Interviews, insight & analysis on digital media & marketing

Taming the wild west of retail media: The good, the bad and what’s next

By Nick Graham, Senior Consultant, Kepler

The digital media landscape is changing. Whilst Google and Meta combined currently represent 50.5% of total US digital ad spend, the dash to digital fuelled by the Covid pandemic has meant that retail media is expected to be one of the fastest-growing segments of digital advertising.

With US digital retail media advertising expected to surpass $52 billion in 2023, retailers who have adapted to the opportunities presented by digital have grown in both revenue and capability. Whilst ecommerce giant Amazon is the dominant retail media player – currently accounting for 77.7% of US digital retail media spend – many retailers have now entered the media space motivated by the ability to capitalise on their consumer data and unique inventory to create an additional revenue stream.

With margins of 75% and upwards, this offers a more attractive proposition than reselling products also sold by competitors and is a great way to offset declines from the rise in inflation and uncertainty in consumer spending.

Everything seems aligned for the expansion of retail media to steam ahead – and from a retailer’s perspective, it makes complete sense to flood the media space to strengthen existing relationships and build new ones. However, advertisers must be aware of the challenges of an immature market and a systemic shift in how they operate.

How can advertisers navigate the wild west of retail media to capitalise on this opportunity and continue their growth?

The Good

  • Closed loops

The greatest opportunity retail media presents for advertisers is the ability to close the loop and understand how audiences exposed to certain methods of communication go on to interact with their products and services⁠—most importantly: what, how and when they purchased.

As retailers assume the role of media owner, they can offer brands the knowledge and security to show how their media spend is resulting in additional revenue.

Amazon’s data clean room solution, AMC, allows advertisers to analyse insights from Amazon’s media and sales as well as the advertiser’s first-party data to combine and improve their marketing. This gives advertisers the ability to evaluate the effectiveness of their activity at the level of the individual impact on specific KPIs.

  • Better control of data

All partners in the media value chain are having to re-evaluate their appetite for customer privacy, with advertisers feeling the pressure to scale their first-party data in a fully compliant way. For industries such as CPG who have historically lagged in attaining first-party data, retail media allows brands to deliver more effective addressable media programs.

The benefit for those who are either unable or unwilling to build a first-party data strategy, is access to vast amounts of quality, actionable data from retail media networks to align with their own. However, this won’t be enough to withstand the upcoming changes to the digital media ecosystem.

With the retail media network model built upon customer data, it’s pivotal for retailers like Amazon to maintain the utmost levels of privacy. This is a big win for advertisers requiring assurances that their practices are compliant with local regulations.

  • Improved customer experience

Closing the loop on the customer journey and applying more control around customer data should allow advertisers to offer customers an unrivalled experience by delivering a stronger data-driven offering and developing more dynamic pricing, offers and discounts. And for the most agile brands, a generation of better and more personalised products and services.

The Bad

  • An immature market

Retail media networks vary according to their size in how they offer their data, build relationships with media buyers, and scale their operation via their tech stack. This lack of standardisation combined with little transparency on fees is difficult for advertisers to keep on top of. This is a potential blocker for advertisers considering if they have the capabilities execute a retail media campaigns in-house.

  • The return of short-termism

Following the 2008 recession, some marketers over-invested in performance marketing to drive results quickly with little regard for long-term objectives. There’s a fear that the growth of retail media network data will cause marketers to gravitate towards the metrics they have access to, rather than the indicators that matter most, leading to rash and skewed decisions rather than timely and smart ones. 

  • Collaboration as a blocker

For advertisers to take full advantage of retail media networks requires marketing, sales and merchandising to all collaborate and work together to deliver the true value from the new offering. This raises questions as to where retail media sits within the organisation, who is responsible for the relationship and the activity, and how it is recognised internally and externally. Advertisers who decide retail media sits outside of marketing will need to upskill teams from scratch to get the most from a complex system. Though collaboration can lead to great systems, great leaders are required to facilitate effective collaboration between teams.

What’s Next

  • Creating the right teams and processes

Developing a marketing and sales team with the right skillset is getting harder as the industry collectively struggles to attract and retain talent. But by breaking through the channel silos and planning media holistically on business need, brands can be more flexible with budget and can better navigate the emerging media opportunities.

  • Finding the right data and tech

The ad tech ecosystem is increasingly complex and fragmented. Advertisers need to future proof their ad tech stack now by auditing their data capture, organisation and activation to identify the gaps in their strategy. These gaps are only going to get wider.

  • Sophisticated campaign planning and operations

With retail media continuing to grow with little unification or standardisation, media plans are becoming more complicated. This complication has the potential to turn many away. To fulfil the promise of more profitable advertising returns, marketers need to onboard the right partners, test and learn quickly, and rebalance their media mix.

  • Establishing a new measurement framework

A lot of the appeal of working with retail media networks comes from the promise of reaching specific shopping audiences and directly measuring the impact of messaging. To this end, some retail media networks have established stronger end-to-end closed-loop attribution, whilst others have developed clean rooms for a more privacy-first approach to measurement.

Final thought

Retail media offers advertisers great opportunity, but many are still struggling with the challenges of an immature ecosystem and the systemic changes to the way they operate. Few advertisers are positioned correctly to be able to extract the true value retail media can deliver. Working with experienced partners will help them successfully set up their teams and processes, data and tech, campaign planning and measurement to deliver more effective work.