The Bright Future of Retail Media
The rise of retail media has been nothing short of remarkable, positioning it as one of the most significant and transformative ad spending channels in today's media landscape. In a mere five years, the industry has catapulted into a $30 billion market, surpassing the growth timelines of social media and search. By 2024 it is expected to grow to $55 Billion. From 2024 until at least 2027 retail media is expected to be the fastest growing ad channel, overtaking CTV.
While to date Amazon has captured over 75% of the U.S. ad spend in retail media, other retailers like Walmart, Best Buy, eBay, Instacart and others are racing to try and catch up and win their share of this rapidly expanding channel. There is plenty of runway for retail media networks (RMNs) to grow and flourish, but it will require strategic change and purposeful collaborations for RMNs to succeed in capturing the opportunity that lays before them.
The Opportunity
The central opportunity for RMNs lies in leveraging their First Party consumer data to help brands target prospective customers across the full funnel, both on and off their platforms. Retailers, with access to their consumers’ purchasing behaviors and patterns, are uniquely suited to help marketers navigate the demise of cookies, the shrinking addressable target market for their brands, and the rising cost of acquisition (CAC) for new consumers. By enabling and connecting full-funnel experiences, from on-platform sponsored ads to social to CTV, RMNs can partner with brands to co-create consumer experiences all along the customer journey. A Nielsen meta-analysis of CPG campaigns found that full-funnel strategies see up to 45% higher ROI and 7% increases in offline sales compared to marketing campaigns across a single purchase stage. A potential win-win for retailers and brands alike. Additionally, Retailers’ ability to carry forward that full funnel experience into branded (brick and mortar) store experiences extends the opportunity for RMNs to help brands stay connected to the consumer throughout an omnichannel journey.
The Challenges
To be sure, there are challenges that need to be addressed for RMNs and brands to fully capitalize on this opportunity. Attribution and measurement are two of the most talked about challenges. Inconsistent or inadequate measurement methodologies make it difficult for advertisers to evaluate the incrementality of their investments and identify which channels and platforms are worth investing in. But these problems exist throughout today’s fragmented digital media ecosphere – they are not exclusive to evolving RMNs. I would suggest that the large, more sophisticated RMNs could be in the best position to lead the way through the tangled web of attribution and measurement to provide better, holistic frameworks and data for evaluating campaign and brand performance, on and offline. At a minimum, RMNs, if they invest adequately in developing and sharing transparent, standardized performance metrics with advertisers, could provide clear and holistic measurement within their respective walled ecosystems, capturing and sharing full funnel performance data. Fortunately, the Association of National Advertisers and the Interactive Advertising Bureau are working to help establish standards of measurement and transparency that will benefit the entire industry. Swift progress in this regard is extremely important.
Another challenge lies in the cultural shift required for RMNs that have emerged from traditional merchant organizations. These organizations may face more difficulties in collaborating and cooperating with brands and marketers compared to their digitally native media counterparts. Evolving from a traditional retailer to becoming a successful media company demands an inherent cultural shift. Over-reliance on the traditional merchant versus brand power paradigm will not aid retail organizations in the competitive world of RMNs. In fact, the power dynamic is inverted, with brands as the buyers and retail media networks as the sellers. Embedding a mindset of embracing win-win outcomes and working in partnership with brands to discover, test, and scale winning full-funnel strategies on their platforms and channels will be crucial for driving success for both brands and retailers.
Summary
Looking ahead, it is clear that retail media will continue to grow and evolve. Embracing retail media is not an option but a necessity for brands and marketers looking to succeed in the digital advertising space. While challenges exist, the opportunities are numerous and cannot be ignored. The future is promising, and brands should start devising strategies to capitalize on the promise and reality of retail media.
The opportunity for retailers to transform their RMNs into significant sources of new revenue are compelling. But they will need to embrace the functional, technical, and cultural changes required to fully realize that opportunity, or risk being left behind.
If advertisers and RMNs can collaborate to co-create this evolution, the future of retail media is very bright indeed.