The popularity of retail media networks is growing rapidly, with predictions indicating that they will account for 60% of global ad spend in the next four years. Retail media is already the fourth-largest advertising media, and is expected to surpass linear TV ad spend by 2025.
In this article, I map out what retail media networks are, and what landscape shift has led to the boom in popularity of retail media networks. I also conclude with some organizational challenges and best practices for retailers to consider.
A retail media network refers to an advertising service owned by a retailer, enabling marketers to acquire ad placements across the retailer's entire range of digital assets. By leveraging the retailer's first-party data, these networks facilitate targeted and personalized communication with shoppers at various stages of their purchasing journey.
I spoke with Teemu Kurri, an in-store retail media professional, Chief Growth Officer and Co-Founder of Doohlabs, who states that in the past 2–3 years, online retail media has experienced significant growth. The trend began when Amazon found success by generating revenue not just from selling products, but also by capitalizing on advertisers and leveraging customer data. This approach proved lucrative for Amazon, and as a result, other major retail players like Kroger, and Woolworths, who have their own e-commerce websites and large audiences to be monetized, recognized the potential profitability of the advertising business. Compared to the margins from product sales, the advertising sector offered the opportunity to earn significantly higher profits: potentially up to 10 times greater. Consequently, these retailers sought to enter the online retail media space.
The two major reasons behind the growing popularity of retail networks are that retailers are looking for new channels to generate additional revenue, and provide personalized brand experiences to customers. Brands or suppliers, on the other hand, are seeking alternatives to third-party cookies, focusing instead on personalized marketing, and improving media spend accountability.
Retail media networks address these objectives by allowing promotions and transactions to occur on the same platform, enabling the direct measurement of the relationship between the two. Additionally, advancements in programmatic advertising infrastructure, data collaboration, and changing attitudes towards data protection and privacy have contributed to the increasing interest in retail media.
Retail media networks can be divided into in-store and online channels, and offsite and onsite channels. In this article, we’ll focus primarily on distribution across in-store channels.
In 2023, the retail industry across the world faces many challenges: the cost-of-living crisis, inflation, chronic labor shortages, and a possible shift in consumer spending that threatens its growth, to name a few. This has led to the need to seek out new ways to generate profit. In-store retail is currently experiencing a surge, and major retailers have recognized the value of their customer contacts in physical stores. Harnessing this data can give them an edge over online competitors. Some retailers have already monetized audiences through in-store screen networks, although this is still relatively uncommon. Teemu Kuri says “investing in retail media screens should be a no-brainer as the payback time can be in a few months if not in weeks.”
When talking about why retail media networks are booming now, Teemu says that “it does help that hardware is cheaper, but that is not the biggest thing.” Three main reasons contribute to the in-store retail media boom:
Retailers are actively exploring alternative methods to generate revenue from their physical store locations. By leveraging their real estate assets creatively, retailers aim to unlock additional sources of income.
Retailer’s success with online retail media has inspired them to invest in in-store media as well. Retailers have observed the effectiveness of targeted advertising and the ability to measure campaign success based on actual sales. This success has fueled their interest in exploring similar opportunities within the physical store environment.
Retailers in general already know a lot about their customers, and recognize the value in gathering customer insights and data. This primary source is by far the best & most useful data to be used in retail media audience creation for advertisers. In Teemu Kurri’s experience, this also means exploiting retailers' own loyalty systems. Implementing in-store retail media, and leveraging sensors, cameras, and various technologies to collect data on foot traffic, dwell time, product interactions, and other relevant metrics is a great way to understand customer behavior and preferences. Utilizing this data, retailers can provide targeted advertising and more personalized experiences, which ultimately, increase the likelihood of sales. Teemu adds, “these data sources do complement this but they are by no means the default. Computer vision (cameras in stores in more general terms) can also be used to measure if an ad gets noticed by the target group.”
The appeal for in-store retail media lies in its ability to measure campaign success in actual sales and its reliance on first-party data. For Teemu, though progress feels slow, there are significant gains for retailers who make strategic moves before the market saturates. In-store retail media benefits both major and mid-sized retailers, especially in the grocery sector, as they have loyal customer bases. Retailers that provide a positive customer experience and utilize store visits for valuable insights are positioned as future winners.
It is important, however, to note that with the vast opportunity that retail media networks promise, there are also risks to tarnishing the customer experience. I spoke with Ian Scott, a Rethink Retail top-100 influencer and Retail Consultant specializing in in-store retail media networks, to discuss this challenge. He says that “in-store media might result in a saturation of information for shoppers. Many retailers, particularly in the value sector, have too much signage in store, resulting in visual noise and wasteful content. It is important to understand when and where to communicate in the shopper journey, otherwise any communication can make no difference to sales.”
Speaking with Ian, we delved into the world of in-store retail media networks and their impact on profitability in the e-commerce landscape. Ian shed light on the significance of strategic placement, engaging content, and the need for a unified approach to realize the full potential of retail media networks. These are the major takeaways for retailers and industry professionals that call for a change in strategy but also organizational structure.
Retail media networks play a crucial role in influencing customer purchasing decisions, and there are missed opportunities in not leveraging in-store advertising. Ian says that “67% of our decisions as shoppers are made at the shelf, be it digitally, on a website, or in-store. When you consider this, traditional above-the-line advertising, aimed at raising awareness, becomes futile if the final point of purchase doesn't effectively communicate with the customer.”
Retailers must think strategically when positioning screens. Otherwise, they may not capture the customers' attention and miss out on effectively communicating about product features. "The adjacency and location of the screen is critical in engaging customers. Peripheral vision and human-to-human interaction play significant roles in customer decision-making. Placing screens closer to the promoted products ensures maximum engagement and reduces distractions," says Ian.
Ian emphasized the significance of crafting compelling and relevant content for retail media networks, focusing on key factors that influence customer purchasing decisions. He says
"The message delivered through retail media networks is 100 times more important than the technology itself. Tailoring the content to highlight product features, brand attributes, and price points is essential for effective engagement and driving sales."
Retailers must undergo a comprehensive shift in organizational perspective, and it is important for them to allocate budgets and resources effectively and foster cross-functional cooperation. Ian recommends that "to fully capitalize on the potential of retail media networks, a top-down approach is necessary. Siloed budgets and fragmented teams hinder the implementation of a unified strategy. CEOs need to drive the change, encouraging collaboration and breaking down the barriers between different departments."
Retailers can invest in retail media specialists and adopt measurement practices that accurately capture the impact of retail media on overall business performance. "Implementing a successful retail media strategy requires changing the perception and engaging the expertise of retail media specialists. By recognizing the broader impact and potential of retail media networks, retailers can unlock new revenue streams and enhance profitability."
The rise of retail media networks, both online and in-store, presents an opportunity for retailers to tap into incremental revenue growth. The popularity of these networks is driven by the success of online retail media and the desire to monetize customer insights while providing personalized brand experiences. In-store retail media, in particular, is experiencing a surge as major retailers recognize the value of their physical store contacts, and seek new ways to generate profit. With the ability to measure campaign success in actual sales and leverage first-party data, in-store retail media offers unique advantages.
As the retail industry continues to evolve, there are significant gains for retailers who make strategic moves before the market becomes saturated. Best practices include strategic placement of screens, compelling content creation, and the need for a unified organizational approach. By embracing retail media networks and investing in specialized expertise, retailers can unlock new revenue streams and enhance profitability within the changing retail landscape.