NEW YORK, United States — Some large fashion and beauty retailers have paused affiliate link programmes as the coronavirus pandemic depresses sales, BoF has learned, throwing a cornerstone of the social media economy into turmoil.
Macy’s, Dillard’s, T.J. Maxx and Ulta Beauty were among the chains to at least temporarily end the practice this week, denying influencers and media companies of the sales commissions they receive from posting links to products. These links have become a multi-billion dollar ecosystem, serving as the main source of income for many influencers and a lucrative revenue stream for media brands.
But with stores closed in most major cities, and consumers cutting back their spending on fashion, retailers are slashing costs. Millions of US workers have been laid off across all industries in the last two weeks, and some economists are predicting a global recession as bad or worse than the downturn that followed the 2008 financial crisis. Dillard’s told its affiliate partners in an email that “the decision was made due to the impact of Covid-19 and the realignment of marketing strategy.”
Now, influencers find themselves scrambling to figure out how to supplement that once-reliable source of income.
Influencers find themselves scrambling to figure out how to supplement that once-reliable source of income.
They don’t have much time to come up with a Plan B: Macy’s Inc. sent out a notice on March 23 informing participants it would pause its affiliate programme starting the next day. Ulta’s halted on March 22, while T.J. Maxx is stopping commissions on March 26 (the off-price chain closed its e-commerce site last week), and Dillard’s on March 30.
“I know people like to trivialise influencers, but this is people’s livelihoods,” said Marie Denee, an influencer who runs the plus-size blog The Curvy Fashionista and received the Dillard’s email. “We’ve been growing and scaling our business over the last 11 years, and we’ve weathered quite a lot but this is very traumatic.”
None of the retailers have said when they might revive their affiliate networks.
“We apologise for the sudden notice and appreciate your patience as we work through these unprecedented circumstances,” Macy’s email to partners read.
The changes to affiliate programs extend to all industries, not just fashion. Companies including Kayak, Emirates and Wyndham also have been emailing affiliate partners that they are changing commission rates to zero.
With tens of thousands of US stores closing their doors, retailers are hoping e-commerce sales can make up the gap. On paper, it might seem like the perfect time to be leaning on influencers to push product.
Bloomingdale’s, which is owned by Macy’s, is continuing its affiliate programme. On Tuesday, March 24, ModCloth emailed partners working with Rakuten’s affiliate arm that it would be increasing rates for new customers during April “in hopes of incentivising their partners to drive some additional traffic to the ModCloth site.”
Maura Smith, the chief marketing officer of Pepper Jam, an affiliate and marketing company, said sales from affiliate links increased 43 percent over the last two weeks of March and that many of its partner brands have been investing more in affiliate marketing.
The effects can radiate outward, as many successful influencers have support teams.
But cutting costs is a higher priority for many companies, said Sara Korab, director of influencer marketing at coupon site Savings.com, which runs an extensive affiliate programme.
Brands working with Savings.com, along with competitors like RewardStyle, CJ Affiliate and Pepper Jam, pay a monthly fee or a sales commission to the networks on top of the influencers’ cuts. They may end up handing over anywhere from half a percentage point to 30 percent of a sale to third parties — money that many companies can’t spare in a global crisis.
“When you have an affiliate situation… there’s a lot of hands in the mix that you have to pay,” said Dee Murthy, chief executive of the fashion group Five Four, which paused affiliate links for Menlo Club, a men’s subscription box. “It all adds up. I’d rather focus energy to get to customers directly through email or social media at this point.”
Many influencers have no easy way to replace the income they’ll lose from the closed affiliate networks. The effects can radiate outward, as many successful influencers have support teams. Even many micro-influencers hire freelance writers, photographers and stylists.
“It’s a lot of money for me and my business to be losing,” said Corissa Enneking, a plus-sized fashion blogger, who added that in a good month her company, FatGirlFlow, can make up to $10,000 a month from affiliate commissions. “That helps pay my interns, my contractors I’ve hired for Pinterest. There are a lot of people who rely on me and the fact that I need to rethink my business plan is terrifying.”
Enneking said she understands why fashion retailers are looking to cut costs, but maintained that brands should be taking care of their partners during such a difficult time.
Influencers can shift to affiliate programs that are seeing growth, like productivity items, online education, and grocery goods.
“I’m sure affiliate programs are a big expense but I have a hard time feeling bad for corporations in all this,” she said. “It’s part of this weird thing that keeps happening in our economy where individuals get screwed for the sake of corporations. You think you’ve built relationships that are personal, but they aren’t. Companies will do whatever they want.”
Influencers are already struggling with paused or cancelled brand work outside of affiliate links, added Denee, who said she has “almost $27,000 worth of contracts and agreements that are hanging in purgatory.”
Murthy, of Fivefour said he sympathises with influencers losing money, but noted that he had his staff to look out for first.
“We’re taking the next couple of weeks to evaluate every dollar we’re spending to make sure we don’t have layoffs,” he said. “Everyone in the industry is shouldering the pain from this.”
Murthy said Menlo Club’s affiliate programme could come back as early as May.
“As I’m turning some marketing channels off, I’m turning other stuff on to test what’s more efficient, so nothing is permanent,” he said. “It would be irresponsible to not check what is and isn’t cost-effective right now.”
In the meantime, Nicole Ron, the vice president of marketing at CJ Affiliate, recommends influencers try to work with brands that sell essentials, which are still in high demand.
“We are seeing a trend in consumers not shopping for luxury goods and spending more on creating a good environment to live in for the foreseeable future,” Ron said. “Influencers can shift to affiliate programs that are seeing growth, like productivity items, online education, and grocery goods. This is an opportunity to work with brands that aren’t having a knee-jerk reaction and provide consumers with what they need.”
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