The Rise of Retail Media Networks

Retail media networks represent a significant evolution in the rapidly growing field of ad-supported digital media channels. What are some of the opportunities and challenges surrounding this $100bn space?

It would be remiss to overlook ad tech’s current focus on the rapid growth of retail media networks, regardless of what might be perceived as an overemphasis. With ecommerce dollars on the rise, retail media network ad spend is also rocketing - seemingly without end. In fact retail media is the advertising’s industry’s fastest growing segment, and is forecast to be worth $8.32bn by 2027, making up 16% of total digital ad revenue.

With this ascent comes a host of opportunities, as well as some challenges to consider. We explore.

The Growth and Expansion of Retail Media Networks

Major European retailers including Tesco, Sainsbury, and Carrefour have carved out substantial niches for themselves. Factors driving this rapid expansion come as a surprise to no one. Firstly, the intrinsic value of retailers' proprietary consumer data for brands that market their products on these retail platforms is significant. Additionally, the broader potential of retail data extends beyond these sites. It plays a crucial role in enabling brands to identify and reach their target audiences across the internet, especially as third-party cookies become obsolete.

These entities are recognised as RMN ‘heroes’, leveraging their vast store networks and deep consumer insights to offer targeted advertising solutions that resonate with brands and shoppers alike. Nearly all major grocers and retailers have made shopper data available to advertisers in the UK. Examples of this trend include Ocado, which has granted advertisers direct access to its customer behavior data, allowing marketers to optimise their audiences and attribute campaigns through The Trade Desk. Additionally, Co-op has unveiled its 'Media Network', which is similar to Tesco's targeted ad placements in-store. These are just a few examples of a growing number of retailers that are leveraging their vast troves of data. By doing so, they not only enhance the efficacy of advertising campaigns but also set new standards for data utilisation in retail marketing. 

What are the Opportunities for Advertisers?

The current market dynamics underscore the rapid growth of RMNs, driven by several key factors. Firstly, there has been a notable shift in consumer shopping habits towards e-commerce, accelerated by the global pandemic and sustained by the convenience it offers. This migration online has opened new avenues for retailers to monetise their digital platforms through advertising, and in turn, advertisers to leverage this data to target audiences at scale. Secondly, advancements in data analytics have empowered retailers to harness the vast amounts of consumer data they collect, enabling the delivery of highly personalised and effective advertising campaigns. Lastly, the quest for more targeted advertising channels has become paramount for brands striving to cut through the noise in an increasingly crowded digital landscape. 

The closed-loop aspect of RMNs is the driving force behind its success. Picture a fluid feedback loop where data flows from consumer engagement back to advertisers and retailers, refining campaigns in real-time. It's the essence of precision, within the commerce arena, with insights from every interaction shaping future strategies to ensure maximum impact. This collaboration isn't just about efficiency; it's a key to unlocking deep insights into consumer behaviour. 

The RMN story for advertisers does not end with data aggregation. Data should serve as a tool toward a greater goal: ensuring a positive customer experience. The cornerstone of effective advertising through retail media networks lies in cultivating a loyal user base. For example, companies like Samsung, Acer, and Hisense are tapping into the potential of Currys Connected Media, leveraging solutions from partners like Circana, Epsilon, and Criteo. By utilising rich first-party customer data, they gain deeper insights into customers' shopping preferences and timing. With a variety of innovative advertising options, brands can directly connect with customers at the moment of purchase, capitalising on these insights to drive engagement and sales.

Challenges and Considerations

Navigating RMNs presents formidable challenges, particularly on the operational front. The pressing question arises: Can every company shoulder the extensive personnel requirements essential for effective RMN management? Moreover, the considerable costs associated with operations cast doubt on the financial feasibility of such endeavours. As if these hurdles weren't enough, the potential advent of programmatic retail media adds another layer of complexity to the mix.

The competitive landscape and market saturation exacerbate concerns. The RMN market's overcrowded nature causes concern about diminishing audience attention and escalating advertising costs. Additionally, the breakneck pace of RMN proliferation raises eyebrows. Without sufficient scale and standardisation, sustainability becomes a looming question mark hanging over the industry's future. These challenges underscore the need for careful consideration and strategic planning in navigating RMNs.

Future Prospects and Strategic Positioning

Retail media is in the early stages of a natural evolution that we have seen happen before in other areas of advertising and media. The commoditized, cookie-cutter retail media networks that we see today are no longer serving media buyers and multi-channel retailers are looking to differentiate themselves.  We are entering the next wave of retail media innovation that will shift the industry towards a pure form of performance media, driven by unique data sets and robust end-to-end attribution. This evolution will be facilitated by the implementation of OpenRTB standards and the utilization of flexible, innovative ad tech infrastructure.

As we finalized the OpenRTB Protocol and standardization is adopted we will see the evolution of programmatic retail media. The days of commoditized static banner ads and sponsored listings, as we know them today, will shift to a model that allows for catalogs to be leveraged to create real time sponsorable product availability to media buyers. This will allow for enhanced targeting, higher ROAS and a more centralized media buying experience. Retail media networks and marketplaces who adopt this early will see higher ROI and scale for their business in the coming years.

James Avery, co-founder and CEO, Kevel