Retailers, it’s time to move past bolt-on media businesses

Retail media’s popularity has scaled at a time of economic uncertainty and budget pressure resulting in a rush to retail media – a sector of the digital advertising market now associated with growth. Retailers could be forgiven for thinking the act of launching a retail media business alone was enough to guarantee incremental success.

In reality, the market is already dominated by a small number of scaled players. Without change, many brands and advertisers will eagerly invest their time and advertising spend with one, perhaps two, of the principal players in each region.

With IAB Europe reporting 92% of advertisers and 74% of agencies are already partnered with one or more retailers, success hinges on the challengers creating competitive propositions that are easy to understand and buy. And fast. However, many retailers across EMEA are being guided by misconceptions about what retail media is and isn’t.
 

The sales channel challenge

In contrast to the more mature US market, retail media has, for many European retailers, been a question of trade marketing campaigns. It’s easy to approach the gold rush of retail media budgets by simply expanding this trade business team to other sources of media demand - opening up retail media as a bottom of the funnel tactic in complement to trade marketing.

Using a single sales channel poses several challenges issues for many retailers. In a single market, most retailers won’t have the right talent or relationships to broker media deals. Articulating their proposition to media agencies and driving incremental revenue means adhering to set standards when it comes to the formats, data practices and KPIs that enable buyers from different verticals to use automation technology and unify measurement and attribution.

This doesn’t necessarily mean retailers need to outsource to specialist sales houses or partners, and for some retailers, developing a media division can be an easy lift.  For others this is a huge departure from their area of expertise. It’s not simply expanding from trade marketing but entering into a media world in which activation budgets are fought for not guaranteed, and there is an expectation of planning tools and specific success metrics to be delivered.
 

Sophistication & demystification

Moving forwards with this plan requires retail media networks to demystify their solution to advertisers.  These advertisers will need a different level of insight and support than when they were mere suppliers. For example, any retail media network is going to provide some kind of closed loop reporting, but often this over-emphasises ROAS at the expense of other KPIs focused on consideration, new-to-brand and market share shifts. Retailers have an opportunity to enrich the reporting with their retailer insights but also level up conversations to understand what will drive the most value to their brand suppliers/customers and support a two-way commercial relationship. It is vital to understand and determine the most important KPI for each retail media execution and what it ultimately needs to achieve for the brand.

Scalability is another core issue when retailers consider retail media only in trade marketing terms. To deliver the level incremental revenue being forecasted across the media, retailers will be required to open up their supply to different types of demand – some of who have traditionally been off-limits. Unlike trade, many retailers successfully expand revenues by selling media to non-endemic brands. Take the fashion vertical, advertisers adjacent to incumbent merchants could well activate within fashion category pages, for example a travel advertiser could be part of a joint push to reach young professionals who travel regularly.
 

The data accelerator

First-party data is synonymous with retail media value. Retailers understand this well yet are rightly protective of this asset which is so closely linked to their customer promise. With on-site media somewhat limited by the size of the retailer’s properties, activating data to inform offsite campaigns that drive new and lapsed customers back to the retailer site in partnership with brands is a key opportunity. Considering life outside of the retailer environment opens new, complementary ways of using the data.

‘Commerce media’ lives in any digital platform including CTV and DOOH. Just like any media campaign, the best outcomes are generated by planning full funnel from the outset, and understanding how audiences move through the full commerce journey, often using retailers’ first-party data to drive more relevant curated journeys from top to bottom of the funnel.

One potential pitfall is to treat media purely as a game of quantity. Successfully scaling a retail media business relies on making the right organisational and technological changes to support the strategy. This relies on engagement in retail media at the board level and across other departments. Embedding the concept of retail media within the retailer allows it to move beyond a front-end transformation into a mindset change about how to connect customers with products.

Winning advertiser confidence hinges on a rationalised approach across everything from the formats and ad-types made available, the sales channels and resources engaging with brands and agencies, through to the choice of KPIs for each execution. While the one front door approach can be to their detriment if they are not prepared, when the right thinking is included in the retailer’s overall strategy, that’s when they will grow profitability and see long-term future growth.