Table of Contents
- Introduction
- The Surge in Retail Media
- Dominant and Emerging RMNs
- Metrics of Success
- Bottom-of-the-Funnel vs. Top-of-the-Funnel
- Future Trends and Conclusion
- FAQ
Introduction
With retail media rapidly climbing the ranks of marketing strategies, it's a game-changer territory for Chief Marketing Officers (CMOs). Surprising as it may seem, retail media has solidified itself as the third-most used marketing channel according to a 2024 survey from Digiday's CMO Strategies series, marking an increase in its adoption over the past year. From stalwarts like Amazon to newcomers like Saks Fifth Avenue and JPMorgan Chase, retail media networks (RMNs) are reshaping the advertising landscape.
So, what makes retail media so compelling? Why is it seen as a potential answer to data privacy challenges and how can marketers optimize their mixed-platform strategies? This blog will dive deep into the mechanics, metrics, and future trends of retail media, illuminating its crucial role in contemporary marketing playbooks.
The Surge in Retail Media
Growing Market Adoption
Over the past year, retail media has seen a significant rise in adoption; 51% of companies utilized retail media in 2024, a jump from 40% in 2023. This surge is fueled by a plethora of new RMNs launched by various retailers, such as luxury department stores, travel agencies, and even banks. Despite retail media still lagging behind social media in popularity, its growth trajectory promises to change that soon.
First-Party Data as a Competitive Edge
One of the key strengths of RMNs is their access to first-party purchase data. Unlike other marketing channels, retail media platforms inherently built for commerce, offer rich customer purchase data that's invaluable for targeted advertising. With tightening data privacy laws and the impending end of third-party cookies, this access gives RMNs a substantial leg up, especially for companies such as Georgia-Pacific, which have used this data to better target their audiences during crucial purchasing cycles.
Financial Growth and Forecasts
The financial health of the retail media market is equally robust, with a notable leap in ad market growth by over $10 billion in 2023 alone. Forecasts predict an 8.3% growth in 2024 and expect retail media spending to make up one-fifth of ad expenditures by 2025. As new platforms emerge and existing ones ramp up their capabilities, retail media is poised for sustained growth.
Dominant and Emerging RMNs
Amazon Leading the Pack
Amazon remains the undisputed leader in retail media, commanding the majority of marketer budgets. However, other platforms like Walmart Connect and Target’s Roundel have been closing the gap. Interestingly, Digiday's 2024 survey indicates an increased use of these platforms, with Walmart Connect almost doubling its adoption rate from the previous year.
Walmart's Strategic Moves
Walmart has been particularly aggressive in expanding its retail media endeavors. Plans to acquire Vizio, a company specializing in TV and streaming data, highlight Walmart’s quest to rival Amazon. Should the deal pass regulatory hurdles, it would augment Walmart’s already significant consumer data repository, making it increasingly attractive for advertisers.
Specialty RMNs
Several specialty RMNs deserve attention. Platforms from companies like Expedia and JPMorgan Chase indicate how varied and adaptable retail media can be. Athletic Brewing, for example, has leveraged platforms like Instacart and Drizly to cater specifically to the food and beverage market, proving just how versatile and niche-specific retail media can be.
Metrics of Success
Primary Metrics: Commerce Over Engagement
Most marketers measure the success of retail media through commerce or sales rather than awareness metrics like impressions or engagement. This focus is logical given that RMNs operate much closer to the point of sale compared to other channels. The immediacy of these transactions provides tighter feedback loops for advertisers, facilitating more dynamic and responsive ad strategies.
Attribution and Measurement Challenges
Despite its strengths, measuring the success of retail media across various platforms remains a challenge. Differences in measurement guidelines and the absence of standardized metrics make it difficult to gauge Return on Ad Spend (ROAS) uniformly. Companies like Haleon have tackled this by creating custom KPI frameworks that go beyond typical ROAS metrics to include indicators that align better with their brand objectives.
Scalability and Consistency
Interestingly, scalability has become less of a challenge in 2024, indicating that RMNs have improved their targeting capabilities and product offerings. However, the lack of consistent measurement remains a significant hurdle. For brands looking to allocate budgets efficiently across multiple RMNs, inconsistency in metrics can lead to suboptimal investment decisions.
Bottom-of-the-Funnel vs. Top-of-the-Funnel
Traditionally Bottom-Funnel
Retail media traditionally serves as an effective bottom-of-the-funnel strategy because of its proximity to the transaction point. The deterministic attribution model provides advertisers with clear insights into the returns on their ad investments. This contrasts starkly with social media campaigns, which are better suited to building brand awareness and engagement.
Emerging Top-of-the-Funnel Potential
Despite its bottom-funnel strengths, retail media shows promising top-of-the-funnel potential. Platforms like Amazon have started to function as search engines for younger demographics, facilitating brand discovery even when users aren't actively shopping. This shift suggests that RMNs can target specific audiences more effectively than broader platforms like social media.
Niche Brands and Specialized Retailers
The emergence of specialty RMNs allows niche brands to better address their specific markets. Athletic Brewing’s strategy to use food and beverage-specific platforms highlights this trend. As more specialized RMNs become available, brands can achieve more refined targeting without depending on the broader algorithms of larger platforms.
Future Trends and Conclusion
Evolution and Consolidation
While the sheer number of new RMNs provides a broader playground for advertisers, there are concerns about sustainability. The market may eventually consolidate around major players like Amazon, Walmart, and Target. Until then, brands must strategically distribute their budgets across platforms to optimize their reach and ROI.
Adapting to Privacy Laws and Data Attributions
As data privacy laws continue to evolve, the ability of RMNs to leverage first-party data will only become more crucial. The added focus on stronger data attribution and measurement methodologies will support more transparent and effective ad campaigns.
The Way Forward
Retail media will continue to grow as a key component of digital marketing strategies. The dual advantages of precise targeting and effective bottom-of-the-funnel conversions make it indispensable. However, brands will need to develop nuanced approaches to navigate the complexities of measurement and platform diversity effectively.
FAQ
What is retail media?
Retail media refers to advertising efforts carried out on digital platforms owned by retailers, which utilize the retailer's first-party data to target consumers effectively.
Why is retail media becoming popular?
Retail media is gaining traction due to its access to first-party purchase data, compliance with data privacy laws, and its effectiveness in driving conversions closer to the point of sale.
How do retailers measure the success of retail media?
Success is primarily measured through commerce and sales metrics rather than engagement or impressions, owing to the retail media's proximity to transactions.
What challenges do marketers face with retail media networks?
Common challenges include inconsistent measurement standards, high media costs, and the need to adapt to a rapidly growing and diversifying market.
Can retail media be used for brand awareness campaigns?
Yes, while traditionally seen as a bottom-of-the-funnel strategy, retail media is increasingly being used for top-of-the-funnel marketing, thanks to its precise targeting capabilities.
