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Retail Media — the new Trade Marketing for a post-Covid world
19 October 2020 19:32pm
The Covid-19 crisis has been exceptional in both its scale and duration. Retailers could not have anticipated the business impact, with many of those that were already suffering from eroding margins reporting 70-100% reduction in sales over the lockdown period.
For grocery and online however, it’s been a different story, with an overall 26% increase in sales across the board. And for the tech sector — which analysts predicted would fall furthest in a recession — the big four global tech giants, Google, Apple, Facebook and Amazon (GAFA) managed to prove them wrong. Even as the US reported one of its worst quarters ever on record, The Big Four reported a combined $205 billion in revenue and $28 billion in profits in the second quarter.
Amazon in particular has been the leader in agility when it comes to innovating its business model, reporting a revenue increase of over 40% overall. True, covid and consumer shift to online shopping has played a part in this however the growth of its advertising business, up 41% in revenue alone, has given its closest competitors cause for concern. A recent Fortune Report suggested that Amazon is now achieving $10 billion per year from ad sales, predicted to increase to $40 billion per year by 2023.
Amazon’s success and recent growth is in a large part, down to the way it has achieved this; building its retail media business and leveraging its 1st party data to brands — in effect bridging the gap more commonly seen by direct to consumer brands. There has been a huge increase/shift in dollars to retail media in recent months over this period — an acceleration of a trend that was already happening in the market, driven by the deep purchase data held by those selling products.
In today’s world, it is more important than ever for retailers to have one-to-one relationships with their customers, and this is where Amazon has invested wisely in its expertise and innovation. In terms of advertising spend, throwing budgets at ineffective channels, not knowing who or if anybody has seen or engaged simply does not work.
The rise of Amazon as a media business is a clear demonstration that there is an opportunity to open a new, more profitable revenue stream for pureplay and multichannel retailers, as they have something unique which brands desperately need. If retailers explore a similar path to Amazon, investing in retail business and delivering real value to brands, they have an opportunity to open new revenue streams and rebuild their position.
Retail Media - what does it mean?
There is a growing trend to talk about monetisation of retail assets or retail media, but what does it really mean? At mediarithmics, we look at helping retailers create new revenue streams by leveraging their valuable data assets, to augment their value proposition for advertisers. Consumers expect personalised shopping experiences and brands expect one-to-one communication opportunities at the core of this customised experience.
- In the UK alone, the top 50 retailers each generate in excess of two million unique page views outside of peak each month, with many brands consistently in double digits each month. All of these ‘eyeballs’ are valuable to brands who are competing to win their own market share vs. their rivals. For example, Coca Cola does not want to buy static display ads on the homepage of Tesco, it wants to be on top of the results page when users are looking for various “soda drinks” options.
- Retail CRM strategies are becoming increasingly sophisticated. Retailers have a huge amount of 1st party data in the form of onsite, CRM, loyalty cards, credit cards etc. Creating customer segments and procuring data management platforms for digital marketing and on-site personalisation allows retailers to really understand their audiences, their behaviours and preferences, intent data which is easy to monetise
- This becomes even more valuable to sophisticated brands like L’Oreal, P&G or Unilever that have small 1st party audiences (sell through resellers) and are looking to get closer to the consumer as well as receiving actionable insights about who is buying their product. Nestle, is a brand that is already doing this, working with retailers like Walmart and Target to increase 2nd party data to better understand customers. Nestle has set itself a target to increase its personalised messages to 40% by the end of this year.
This is a win-win Trade Marketing opportunity for retailers to receive investment from brands to promote their products, as well as driving incremental margins through increasing the overall sales for the brand. Retailers understand what brands and categories people will buy and at what frequency, and all of this insight (not just data) is what can be made available to the market at a premium.
To illustrate this, as an example
- Let’s assume that Sony is willing to provide its CRM data to Curry’s, who in turn will review this alongside their own data.
- Curry’s would be able to clearly identify which of Sony’s customers were browsing for these products on their website, as well as those who were interested in competitor brands.
- They would then be able to produce highly personalised retargeting or email campaigns from Sony directly to these customers, utilising Sony’s creative assets and essentially becoming a full-service offering to brands.
- Curry’s can then provide Sony with insights that would have previously not been available, allowing them to gain a better understanding and constantly improve future campaigns.
The decline of 3rd party data as a result of changing customer behaviour and the pressure from GDPR legislation, means that the current trend for a shift in budgets to retail media is here to stay. Some agencies are reporting upwards of a 45% increase in Retail Media spend in recent weeks, and this is set to rise as more advertisers return to the market.
How do I build a retail media proposition?
This sounds great, but I’m not Amazon, so where do I start?
Define your objectives - what do you want to achieve in building a retail media proposition for YOUR brand?
Step 1: Identify what makes your audience special: who are your customers? Why do they choose you instead of your competitors? What are the biggest audience segments you could build? Do you have a critical audience size and/or niche audiences that would bring value to brands or agencies?
Step 2: Prepare your sales team. Building a new revenue stream requires to also build a value proposition that will be pitched by the sales team. You can either train your current team or hire new people that are subject matter experts.
Step 3: Begin with testing your value proposition with your current suppliers. A good way to validate your value proposition is to test through trade marketing. Here you can focus on a specific vertical. Hone an understanding of customers and prospects with an interest in a specific vertical and provide campaigns for a given supplier.
Once you are ready you can create your data sales house and offer your data assets to any brand or agency. Your teams will be able to sell multi channel campaigns and audience insights to maximise your ROI on currently unused assets to achieve huge margin levels exactly as Amazon Advertising does.
Groupe Casino, who are a mediarithmics customer, is a best-in-class example. With 15 ecommerce websites and a database of over 30M contacts, they were able to leverage the mediarithmics technology to build their very own sales house for retail media — named relevanC.
This has allowed them to:
- Bundle multiple inventory and data sources into one offer
- Provide brands with a broad catalogue of precise data segments that can be retargeted inside and outside of the Groupe Casino inventory
The results? relevanC has generated 41M Euros in incremental revenue (2x YoY growth), as well as providing 1,300 available segments from 40 different data collection sources.
At a specific brand level, relevanC drives significant incremental gains. As an example, a recent campaign for Danone’s product Actimel realised a 200% click through rate increase and a 25% increase in sales, with a 220% reduction in cost per view.
If you would like to hear more about creating your very own Retail Media proposition to grow ad revenue and enhance relationships with brands please visit www.mediarithmics.com.