How Hearst Magazines is using its digital membership model to grow its e-commerce marketplace business
By Kayleigh Barber • March 27, 2024 • 4 min read •
Ivy Liu
This article is part of Digiday’s coverage of its Digiday Publishing Summit. More from the series →
The Hearst e-commerce marketplace is just over a year old, but is already proving that publishers with categorical authority and expertise on topics have a better chance at selling products to readers — sometimes at a higher commission rate.
In September 2022, Sheel Shah, Hearst Magazine’s svp of growth for the enthusiast and wellness portfolio, took the stage at the Digiday Publishing Summit in Key Biscayne, Fla. to talk about the publisher’s investment in building out an e-commerce marketplace. A year-and-a-half later, Shah returned to the stage at the summit in Vail this week to share how that plan has come to fruition, and why focusing on the enthusiast and wellness titles, like Oprah Daily and Men’s Health, within that marketplace has increased average order value and frequency of transaction, particularly amongst subscribed readers.
Hearst’s affiliate and commerce revenue was up in 2023 year over year, though Shah declined to share exactly how much, though he said the enthusiast and wellness portfolio had some of the strongest growth rates. He pointed specifically to Popular Mechanics, which experienced a 25% lift year over year in commerce revenue last year, which is why the onus has been put on the brands in this portfolio to continue to build out the marketplace.
While Hearst sells its own products in its marketplace, there are only 10 or so products of this caliber and will likely remain in that range, according to Shah. What Shah’s been focusing on to populate the marketplace is drop ship deals with third-party retailers, of which the marketplace currently has 35 deals and represents thousands of product skews.
Where Shah said that an affiliate commerce deal only gives a publisher an average commission of 8-10%, and its own product that Hearst manufactures, sells and ships out is 100%, drop ship deals with third-party brands is seen as a happy medium. A typical drop ship agreement can net Hearst 25-30% commission rates, with luxury products yielding a little more.
Take the Oprah Daily shop, which has signed drop ship deals with some of the brands regularly featured in the annual holiday shopping guide, Oprah’s Favorite Things. Four or five of the top 10 products sold in this shop now come from third-party retailers, like luxury joggers that retail for upwards of $150.
“Not only does it allow us to drive up average order value, but it also allows our catalog to feel richer for the user that’s entering our commerce platform and not just seeing the 10 or 20 [products] that we’re creating in house,” said Shah.
Narrowing into the enthusiast brands, which have a naturally smaller audience than general interest and lifestyle titles, Hearst’s conversion rates have come down a bit from the 3.5-4% average that Hearst had in 2022. But Shah said that as the product catalog expands in the marketplace, especially to include higher priced products, that’s to be expected.
But at the same time, having higher price point products in the marketplace (like an $800 adjustable dumbbell set that’s the number one selling product in the Men’s Health marketplace), means that even though conversion rate declined, average order value increased. The dumbbell set being a drop ship product in its marketplace, Hearst stands to make around $250 on a single purchase, whereas a sale made through an affiliate link on Amazon would net closer to $80 for Hearst, Shah said.
“You can take a little bit of a conversion rate hit for that [higher commission rate] and then add on all the other benefits of having the transaction happen on your platform… You’re now starting to build a larger first-party audience, you now have their email addresses to send them newsletters… You can keep them in your ecosystem and have less of a reliance on traffic sources like Google,” said Shah.
The authority that drives the commerce success is also what largely steers Hearst’s membership offering, and finding ways to overlap those businesses has increased the marketplace’s transaction volume as well. For example, now when someone wants to subscribe to a digital membership, they are redirected to Hearst’s e-commerce platform.
“That was a major driver of bringing more traffic in, but more importantly, it brings higher intent traffic in,” Shah said. And even though some portion of the audience ends up abandoning the membership purchase journey, they are now seeing all of the products within that brand’s shop.
The membership base, which was up 50% year over year in 2023, is also contributing to an uptick in e-commerce revenue, Shah said, because the average order value for members is 50% higher than non-members. Additionally, members also buy from the marketplace more frequently throughout the year than non-members, given members are incentivized to buy in the marketplace with exclusive discounts and free shipping.
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