Retail media has been a hot topic in online advertising for a couple of years now. This time last year, e-marketer even went so far as to declare 2022 as “the year of retail media” (although the cynics amongst us remember how the ‘year of mobile’ continued for half a decade). And according to a GroupM report last summer, retail media already accounts for almost 11% of global ad spend.
But if you’re reading this and wondering what’s going on, don’t worry, you haven’t missed the boat. Retail media is getting started. And even if you’re already experimenting with the channel, there are probably some emerging trends you should be aware of.
Before we get on to the detail, it’s worth defining what we’re talking about. Retail media networks (RMNs) are the platforms and tech infrastructure that retailers own and that marketers can use as media properties to reach the retailer’s customers with their marketing messages. Or as James Chandler, CMO of IAB UK puts it, they’re “Shopper Marketing 2.0”. They can include the retailer’s website(s), its apps, and any other digital properties. They can also include the offline channels familiar from v1.0; in-store and direct mail, for example.
Critically, what all RMNs are founded on is the data that the retailer collects about its customers as they travel through these digital platforms.
1. What’s the big deal for advertisers?
Advertisers are excited for three main reasons. The first is that collaborating with partners who own serious amounts of opted-in first-party data is a way to target audiences, attribute responses and measure effectiveness in the post-third party cookie world. This is particularly important for brands in areas like CPG, where there are limited chances to build a direct relationship with the customer.
In addition, the ‘closed loop’ offered by retail media – customers buying a product on the same site where they saw it advertised – gives unprecedented insight into an audience’s response to advertising, and perfect environment in which to test and evaluate new approaches.
The second reason is that consumers have been shown to be more receptive to advertising when they’re already shopping, increasing the efficiency of retail media advertising.
Finally, in the long-term, better understanding of customer behaviour should result in brands creating better products.
2. Why do retailers care?
Many retailers have been hard-hit by the move to online shopping driven by the pandemic. The decrease in visits to shops has made in-store media less effective, reducing marketers’ spend in the channel. At the same time, the rise of free delivery as a point of competition has cut into the already thin margins of their ecommerce operations. So the big attraction of retail media is that it provides a new revenue stream, as Boots CMO Pete Markey explains in a conversation with The Drum and LiveRamp International President, Warren Jensen.
And if advertisers are able to deliver better, more targeted advertising, retailers should also benefit from higher sales that result
3. What are the challenges in making the most of retail media?
Although RNMs offer big wins to both sides, these don’t come without effort. Advertisers, for example, face budget-planning issues in both the short and medium term. Firstly, they need to audit the resources they currently devote to traditional retail-based channels and decide how these are to be allocated in the new world.
Then, if and when initial trials are positive, a bigger rethink of the marketing mix will be needed. However, it will be crucial for marketers to avoid the ‘empty funnel’ trap that has affected other performance channels. Investment in brand-building – on RNMs as well as off – will still be required to maximise the benefits of direct response advertising on the networks.
On the network side, a cultural shift will be needed. Retailers will need to think about themselves as publishers, and the most successful will be those which integrate this element of their business most completely with the rest of their operations.
As part of this, retailers will need to recruit for very different skill-sets than they’re used to. Technology partners may be able to help in the short-term, but the strategic nature of the retail media opportunity is such that most retailers will want to take the operation fully in-house.
Then both sides need to audit their data and technology. There’s no point in building a strategy based on data sharing if your data is incomplete, scattered around the organisation in silos or stored in incompatible formats.
Similarly, what do you need to do to bring your technology – and your tech expertise – up to speed? Where do you need to invest and where can you partner? For example, a key component of any kind of data collaboration is a data clean room (such as LiveRamp’s Safe Haven), where partners can share and leverage anonymised customer data without breaching privacy regulations or consumer trust. Do you have the know-how to establish one for yourself, perhaps through AWS’s recently launched initiative, or do you need a partner to help?
4. What’s next?
Two major trends to watch out for in future are an increase in the number of networks, and a growing need for standardisation.
Up to now RNMs have been mainly the preserve of Amazon and the major grocery chains – Walmart, Target, Carrefour, Tesco etc. However, more specialist retailers – such as Boots in the UK – have also moved into the space with great aplomb. This is likely to continue as data-rich retailers and etailers start to realise the value of the more targeted data they hold.
The disadvantage of this proliferation up to now has been that most RNMs have been set up as standalone operations. This may not matter if you’re happy to only deal with Amazon, but for marketers that want to build a retail media ecosystem around their brand, the current lack of standardisation could be a topic set to dominate in the coming years. History suggests that the sector will evolve towards a set of standards; the big opportunity for 2023 will be to establish those standards now, while the industry’s foundations are still being built. The earlier companies get into retail media, the bigger say they will have in how this multi-billion dollar industry is created in the UK, and the quicker they will reap the benefits.