president of Gemvara.com prior to its 2016 acquisition by Berkshire Hathaway.
Lovesac announces CFO transition
Furniture retailer Lovesac said Donna Dellomo will retire as EVP and CFO, and move to an advisory role, effective June 30. Dellomo was with Lovesac for six years.
Keith Siegner was appointed as the next EVP and CFO. He brings experience as CFO of esports company Vindex, as well as executive roles at Yum! Brands, UBS Securities and Credit Suisse.
Additionally, Jack Krause will retire from the role of chief strategy officer, effective June 30. His responsibilities will be divided between CEO Shawn Nelson and president Mary Fox.
“Since joining Lovesac, Jack has played an instrumental role in transforming the Company into a true omni channel retailer by helping expand our physical touchpoints and digital platform as we continue to disrupt the industry,” said Nelson, in a statement.
NRF adds board members
The National Retail Federation announced the addition of five new board members. They include:
- Marguerite Adzick, founder and CEO, Addison Bay
- Harley Finkelstein, president, Shopify
- Ian Kahn, partner, PwC
- Sharon Leite, CEO, Ideal Image
- Carrie Tharp, VP, strategic industries, Google Cloud