Economic headwinds are forcing most industries to find avenues of diversification to secure stability and generate growth. For retailers, the winds are blowing favourably down the digital aisles and encouraging many to explore new strategies to diversify revenue streams, boost growth and satisfy shareholder demands, writes David Muldoon, VP Strategic Advisory, MediaLink.
Driven by the e-commerce boom, evolving shopper habits, and the approaching demise of the third-party cookies, Retail Media Networks (RMNs) are looking to monetise retailers’ touchpoints and their treasure trove of first-party shopper data by plugging the gaps for advertisers.
And as retailers become media channels in their own right, through their online channels and in-store media space, this budding revenue opportunity is set to be worth £6.5 billion by 2027 and is already becoming a key driver of digital’s overall market growth.
So, what do retailers need to know to ensure they’re cashing in on this burgeoning revenue driver?
One size doesn’t fit all
Firstly, there isn’t a one-size-fits-all approach to RMNs, and as the market matures, we’ll likely see retailers test and learn the various models. RMNs can operate as a function of marketing, as a standalone business, or on the spectrum in between.
For some high-end retailers, RMN is led out of the marketing department with an ‘invite only’ approach: the marketing team selects brands for participation based on joint business plans. Big players like Amazon and Walmart, however, operate their RMN as a line of business. Amazon Ads and Walmart Connect report to the CEO with separate product, account management, analytics, sales & marketing.
As retailers mature over time, they are more likely to grow and dedicate their RMN offering to a separate business unit, especially as they are a significant profit driver. However, for now, continued investment is still required, as retailers feel the push from advertisers for standardisation, scale, and improved measurement.
Value and premium
Product launch mailers and promotional in-store installations have historically been effective tools in the battle for consumer attention and joint business plan dollars.
But the swelling of online shoppers post-pandemic and the broader availability of automated tools have driven a seismic change for retailers. And a glance across the pond reveals the large-scale commercial value available to retailers integrating RMNs into their negotiations with brands.
Walmart has been a driving force in the US brick-and-mortar retail scene for over five decades, and it is predicted to emerge as the latest big player in the overall digital ad ecosystem commanding 1.5% of total US digital ad spending.
Premium retail media set-ups provide retailers with greater leverage and flexibility. Automated bidding – conducted in real-time – ensures ad inventory is sold seamlessly without giving brands excessive visibility.
Loyalty cards, already a staple for most household retailers, have seen their stock soar in the wake of the cost-of-living crisis. Fueled by first-party data, these programs will be an attractive differentiator for advertisers looking to navigate the impending cookieless landscape.
We are at the start of this journey, with a lot of work to build the right standards and tools. But as the opportunity matures, it will drive integration and collaboration in the market along with highly accurate targeting and measurement showing what has been bought, when, and where, and tying it back to a specific campaign.
Out of home and in the store
We’re also seeing the opportunity for retailers to become media spaces in their own right. Tesco’s partnership with JCDecaux saw the supermarket build a 500-strong SmartScreen network – the largest in the UK. It allows advertisers to access more than six million shoppers every fortnight.
FMCG brands want to get their products in front of consumers when they’re in purchase mode, and the greater convergence of content and commerce moments we’ve seen has been a game-changer. Retailers are becoming content publishers, making their commerce space a brand-building one, which increasingly helps to convince brands to spend their cash with them.
For brands, having access to retailers’ unrivalled first-party data means they can create more impactful shopping experiences – everything from insightful personalised product recommendations to product discovery opportunities – and deepen their connections with customers. However, access to consumer metrics in the UK will always be a challenge relative to the US due to the consumer protection provided by GDPR. And with brands wanting to adopt Retail Media Networks as part of a coordinated omnichannel journey, there is still a way to go before UK retailers can unlock the same levels of revenue potential as their US counterparts.
FMCG’s new bread and butter
While the power seemingly sits with the retailers as the data and inventory owners, they have much to do to prove they’re worth the sustained investment.
88% of brands believe retailers influence them to buy advertising on their RMNs through their JBP negotiations – which can sometimes be seen as a have-to-buy rather than a want-to-buy. Against a backdrop of fragmentation, a lack of standardisation, over-complexity, and limited inventory, retailers need to work harder to deliver results that are effective and efficient compared to other platforms if they’re to appease marketers. Retailers also need to be more proactive in adopting a sales strategy that rivals the established media owners, accessing the right people within both the brands and their agencies, with a competitive narrative.
But appease these concerns, and retailers will undoubtedly find themselves first in the queue, alongside the tech giants.
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