Netflix enters e-commerce fray as subscription growth slows

Dive Brief:

Netflix launched an e-commerce shop that will sell limited-edition merchandise based on its shows and brand, per a blog post. Netflix.shop is available in the U.S. and will roll out to other countries in the coming months.
The debut collection includes streetwear and action figures based on anime series "Yasuke" and "Eden," along with apparel and decorative items inspired by "Lupin" made with the Louvre in France. It also includes anime-inspired collectibles from emerging designers, with products based on "Stranger Things" and "The Witcher" to come.
While it already offers consumer products through partners like Target, Netflix opening an e-commerce shop will give it greater control over revenue opportunities. The streaming giant reported revenue growth of 24% in the first quarter of 2021, but faced a subscription growth slowdown.

Dive Insight:

Netflix launching an online shop for branded merchandise is one way the streaming platform can build on the gains in brand value it saw during the pandemic, as consumers spent more time with digital video. It's also the company's first foray into connecting content with e-commerce, a trend that has affected the entire marketing landscape as brands attempt to shrink the sales funnel across a variety of digital platforms.

Video platforms including YouTube and TikTok have beefed up their respective commerce offerings, and shoppable livestreams became a go-to tactic as brick-and-mortar stores were closed during the pandemic and consumers increasingly shifted to online shopping. Walmart has teamed with TikTok for shoppable livestreams as it seeks to compete with e-commerce leader Amazon, which has made its own content plays.

While Netflix.shop will not be integrated into the streaming giant's actual shows, it does offer a new revenue opportunity for the company. Netflix reported a 24% lift in revenue in Q1 2021, but its subscriber number came in below a previous guidance — a slowdown the company attributed to the continuing effects of COVID-19 on production. However, Netflix is also facing more competition across the streaming landscape, from fellow subscription services like Disney+ and HBO Max and ad-supported video-on-demand platforms that surged during the pandemic.

Additional sources of revenue like Netflix.shop could help the company push back on calls from investors to bring advertising to its platform, which it has steadfastly refused to do. CEO Reed Hastings said in a 2020 earnings call that "there's not easy money" in competing with Google, Facebook and Amazon in the online advertising market. Its e-commerce offering could create a new revenue stream without the costs associated with establishing an ad business.

While Netflix seems unlikely to add advertising to its content, it often flexes its marketing muscle to promote its original shows and films. The platform teamed with water brand Liquid Death to promote "Army of the Dead" with a campaign that included a late-night infomercial. However, a recent effort in support of new show "Sweet Tooth" that included a front-page advertorial in USA Today drew criticism for blurring the line between advertising and news.