(7 pages)
Marketing budgets are flowing toward retail media networks (RMNs) as retailers, from Amazon to big-box stores to grocery chains, capitalize on the shift to e-commerce while offering advertisers unique audiences and valuable data insights to build new high-margin businesses. Manufacturers and brands are increasing their ad spend on RMNs because they offer unique, valuable audiences and provide data that measure ad effectiveness, thus helping to close the loop between ad view and product purchase.
Despite this success, retailers and advertisers alike question the trajectory of retail media. How sustainable is the growth of RMNs as an advertising channel? How much space remains for RMNs other than Amazon? Is the marketing spend on retail media really new or merely a shift from marketing budgets that already benefit retailers, such as shopper and co-op marketing?
Our latest Retail Media Networks Advertiser Survey helps answer these questions and exposes five widely held beliefs about RMNs as myths. The accompanying charts further illustrate the retail-media reality and the opportunities it provides for brands, manufacturers, marketers, and retailers.
Myth #1: Retail media is an Amazon-only story
Wrong. While Amazon is the leading RMN by market share and advertiser usage, a majority of advertisers have spent or plan to spend on other RMNs as well. In fact, 80 percent of advertisers currently use at least one retail media network in addition to Amazon.
As they scale and build out their value propositions, advertisers are recognizing the benefits of diversifying into other RMNs that provide access to unique, highly targeted audiences, a range of reasonable costs per thousand impressions (CPMs), and other advantages that make them attractive advertising options.
Myth #2: RMN is a CPG-focused phenomenon
Not according to our research. While consumer packaged goods (CPG) companies are among the most bullish about RMNs, with more than 85 percent of survey respondents planning on increasing spend in the next 12 months, other verticals stand out as much or more. Sellers of jewelry and luxury goods, consumer electronics, and beauty products, for example, report similar planned growth in RMN spend. Overall, 80 percent of advertisers surveyed across verticals plan to increase RMN spend in the next 12 months, and approximately 20 percent plan to increase it by more than 10 percent. Just 5 percent of respondents plan to downshift their retail media spend in the same period.
Myth #3: RMN spend comes from dollars retailers already earn
False. Our research suggests that more than 80 percent of spend flowing into retail media networks is incremental and comes from all sources, including net new spend and reinvestment of brand and performance budgets. So for retailers, RMNs provide an incremental source of high-margin revenue, and substitution for shopper or co-op marketing can be managed.
On the advertiser side, this surge in budgetary allocation to RMNs delivers performance that justifies the investment, a conclusion supported by the fact the median advertiser has already been spending on RMNs for three to four years.
Myth #4: RMNs are mainly a substitute for lower-funnel or shopper marketing
Not quite. Lower-funnel and shopper-marketing outcomes are important, but for advertisers, brand building is equally so. In fact, advertisers surveyed place equal emphasis on RMNs for performance marketing and brand building. The implication for retailers is clear: to compete for advertisers’ investments, they must have the capabilities to offer robust, end-to-end campaigns.
Myth #5: Enabling advertisers to self-serve gives RMNs a major competitive advantage
In fact, the opposite is true. Self-serve was the least important buying factor for the advertisers surveyed. Many other factors mattered more, including performance, access to unique audiences, and ease of working with the RMN.
That doesn’t mean self-serve should be neglected, however. In the 12 months preceding our survey, 50 percent of RMN investments were made through a self-serve platform or solution. Self-serve can be a lucrative table-stakes offering that helps win additional advertiser spend, but it’s clearly not a source of competitive advantage.
What this means for retailers
With these myths dispelled, now is the time for retailers to embrace the future of retail media. Leaders can take initiative with the following five actions:
- Dive in. The best way to start is to just get on with it. Retailers should take an agile approach with a cross-functional team (for example, marketing, tech, data, and merchandising), treat early failures as the price of new knowledge, and share positive results and learnings with their organization and its advertisers.
- Capitalize on uniqueness. What separates your RMN from the pack? Is it your audience and associated customer insights? Is it your brand or e-commerce experience that makes advertisers want to join? Your chosen minimum viable product (MVP) feature set has implications for your team’s skill set and for which tech, operations, and agency partners are most appropriate. Plan properly to add value for all players in a distinctive way.
- Rally the organization. Buy-in to the RMN vision from key parties—marketing, merchandising, e-commerce, product, and analytics—is critical. Tell a compelling story that shows how the proposed RMN will drive the core retail business and e-commerce. Develop a plan to leverage internal and external resources to implement it.
- Choose the right partners. Leaders must determine who will be responsible and accountable for key RMN activities, across sales, managing supply and demand, planning campaigns and making buys, and delivering on reporting and measurement? How will these differ across key ad-inventory types, such as sponsored listings, onsite display and video, or offsite audience targeting? Partners with the right underlying capabilities and mindsets to help build the RMN business are crucial.
- Build a media business. The retailer’s plan must recognize a simple truth: there is a business to build beyond simply enabling ad products. It entails financial planning, billing and reconciliation processes, legal and accounting ramifications, and new processes around campaign planning and execution. Media customers expect many of these behind-the-scenes capabilities, and brands, too, demand credible media expertise and sound campaign operations.
The authors would like to thank Sabrina Hand, Calvin Weng, and Nicole Zuber for their contributions to this article.
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