All your TOP questions about Retail Media Networks... ANSWERED!

What is Retail Media and why is it important?

Retail Media is a modern solution for a new retail landscape and a strategy that benefits both brands and retailers.

At a base level, retailers can use their assets (both in term of digital and physical real estate, and their customers’ first party data) to show specific offers and promotions their customers will love and engage with. Of course, pre-requisite is to organize all customer data into a Single Customer View.

On the other hand, brands get increased product and brand visibility, and typically experience an increase in conversions with the placement of well targeted media near points of sale, plus the ability to monitor campaign performance and put advertising dollars where they matter most.

It’s so effective, it’s no wonder that the use of retail media by brands and retailers has increased drastically over the last few years.

What are retail media use cases?

In early retail media programs, the majority of advertising inventory lived on a retailer’s owned and-operated platforms, however “off-site” opportunities have opened up additional inventory and budgets.

Going forward, some retailers are experimenting with the separation of their data and ad inventory entirely, a move that offers brands additional flexibility as partners, but also risks commoditization.

Retailers that are better able to trace sales, for example those with highly adopted loyalty programs, are likely in a stronger position. Separating out retail data from inventory could also lead to non-endemic brands advertising in greater numbers, provided that the premium being paid to activate on retail data is supported by an equal or greater increase in performance.

What is retail media revenue?

We define retail media revenue as any advertising revenue accruing to a retail-based company, including marketplaces. Revenue generation potential is a function of four primary factors:

Campaigns

The number of campaigns run across all selected channels. The ability to rapidly plan, implement, measure, and evaluate allows for greater quantity.

Impressions

The number of impressions served per campaign, which are a function of audience size (reach) and advertising frequency.

Audience

The ability to model audiences and look-alikes, which is highly dependent upon access to first-party data and advanced analytic tools within the planning platform.

Channels

The range of digital media options available, such as websites, mobile apps, display media, video, email, sponsored search, social media, connected TV and digital out of home.

How big is retail media revenue?

GroupM estimates that global advertising revenue for retail-based companies was $88 billion in 2021 and $101 billion in 2022. This amounted to 18% of global digital advertising and 11% of total advertising.

As a percentage of global e-commerce GMV, this amounts to 1.8%.

We expect retail media advertising to increase roughly 60% by 2027. This exceeds the growth rate expected for all digital advertising, meaning that retail media will take an increasing share of digital ad revenue over the next five years.

Walmart’s network, Walmart Connect, is responsible for 12% of the company’s profits. One-quarter of retailers are generating more than $100 million in revenue from their media networks, according to Forrester. That’s made these networks a game changer for many retailers – and a potential lifeline in a worsening economy. Retail profit margins tend to be slim – in the 3% to 4% range. The margin on ad sales is usually 70% to 90%, according to BCG.

According to MediaRadar:

• In the eight months from May 1, 2021 to the end of January in 2022, more than 23,500 companies bought ads on retail media networks.
• 14% bought ads every month; the retention rate from December to January was 59%.
• 24% of the companies advertising in January 2022 were first-time buyers.

What is the biggest benefits of retail media for brands?

Through retail media, brands can reach shoppers with relevant ads near the digital or physical point of sale. Retailers, on the other hand, can leverage their first-party data generating a new revenue stream.

Now is the moment for retail media: Increasingly more brands are investing in retail media now because it enables them to:

• Reach the shoppers while they are in the purchasing mindset
• Drive more product sales and capture more share of wallet
• Target and measure campaigns without relying on third-party cookies

What makes retail media networks valuable?

Dollar General is a great example of what makes a retail media network valuable. It has a deep relationship with consumers who are difficult to reach through other channels. Of the chain’s more than 18,000 stores, 75% serve markets of 20,000 or fewer people. Because of this, it can provide brands with hard-to-get, first-person consumer data. That’s the kind of unique reach brands want.

“When you look at impression volume and delivery what ends up happening is it’s concentrated in major mass-market urban areas. However you’re not capturing everyone, right? And because we have identified and can reach 90% of our customers through paid media, we are extending reach that’s unduplicated in rural areas.”

Charlene Charles, head of DG Media Network operations

Why is first-party data critical for a Retail Media strategy?

When third-party cookies go away, brands will lose a significant part of their data pool.

Retail media is one of the few alternatives that can help them to fill the void left behind.

Brands have already begun shifting budgets to retail media. This change will lead to a greater shift, with retail media taking its place as a core part of brand marketing plans, rather than an add-on.

Retailer first-party data provides many benefits, such as:

• It’s privacy-safe
• Ready-to-buy audiences, at the point of purchase
• Up-to-date information
• Includes both online and offline data, for a larger data set
• Detailed, for more precise, effective personalization
• Closed-loop, so you can attribute ad spend directly to sales

How do Retail Media Platforms Work?

Through a Retail Media Platform, retailers and brands can build better partnerships.

Monetization in Retail Media Retail Media is not about selling the retailer’s shopper identities directly to brands. It is about providing access to first-party audience intelligence on a single platform that integrates campaign planning, implementation and analysis.

• Deploy the same tools that retail giants already use, you can also compete in the Retail Media Market – and WIN!
• Join a transparent, open ecosystem that maximizes revenue for retailers and flexibility for brands.
• Access to broad advertiser demand for retailers and sell your retail media with ease
• Benefit from access to standardized workflows and metrics across retailers
• Run multi- or single retailer campaigns with a variety of ad formats
• Get full visibility and pricing control

Revenues are derived from two broad classes of advertisers who want to communicate with their shoppers – those whose products are sold by the retailer, and those who merely want to reach the retailers’ shoppers:

Endemic Ads

The primary advertising value proposition is for products sold by those retailers – sometimes called “endemic” advertising. For brands, this affords a means of persuading shoppers to purchase those products with very fine targeting, efficiency, and measurability. Retailers who do an excellent job at capturing longitudinal shopper behavior from their first-party transaction (TLOG) and loyalty data are in a strong position to monetize the effort.

Non-Endemic Ads

There are also secondary opportunities for RMNs to sell advertising for related brands or services not sold in their physical or digital stores. “Nonendemic” advertisers (warranties, insurance, and professional services are some examples) represent important sources of incremental revenues. Lifeevent “triggers” that may be signaled by their search or purchase behaviors may be of significant value to those advertisers.

What are the common channels for Retail Media?

On-Site Retail Media

This is the more familiar and intuitive scenario, where ad messages are placed within the retailers’ e-commerce app and/or web site or communicated via the loyalty program. Major ad formats include display ads and sponsored product ads that are context and relevance driven. Messages are delivered via the retailer’s own properties – that is they are embedded in the digital storefront, on the mobile app or in the physical store. Rates and measurements are determined on a “cost per thousand” (CPM) basis for display ads. Sponsored product ads normally rely upon Cost Per Click (CPC), that is, only click-throughs are counted.

Off-Site Retail Media

A RMN may accumulate an audience of shoppers that may be reached through other un-owned channels they frequent, including social media or news sites. Here, loyalty programs that enable identification of customer segments is becoming much more important as third-party cookies go away.

Offline Retail Media

An offline campaign is defined as any form of advertising implemented away from a brand’s owned online channels. Throughout the years, the list of offline channels has become longer as new technologies emerged in the market. We can now find a great variety of offline channels that brands and retailers can use to implement offline campaigns.

Below are a few examples:

• Traditional media: TV, Radio, Print
• Outdoor: Billboards, Transit
• Event Marketing: Sponsorship, Trade Shows, Conferences
• Publicity: PR, News

However, the best time for retailers and brands to promote their products is when prospective customers are in that “ready-to-buy” mode, and when it comes to offline, this will happen in the store.

How can grocers establish successful retail media relationships?

A few things retailers can keep in mind to establish successful media relationships include:

• Demonstrate the value and granularity of your first-party data
• Get ready to provide advertisers with comprehensive measurement via clear and robust reporting. This includes aggregate views of metrics by campaign, by category, by product, etc. Brands need retail media solutions that offer the control and flexibility to move budgets and optimize campaigns quickly — ideally from one central point.
• Get advertisers on board to buy retail media inventory
• Offer diverse ad formats to achieve a brand’s specific goal across the consumer journey
• Highlight the unique value of your particular audience – for example: its scale or its specific interest or alignment with brand partners
• Partner up with a company like Loyal Guru, that offers both the tech and the retail expertise to guide you towards success. This will help you avoid costly mistakes, and access infrastructure, technology and knowledge to shorten the time to launch – compared to building the entire retail media solution in house.

We work with many grocers who previously had zero experience in digital media, as well as more experienced grocers with strong marketing teams in house, so we know what it takes for them to start monetizing — and how to help them mature into retail media.

For retailers, what does it take to get started?

• Build loyalty data and grow the POS transaction-log user-identification rates to at least 30-40%. Ensure great data hygiene of product reference data mapped to the transaction data.
• Develop the digital properties, ensure high log-in rates and on-site personalization.
• Direct sell on-site banners (ideally native formats) ads on the mobile app and sites and target based on context and purchase behavior.
• Develop audience insights and ROI measurement approach
• If e-commerce is successful, and site traffic is strong enough, sell Sponsored Product Ads that allow brands to boost product position to higher on the page

Longer term, retailers will look to augment revenues from their RMN by extending media buying to off-site mobile media that drive back to on-site and in-store conversion. Some methods include programmatic mobile ad banners, real-time bidding (RTB), and mobile web banners.

Extend media buying to off-site mobile media, driving back to on-site and in-store conversion.

Develop multi-channel media plans (social, mobile, desktop, DOOH) Create data insights sessions with key brands, and longer-term media plan.

There can be peril in attempting to create an in-house RMN ecosystem in terms of both investment and time lost. The complexity of stitching too many “best-of-breed” solutions together can drive up project uncertainty, costs and complexity.

Conclusion: Retailers need to act swiftly

Specially, if they want to:

• Compete vigorously for a fair share of marketing/ad funds before more developed competitors outmaneuver you and corner the market
• Establish a Retail Media platform that meets the expectations of brand marketers and media buyers – independently or in partnership with network vendors
• Adopt a collaborative process that brands can use with minimal friction to access and share first party data and evaluate activation performance
• Converge your Retail Media Network with your loyalty program to enable personalized messaging and enhance the value of the shopper experience
• Demonstrate empirically your audience’s value to your brand partners to attract a vigorous book of endemic advertising
• Present a value proposition to non-endemic advertisers whose goods or services may be of interest to your shoppers
• Amplify digital offers using paid Retail Media to ensure shopper awareness of great deals or discounts that drive trips to the store

There is an orderly strategic path for well-established retailers to join the Retail Media competition that takes advantage of lessons learned and methods already established by early adopters. A strong strategic partnership can greatly improve the implementation and assure success of the initiative.