Retail media is going nowhere but up in 2024 - here's why
After an explosive couple of years, will the hype around retail media fade in 2024? Not likely. Here, Glen Conybeare (global president, IPG Mediabrands Commerce) outlines how he believes retail media will start to evolve in the next twelve months, as it continues its incredible growth.
The frenzied scramble onto the retail media bandwagon has subsided a little, with the rate at which retailers are setting up new retail media networks (RMNs) slowing noticeably. But that doesn’t mean the excitement around the channel has decreased in the slightest.
In fact, a “continued influx of retail media dollars into digital ad formats” was one of the key reasons Magna recently decided to raise its 2023 US ad spend forecast. What’s more, eMarketer predicts US retail media ad spend will more than double by 2027, to exceed $100bn. Even if the actual increase turns out to be half this much, it’s still exceptional growth.
Retail media remains a fantastic opportunity for retailers to boost profitability, and for brands to reach the right audiences, at the right moments. So, as we head into 2024, are we going to see a more measured and mature retail media market emerge? Personally, I expect retail media to start to evolve in two key ways over the next twelve months. First (and maybe most obvious) it will gradually become more standardized. And second, RMN activity beyond retailer dotcoms will become as important as the advertising on them.
Market forces will drive standardization
An almost universal concern about RMNs is the lack of standardization. In their rush to stand up networks, each retailer had different priorities and took a different approach to areas like activation and reporting. The result? Brands and agencies are left struggling to manage campaigns across multiple networks that all operate differently.
In 2024 we’ll start to see increasing standardization, driven largely by market forces. Even with spend growing, supply will start to outstrip demand. And when emerging retailers realize advertisers aren’t buying their inventory because their data and activation don’t align with the bigger players, they’ll inevitably adjust to match the market leaders or else risk wasting their considerable investment in this area.
There will also be an element of consolidation. We’re already seeing smaller retailers jumping into existing networks because the costs of setting up their own outweigh the benefits. Over the next twelve months there is likely to be an increase in the number of key players launching marketplaces to maximize revenues by selling smaller retailers’ products. Of course everyone’s familiar with Amazon’s market-leading model, and major retailers such as Walmart already have marketplaces. But there are also successful vertical-specific players – such as Ulta in the beauty category– making a success of marketplace operations.
Retail media will move increasingly off site
It’s easy to think of retail media as the new kid on the block. In reality, it’s been around for decades, except we used to call it ‘shopper or trade marketing.’ Before the internet made e-commerce possible, brands already worked together with the retailers that sold their products. Consumer packaged goods, for example, supported their grocery store partners with cooperative marketing efforts such as endcap promotions, shopping-cart sponsorships, and printed coupons (and they still do).
In recent years, retailers have nudged these trade marketing budgets toward digital retail media. After all, running a digital campaign across e-commerce sites requires less effort for the Retailer than installing physical displays in stores across multiple locations which in turn helps their margins.
All this means that a large proportion of retail media spend has so far come from endemic brands that are already selling their products through the retailer. But retailers only have a limited number of endemic brands to which they can sell media? inventory – as well as a finite supply of media to sell. Which means they’re starting to look at opportunities outside of this well-established model.
Over the next year we’re likely to see an increasing proportion of retail media spend coming from non-endemic brands that don’t advertise on the retailer’s e-commerce site at all. A combination of evolving privacy regulations and ongoing cookie deprecation means it’s getting harder for brands to find and reach audiences online. With offsite retail media they can use the retailer’s high-quality, first-party customer data to reach known audiences across the publisher networks with whom the retailer has partnered. Brands are effectively advertising on the open web, but through RMNs.
Using these privacy-compliant approaches, a travel brand might, for example, match up its loyalty program information with a grocery store’s first-party data, to find prospects with similar characteristics to its own customers. It can then serve personalized advertising to the grocery store’s customers, across a range of selected publisher sites, based on their shopping behaviors and preferences.
Emerging tech will propel retail media’s evolution
As part of this shift to non-endemic brands and off-site activity, we’ll see increasing use of technology to match brands’ first-party data with retailers’. This year we’ve heard a lot of talk about the power of data clean room technology for privacy-compliant first-party data match-ups. But few advertisers are yet using it, partly due to the costs and complexities involved. In 2024 – as data clean room technology improves and brands and agencies learn how to use it to greatest effect – the cost-benefit equation will become more palatable.
We’ll also start to see the digitization of all retail media. Right now, brands can buy digital advertising online, but they’ll eventually be able to use the same buying models to purchase digital advertising in stores. Whether it’s the pricing panels that run along supermarket shelves, or the seasonal signs that promote special offers, all the physical in-store media that is currently printed will ultimately be digitized. And once this happens inventory will be traded in much the same way as digital ads on websites. Just think of it as digital out-of-home advertising in retail stores.
The journey is just beginning
It’s still in the early days for retail media in its current form, and while its evolution will gain pace in 2024, we’re still some way off from seeing these trends becoming common practice. We’re probably two to three years away from the tipping point for standardization, for example, and we’re unlikely to see automated trading of digital in-store advertising become the norm this side of 2028. But the excitement around retail media is still very real, as the only direction we can expect it to go in 2024 is up.