Imagine a world where every time a consumer browses products online, they are met with highly relevant ads that seem to read their mind. This is the power of retail media. In the US, retail media ad spend hit $45 billion, almost 20% more than in 2022. This year in 2024, it’s forecasted to grow by another $10 billion!
As the lines between in-store and online shopping blur, retail media networks are becoming an essential advertising platform for brands looking to reach shoppers at the digital point of sale. In this article, I’ll dive into what exactly retail media is, how it works, and why its future is intertwined with loyalty programmes, for brick and mortar and digital businesses alike.
Contents:
Key Takeaways
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Retail media is a powerful advertising tool that allows brands to reach consumers directly on retailer-owned platforms or affiliate publisher platforms
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Retail media networks leverage first-party customer data to deliver highly targeted ads to shoppers at the point of sale.
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The benefits of retail media for brands include connecting with relevant shoppers, increasing product visibility and driving sales.
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Retail media networks prioritise consumer privacy by using anonymised data and providing opt-out options for targeted advertising.
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The future of retail media is promising, with ad spend expected to grow significantly as more consumers shift to online shopping experiences.
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Brick-and-mortar stores can benefit from creating their own retail media networks by generating new revenue streams and providing a more seamless in-store shopping experience.
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The growth of retail media advertising is driven by factors such as economic pressures on retailers, the desire for brand amplification, advancements in ad targeting technologies, and shifting consumer behaviours.
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Integrating loyalty programmes with retail media networks can create more effective ad campaigns by leveraging customer data to tailor messaging and offers.
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Brands can benefit from combining loyalty programmes with retail media through improved ad relevance, higher conversion rates, and better ROI.
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By combining retail media and loyalty programmes, retailers can create a virtuous cycle that enhances customer lifetime value through personalised experiences, increased engagement, and ongoing sales.
What is Retail Media?
Have you ever been browsing your favourite online store and noticed an ad for a product or special offer that seems to be exactly what you've been looking for? That's retail media in action. Retail media is a form of digital advertising that allows brands to reach consumers directly on retail websites and apps.
Relying on a web of brands that promote one another’s products or services or promotional offers to a like-minded audience.
Awin, our partner and global affiliate network defines Retail Media as:
"An advertisement strategically placed on a retailer’s ecommerce site to positively influence customers precisely at the point of sale. This form of advertising empowers brands to enhance their visibility within the online shopping environment"
Types of Retail Media: Endemic vs Non-endemic Advertising
Generally, there’s two types of retail media. Endemic and Non-endemic.
Endemic
This is when a brand seeks to enhance their products on a retail media network. For example, Kelloggs might pay for increased listings for cereal with Walmart.
Non-endemic
Non-endemic on the other hand, is the driving force behind the exponential financial growth in retail media. This is where the retail media network advertises a brand, product or service that they are not directly associated with or sell on their site but are complementary. For example, protein or health food providers advertising on JD Gyms’ loyalty platform.
What is a Retail Media Network?
So, what exactly is a retail media network (RMN)? It's a platform that enables Consumer Packaged Good (CPG) brands and other advertisers to promote their products on retail websites, apps, and other digital properties, such as loyalty and reward programmes.
Retail media networks leverage customer data and advanced targeting capabilities to deliver highly relevant ads to shoppers at the point of sale.
Most experts agree that retail media – whilst still in its infancy – is the future advertising channel.
How do retail media networks work?
When you visit a retail site like Walmart or Home Depot, the retailer collects data about your browsing behaviour, search history, and purchase preferences. This data is then used to create targeted ad campaigns that reach you with the right product at the right time.
Retail media network examples
The best way to understand retail media is to look at some examples. I’ve picked two of the biggest names, both of which just happen to be U.S. based companies. Retail media is really beginning to mature across the pond. It only makes sense then to switch our focus there.
Let’s see how Amazon and Walmart are using retail media to drive innovation in marketing strategy:
Amazon
Amazon leads the U.S. retail media advertising market, holding a 75.2% share, significantly outpacing Walmart. Its advertising arm, Amazon Ads, competes closely with Google and Meta, capturing 10.2% of the US digital ad market in 2023.
Amazon stands as the leading force in the U.S. retail media sector because it’s supported by a massive base of over 200 million Prime members. That’s just in the U.S. alone! This gives Amazon unparalleled access to detailed transactional data.
Amazon Advertising's key services include:
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Sponsored Products: Places product listings in prime locations such as product detail pages and search results on Amazon.
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Sponsored Brands: Features a brand and its range of products throughout the Amazon site.
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Sponsored Display: Enables advertisers to target audiences not only on Amazon but also on external sites, including Twitch and other third-party platforms.
Walmart
Walmart Connect stands as one of Amazon's main competitors in U.S. retail media. Attracting over 240 million visitors weekly to its stores, Walmart is recognised as the world's largest retailer.
According to Comscore, Walmart sees over 100 million unique monthly visitors online. Through retail media expansion, Walmart aims to facilitate brand connections with audiences across its digital and physical platforms. Offerings include:
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Search: Positions advertiser's products in search results.
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Display: Targets relevant audiences on Walmart's site, app, and external platforms.
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In-store: Engages customers in physical locations via T.V. screens and displays across thousands of stores.
Why is Retail Media Important?
For starters, it's a rapidly growing segment of the digital advertising business. As I’ve already shown you, ad spend is set to accelerate at a rapid pace in the next few years. Mostly thanks to its innovative ability in the way brands connect with their consumers. Let's refer back to my Walmart example.
Experts believe that shoppable video content is the next frontier of retail media. Walmart has already ramped up its CTV advertising efforts. Connected TV advertising tailors commercials for targeted consumers and increases brand reach.
Think about it: When you're on a retail site, you're already in the mindset of making a purchase. You're actively searching for products and considering your options. By placing targeted ads in front of you at this critical moment, brands can influence your buying decision and drive sales in a way that feels natural and unobtrusive.
What are the Benefits of Retail Media?
The benefits of retail media networks go beyond just boosting sales. They also provide valuable insights into consumer behaviour and preferences. By analysing data from retail media campaigns, brands can gain a deeper understanding of their target audience and optimise their marketing strategies accordingly.
It’s no wonder then, that retail media offers a range of benefits for both advertisers and consumers. Let's take a closer look at some of the key advantages:
Connects brands with relevant shoppers
One of the biggest benefits of retail media is its ability to connect brands with the right shoppers at the right time. By leveraging customer data and advanced targeting capabilities, retail media networks can ensure that ads are shown to consumers who are most likely to be interested in a particular product or brand.
Imagine you're a CPG brand looking to promote a new line of organic snacks. With retail media advertising, you can target shoppers who have previously purchased similar products or who have shown an interest in healthy eating. This means you're not wasting ad spend on people who are unlikely to buy your product.
Improves product discovery for consumers
From a consumer perspective, retail media can actually enhance the shopping experience. By showing relevant ads and product recommendations, retail sites can help shoppers discover new products they might not have otherwise found.
Let's say you're shopping for a new pair of running shoes. As you browse the athletic footwear section of your favourite retail site, you see an ad for a new brand of shoes designed specifically for long-distance runners. You click on the ad, read some reviews, and decide to give them a try. Without retail media, you might never have discovered this perfect pair of shoes.
RMN data is always privacy-first
Of course, with all this talk of customer data and targeted advertising, you might be wondering about privacy concerns. The good news is that retail media networks are committed to protecting consumer privacy.
Most RMNs use anonymised data that can't be traced back to individual shoppers. And they typically give consumers the option to opt out of targeted advertising if they prefer not to see personalised ads. So your customers can enjoy the benefits of retail media, without them or you, worrying about their personal information being compromised.
Retail media has a promising future
As more and more consumers shift their shopping habits online, the importance of retail media will only continue to grow. That’s exactly why some experts predict that retail media could eventually rival traditional advertising channels like TV and print in terms of ad revenue. With younger demographics now using streaming platforms and gaming consoles, that prediction isn’t too much of a leap to believe. Particularly when Millennials and Gen Z want more digital options.
For brick and mortars looking to compete with e-commerce giants like Amazon, retail media also offers a way to level the playing field. By creating their own retail media networks, traditional retailers can tap into a new source of ad revenue while also providing a more seamless and personalised shopping experience for their customers.
Prioritises brand safety in RM environments
Another advantage of retail media is its focus on brand safety. When you advertise on social media or other digital platforms, there's always a risk that your ad could appear next to content that doesn't align with your brand values. But with retail media, you have more control over the context in which your ads are shown.
Retail sites have a vested interest in maintaining a positive and trustworthy environment for their customers. If my experience in the customer loyalty sector has taught me one thing, it’s that customer trust is like gold dust. Particularly in a time when consumer trust is at an all time low.
Retail media carefully curate the products and brands they feature on their sites, which means you can feel confident that your ads will appear in a brand-safe context. Your potential customers, on the other hand, will feel reassured that your brand is genuine. Hopefully the beginning of a long term relationship, nurturing them from suspicion to advocacy.
Exciting ROI projections
Perhaps most importantly, retail media offers the potential for impressive ROI. By reaching consumers at the point of sale and using advanced targeting techniques, brands can drive significant increases in sales and revenue.
In a recent survey, 60% of advertisers said they planned to increase their spending on retail media in the coming year. And it's no wonder why – some brands have reported ROI as high as 10x or more from their retail media campaigns.
Of course, as with any form of advertising, the success of your retail media efforts will depend on a variety of factors – from the quality of your creative to the relevance of your targeting. And of course, the effectiveness of your loyalty programme in your value propositions. But with the right strategy and execution, retail media can be an incredibly effective way to grow your brand and boost your bottom line.
What are the Drawbacks to Retail Media?
It would be disingenuous of me to say that retail media is the end all be all. Like most strategies, retail media has a few drawbacks you should definitely consider.
High competition and costs
In top-tier RMNs, the fierce competition can sometimes increase advertising expenses, causing brands to enter bidding wars for premium ad placements.
Budgeting challenges
For brands with smaller budgets, the steep cost and intense competition of RMNs may restrict their effective participation, potentially leading to diminished returns on investment compared to other marketing avenues.
Data access limitations
While RMNs offer valuable consumer insights, the control of their data more often than not stays with the retailer. This would limit your brand’s access to data that could be used in your other marketing strategies.
Issues with transparency
The processes of data collection, analysis, and usage may lack clear transparency, hindering your brand’s ability to fully understand and utilise consumer behaviours and preferences.
Operational challenges
Running campaigns across various RMNs call for significant resources and time, often requiring brands to tailor their strategies and content for each specific platform.
Integration challenges
Then there’s the challenge of aligning retail media campaigns with your brand’s overarching marketing strategies. This becomes even more difficult when coordinating with multiple retail platforms and partners.
Misaligned objectives
Sometimes, the aims of the RMN diverge from those of the advertising brand. While retailers focus on sales and customer experience, this focus might not always match the brand's specific marketing goals.
Limited control
Brands may find themselves with restricted control over their ads' placements and contexts, potentially leading to less than ideal ad positioning. Not to mention the potential of negative associations that don't align with your brand's image.
Attribution hurdles
It can be challenging to directly link RMN advertising efforts to sales and conversions. If consumers engage multiple touchpoints across the purchase cycle, pinpointing the effects of specific stages in your campaigns may become that little bit more complex.
Dependence on retailer metrics
Brands are often reliant on the RMN for performance metrics and analytics, which may not always provide the depth or specificity required for detailed performance evaluation.
What is Driving Retail Media Growth?
Retail media has been around for a while, but it's only recently that it's begun to take off as a major player in the digital advertising space. Which begs the question; what's behind this sudden surge in growth? Let's explore some of the key factors driving the rise of retail media.
Non-endemic retail media
For one thing, we know that non-endemic retail media is driving mass adoption of this strategy. This of course makes sense, with the current zeitgeist in brand marketing shifting towards meeting customer expectations. Primarily focussed on enhanced experiences, consumers want brands to align with their lifestyle choices and personal values.
It comes as no surprise then that non-endemic retail media is taking precedence. As brands are looking to boost awareness of their products or services that may resonate with previously untouched audiences. Who may see the relevance and value of said products or services, especially if they are complementary to what’s already on offer in the existing RMN.
Response to economic pressures on retailers
One of the biggest drivers of retail media growth is the increasing economic pressure on retailers. With the rise of e-commerce, many brick and mortars are struggling to stay afloat. Retail media offers a new source of revenue that can help these businesses offset some of their losses.
By creating their own retail media networks, retailers can monetise their website traffic and customer data. They can charge brands for the opportunity to reach their customers with targeted ads, creating a new stream of ad revenue that can help boost their bottom line.
A desire for brand amplification
At the same time, brands are increasingly looking for new ways to reach and engage their target audiences. Traditional advertising channels like TV and print are becoming less effective as consumers spend more time online. Retail media offers a way for brands to amplify their message and connect with consumers in a more targeted and effective way.
By advertising on retail sites, brands can reach shoppers who are already in the mindset of making a purchase. They can use customer data to create highly targeted campaigns that speak directly to the needs and interests of their ideal customers. This can lead to higher conversion rates and a better return on ad spend.
Advanced ad targeting
Another factor driving the growth of retail media is the increasing sophistication of ad targeting technologies. With the help of machine learning and AI, retail media networks can now analyse vast amounts of customer data to create highly targeted ad campaigns.
For example, a retail media network might use data on a shopper's streaming history, search queries, and past purchases to show them ads for products they're most likely to be interested in. This level of targeting simply wasn't possible with traditional advertising channels.
Shifting consumer behaviours
Finally, the growth of retail media is being driven by shifting consumer behaviours. As more and more shoppers move online, they're increasingly turning to retail sites as a starting point for their product research and purchasing decisions.
In fact, a recent survey found that 81% of shoppers research products online before making a purchase, and most prefer to shop on retail sites that offer personalised recommendations. By advertising on these sites, brands can meet consumers where they are and influence their purchasing decisions in real-time.
As these trends continue to evolve, it's clear that retail media will only become more important in the years to come. Retailers who invest in building their own retail media networks will be well-positioned to capitalise on this growth, while brands who embrace retail media advertising will be able to connect with their target audiences in new and exciting ways.
How Can Loyalty Programmes Work with Retail Media?
Loyalty programmes have long been a staple of the retail industry, but they're often siloed from other marketing efforts. We’ve spotted an opportunity of integrating the best of what loyalty programmes have to offer with the emerging possibilities of retail media.
Part of a Digital Transformation Report from econsultancy...
"looks at why businesses have increasingly turned to loyalty programmes to make a more competitive offering to consumers in an economically difficult environment, as well as to secure an invaluable source of first-party data. It also examines how the 'loyalty surge' has fuelled a boom in a new type of advertising - retail media - and the advantages it offers for retailers and their client brands"
I believe now more than ever that retailers can create even more seamless and personalised experiences for their customers, while also driving better results for their advertising partners.
How to integrate loyalty programmes into retail media to drive engagement
One way to integrate loyalty programmes into retail media is to use customer data from the loyalty programme to create targeted ad campaigns. For example, if a customer frequently purchases a particular brand of skincare products, the retailer could show them ads for that brand's latest offerings or promotions.
This not only helps the brand reach its target audience more effectively, but it also helps the retailer drive engagement within its loyalty programme. By showing customers relevant and personalised ads, retailers can encourage them to keep coming back and engaging with the programme.
How to leverage customer data in loyalty programmes to tailor retail media campaigns
Another way to leverage loyalty programmes in retail media is to use customer data to tailor ad campaigns to specific segments of the loyalty programme. For example, a retailer could create a campaign specifically for high-value customers who spend above a certain threshold each year.
By using data from the loyalty programme to identify these high-value customers, the retailer can create a more targeted and effective campaign that speaks directly to their needs and preferences. This can lead to higher conversion rates and a better return on ad spend for the brand.
How to boost ad relevance and performance with loyalty driven insights
Loyalty programmes can also provide valuable insights into customer behaviour and preferences that can be used to boost the relevance and performance of retail media campaigns. For example, if a retailer notices that a particular segment of its loyalty programme tends to purchase products in a certain category more frequently, it could use that insight to create more targeted ad campaigns for brands in that category.
By leveraging these loyalty-driven insights, retailers can help brands create more effective ad campaigns that resonate with their target audiences. This can lead to higher engagement rates, better conversion rates, and ultimately, a better return on investment for the brand.
How to enhance CLV through combined retail media and loyalty efforts
Finally, by combining retail media with loyalty programmes, retailers can create a virtuous cycle that enhances customer lifetime value (CLV). When customers see personalised and relevant ads through retail media, they're more likely to make a purchase and engage with the retailer's loyalty programme.
As they continue to engage with the programme and make more purchases, the retailer can use that data to create even more targeted and effective ad campaigns, which in turn drives more engagement and purchases. Over time, this cycle can lead to higher CLV and a more valuable customer base for the retailer.
How to strengthen brand loyalty with targeted retail media experiences
For brands, integrating retail media with loyalty programmes can also help strengthen brand loyalty. When customers see targeted and relevant ads from a particular brand through a retailer's media network, they're more likely to develop a positive association with that brand and see it as a trusted and valuable partner.
Over time, this can lead to increased brand loyalty and a higher likelihood of repeat purchases. By leveraging retail media to create targeted and personalised experiences for customers, brands can build stronger relationships with their audiences and drive long-term growth and success.
Embracing the Future of Retail Media
Retail media is emerging as a powerful tool for driving growth and success in today's competitive retail landscape. Leveraging customer data and personalised advertising, retailers and brands can create targeted campaigns that:
- Reach consumers at the point of sale.
- Drive engagement.
- Boost ad relevance.
- Enhance customer lifetime value.
As the industry evolves, retailers who invest in retail media networks and brands who embrace retail media advertising will be well-positioned to capitalise on this growth and build long-term relationships with their customers. Even more so with a loyalty programme in place.
FAQS
What is retail media advertising?
Retail media advertising refers to the practice of brands advertising directly on retailer-owned platforms, such as websites, apps, and in-store digital screens. It leverages the retailer's first-party customer data to deliver targeted ads to shoppers at the point of sale.
How do retail media networks benefit brands?
Retail media networks allow brands to connect with relevant shoppers, increase product visibility, and drive sales. By leveraging the retailer's customer data, brands can create highly targeted ad campaigns that reach consumers who are most likely to purchase their products.
What advantages do retail media networks offer consumers?
Retail media networks enhance the shopping experience by showing consumers relevant product recommendations and personalised ads. This helps shoppers discover new products they might be interested in and makes their online shopping journey more efficient and tailored to their preferences.
How do retail media networks ensure consumer privacy?
Retail media networks prioritise consumer privacy by using anonymised customer data that cannot be traced back to individuals. They also provide consumers with the option to opt out of targeted advertising if they prefer not to see personalised ads while browsing retail sites.
What is the future outlook for retail media advertising?
As more consumers shift to online shopping, the importance of retail media advertising is expected to grow significantly. Experts predict that retail media ad spend could eventually rival traditional advertising channels like TV and print in terms of revenue.
How can brick-and-mortar stores benefit from retail media networks?
By creating their own retail media networks, brick-and-mortar stores can generate a new revenue stream through ad sales. This can help them compete with ecommerce giants and offset economic pressures. Additionally, retail media can provide a more seamless and personalised in-store shopping experience.
What factors are driving the growth of retail media advertising?
The growth of retail media advertising is driven by several factors, including the increasing economic pressure on retailers, the desire for brand amplification, advancements in ad targeting technologies, and shifting consumer behaviour towards online shopping and personalised experiences.
How can loyalty programmes be integrated with retail media networks?
Loyalty programmes can be integrated with retail media networks by using customer data to create targeted ad campaigns. For example, retailers can show personalised ads to loyalty members based on their purchase history, preferences, and tier status, driving engagement and sales.
What benefits do brands gain from integrating loyalty programmes with retail media?
By integrating loyalty programmes with retail media, brands can create more effective ad campaigns that resonate with their target audience. Loyalty data provides valuable insights into customer behaviour and preferences, allowing brands to tailor their messaging and offers for higher conversion rates and better ROI.
How can combining retail media and loyalty programmes enhance customer lifetime value?
Combining retail media and loyalty programmes creates a virtuous cycle that enhances customer lifetime value (CLV). Personalised ads driven by loyalty data encourage customers to make purchases and engage with the loyalty programme, providing more data for targeted campaigns ultimately increasing CLV.
Author Bio, Written By:
Mark Camp | CEO & Founder at PropelloCloud.com | LinkedIn
Mark is the Founder and CEO of Propello Cloud, an innovative SaaS platform for loyalty and customer engagement. With over 20 years of marketing experience, he is passionate about helping brands boost retention and acquisition with scalable loyalty solutions.
Mark is an expert in loyalty and engagement strategy, having worked with major enterprise clients across industries to drive growth through rewards programmes. He leads Propello Cloud's mission to deliver versatile platforms that help organisations attract, engage and retain customers.
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