Why are marketers suddenly going off their trolleys over retail media?
As marketers’ access to online consumer data dries up, brands are increasingly turning to the companies that know us better than anyone – retailers. For our Evolution of E-commerce Deep-Dive, we explore the retail media gold rush.
Retail media set to be worth $100bn by 2026 / Adobe Stock
Retail media is set to boom. Boston Consulting Group (BCG) estimates that, globally, it will grow by 25% a year over the next five years to be worth $100bn and account for over 25% of total digital media spending by 2026. eMarketer meanwhile forecasts that US retail media networks will exceed $52bn in ad sales by 2023.
“It’s a crucial part of any modern marketing campaign,” says Roxanna Larizadeh, the global commerce lead at Starcom. “The general concept of retail media –advertising direct-to-consumer, wherever they are – is nothing new, but the landscape has evolved along with the technology.”
Amazon set the benchmark but, today, Walmart, BestBuy, Tesco, Boots, Morrisons and a plethora of other top retailers are all investing heavily in creating their own networks. According to a study from McKinsey, 80% of advertisers currently use at least one retail media network in addition to Amazon.
The appeal for CMOs is clear. A broad house of advertising inventory and opportunities, advertisers can buy into a mix of product promotion, sponsored search results, product pages, branded content, in-store activations, self-service placements and extras such as mentions on the in-store radio. The campaign build, media plans and measurement, meanwhile, are all backed by a retailer’s own data, often through loyalty schemes. They can link in-store and online activity, meaning your local supermarket will know a lot about a customer, such as their postcode, how much they spend a month and exactly what they spend it on.
And it’s not just retailers tapping into this. Holding companies including WPP and Publicis Media are going all in on retail media because investment will accelerate and the offerings will become more integrated.
The space is naturally of most interest to the FMCG brands stocked by these retailers, so those in beauty, snacks, personal care, hygiene products, cleaning products and consumer electronics, and Larizadeh says retail can help optimize media plans, campaign bids and keyword discovery. One client has seen sales value climb 75% using it, she reveals.
This rings true with The Future of Retail report from The Trade Desk, which claims that 39% of marketers using retail media use it to build brand equity. 44% say they use the data to track sales growth and 76% of claimed they would use point-of-sale data frequently or very frequently. In most cases, this data was being used to close the loop but now that growing privacy measures from tech companies such as Apple and Google limit what consumer data can be linked, eMarketer has found that motivation to work with retail media to gain first-party data almost doubled from 33% to 62% between 2020 and 2021. The media real estate seems to be an afterthought to some marketers who fear they will soon be blinded.
And, it appears, retailers aren’t willing to be as gung-ho with data as the open web, commonly using of ’clean rooms’ such as Infosum that let brands use consumer data without it leaving the platform (or room).
Lauren Wetzel, the chief operating officer at InfoSum, says: “Retail media is a direct response nirvana – data-driven, close to the point of sale, targeted, measurable and full of insight.” But, she says, it also cultivates all ends of the marketing funnel as ”the perfect hybrid” between traditional direct response and brand building channels. ”It’s what display advertising always wanted to be, but never could.”
There’s a huge amount of incremental spend coming into the space and Wetzel thinks it is being diverted from traditional brand-building media such as TV, as well as from search and display. Meanwhile, BCG estimates that 60% to 70% of its projected $100bn by 2026 retail media revenue will be net new spending over and above historical trade dollars.
Fragmentation and measurement
But as ever, there are shortcomings. If dozens of retailers build unique media offerings, that’s a lot of ecosystems for agencies to navigate. And will they be able to measure success across all these platforms in a functioning manner?
Wetzel says: “Planning, executing and measuring campaigns across dozens of providers will be difficult as so much data needs to move and change hands. There’s also a privacy risk at play – consumers’ first-party data must remain protected.”
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Brian Gleason is the chief revenue officer at commerce media company Criteo, which works with 150 retailers including Asda, Very, Currys and The Hut Group in the UK. He thinks we’re seeing brand dollars simply following people online, but agrees on the fragmentation point. “Every retailer we speak to has a different vision of how retail media will work for and support their primary business. For example, some of our retailers work with us to power their entire retail media solution whereas others work with us in a limited capacity or combine different levels of service for their suppliers and brands.“
Research by Criteo found that 43% of shoppers start their product search on retail and brand websites, not on online marketplaces or search engines. Another of its studies found that around half of media agencies (52%) felt too few retailers were offering brands attractive advertising environments.
Gleason predicts that more than three-quarters of brand marketers will up their retail spend over the course of 2022 – for several reasons. Firstly, retail media offers marketers the ability to blend product ads natively with other product listings at the point of sale. Also, audience insights are drawn from a retailer’s first-party data. This feedback loop helps marketers to quickly scale advertising campaigns and to identify new shoppers in a privacy-compliant manner. Another reason, says Gleason, is that retail media by its very nature tends to be brand safe.
Its potential had previously been dormant due to there being a gap in how retailers sell media and how adtech at the time functioned. “Now, it is starting with the retailer in mind, building tech that serves the unique needs of retailers, their suppliers and their customers,” he explains.
”A huge accelerator in getting the integration right is engagement in retail media at the board level. Embedding a top-down approach to the concept of retail media presents the opportunity for businesses to move beyond a front-end transformation.”
Gleason admits, however, that most transactions still occur in-store and there’s a big piece in connecting the online and in-store measurement.
Paul Bland, the head of biddable at Havas Media Group UK, is in agreement, but adds that brands are realizing that offsite retail media is bringing ”better sales results” and providing an ”opportunity to gain access to more data to work faster on new products, experiences and pain points”.
This channel, he says, is ”adding more pieces to the campaign puzzle,” but requires a lot of thought to implement. For a consumer packaged goods brand to land on the right approach and in the right network, a typical campaign requires a strategy and business forecast, an estimation of business outcomes, plus set-up from creative development to prototypes and technical features, optimization of the retail space all the way to an in-depth analysis of the business after the campaign launch.
Bland tells us: ”There are countless opportunities in social commerce and, more broadly, in shoppable media. Currently, as the brands are in different stages of maturity, we have some outstanding cases in social commerce or online-to-offline experience, but we hope to have a case in the future that covers end-to-end retail media.”
In the long term, due to its multiple uses in the marketing funnel, he believes that retail media will bring about the end of siloed budgets, playing a role in democratizing brands.
For more on the Evolution of E-commerce, check out The Drum’s latest Deep Dive.