ArticleRetail Media Is Here
I’ve spent the last 4+ days at GroceryShop – an annual event featuring more than 4,000 leaders in the grocery and retail industries. After well over 50 meetings with partners, retailers, brands and vendors, multiple demos and some good, old-fashioned playing around in-platform – my biggest takeaway from the past few weeks is way too many brands are sleeping on retail media.
Actually, let’s go a step further: retail media is poised to be the most consequential advancement in digital advertising in the past decade. That may sound like hyperbole, but, if anything, it’s underselling it.
So, for today’s issue, I want to share why retail media – what I’ve learned, how we’ve worked on these platforms so far, and (most importantly) where this whole thing is going.
Let’s start at the beginning: what is retail media? Put simply, retail media is advertising placed at or around the point of purchase. Historically, this has been limited to in-store signage, end caps and the like. However, propelled by the pandemic and the inexorable march toward online, retailers large & small have evolved these offers to be so much more. Today, retail media includes homepage takeovers, in-app placements, on-PDP ads, seasonal page ads on-site, along with a host of off-site placements on third-party websites and social channels.
At first glance, this may seem like every other programmatic or paid media solution out there – it’s just digital ads. And yes, that’s true. But the point of leverage isn’t the ad network; it’s the data powering those placements.
Historically, retailers have had among the richest, most valuable data sets around – after all, about 85% of addressable retail is still transacted in-person. That translates to billions (yes, with a B) of data points generated every day – from what you purchase, to how frequently you purchase, to how much you’ll spend, whether you use coupons (or not), when you’ll adjust spending patterns, and so much more.
If social media captures our imagination and drives our aspirations, and search reveals our needs, challenges & retail data reflects our priorities – the things we actually spend money on every day. But, until now, that data wasn’t widely available, even to the retailers themselves. But, credit where credit is due: retailers large and small have made substantial investments in building tech stacks (and yes, there are many) that enable them to better tap into the latent value of this data.
If this wasn’t good enough, there’s another factor at play here: the pending death of the third-party cookie. For the past 20+ years, marketers have targeted using a Frankenstein approach: layering third-party (from who-knows-where) and first-party data together to (hopefully) reach their target audience. The confluence of these two factors: (1) the activation of retailer data and (2) the demise of the third-party cookie – will propel retail media from a niche thing to the thing within the next 12 months. After seeing this in-person and speaking directly with many of the ad platform leads at the major retail media networks, I’m convinced. Retail Media is a Facebook-in-2014 level opportunity – and that’s underselling it.
You’re probably wondering: why should I care? I don’t sell in retail. I don’t have an ecommerce product. How does this help me?
The answer: the value of retail media isn’t in selling physical goods. It’s in the audiences.
Retailers have years (or, in the case of Target, Walmart, CVS & Amazon, decades) of your purchase data on a SKU-by-SKU level. That alone would be incredibly valuable; but retailers have more – they have SKU-level properties, like your clothing size, diet habits, what brands of deodorant you buy, the type of toothbrush you use, what sports your kids play (and, whether or not you’re expecting kids, for that matter). And historically, that data has been completely inaccessible and unusable outside of the retailers themselves.
Retail Media changes that for everyone, not just retailers or in-store brands.
Imagine you’re a restaurant or spa looking to attract affluent tourists – historically, this was somewhat difficult (sure, find people who are interested in your city + staying in posh, 4* or 5* hotels) – but that’s unreliable. You don’t know when they’re traveling. You’re at the mercy of Meta or Google’s data. But what if you could tap into (for instance) Uber’s data – build a segment of people who have spent $10,000 or more on Uber + Uber Eats in the past 12 months AND who are currently visiting your city.
Or, take the case of a residential plumber looking to expand his/her customer list. Sure, you can target hyper-competitive queries around common plumbing problems/challenges – and likely find some new customers (likely at a relatively high price per new customer). Or, you could augment that strategy with ads directed to people who are shopping at Home Depot or Lowes or Walmart for drain cleaner or a drain snake, or individuals who are buying plumbing supplies for the first time. Each of those behaviors indicate that the person is having plumbing problems and trying to DIY it.
Another example: a daycare provider looking to generate registrations for a new location. Historically, childcare CPCs (on Google Search) are staggeringly expensive. But what if you could tap into Amazon + Walmart’s data to find everyone around your new location who has purchased Size 2 or Size 3 diapers in the past 3 months?
Finally, what about B2B? Virtually every retailer has B2B programs/partnerships that could be leveraged for lead generation. A simple example: Lowes and Home Depot both have contractor programs. Build a segment of all users who are enrolled in those programs within your target market, then serve them ads promoting your widget/tool/platform/whatever. Amazon has Prime for Business. Walmart has a Business offering. The options are limited only by your imagination (and what retailers are willing to provide).
These are just the tip-of-the-iceberg examples. Retailers (yes, even the big ones) are still quite behind even mediocre digital ad platforms (like X or Pinterest) in terms of their targeting, bidding and platform operations. But that’s the opportunity for skilled, out-of-the-box marketers – not only do you have massive arbitrage opportunities, but there are co-creation opportunities as well. If I learned anything from the dozens of meetings I’ve had over these past few days, it’s that retailers want to learn from marketers outside their bubble. They’re open to collaboration. They are honest about the fact that they have unknown-unknowns.
It’s not all roses, though.
Just like with Facebook in 2014, there are challenges:
- Rudimentary Ad Networks – I’ve worked on campaigns spanning everything from nascent retail media networks to Amazon, and I can tell you there are massive differences between platforms, and most (not all) platforms are operating at the same level of sophistication as Google/Meta were in the early-to-mid 2010s. Automated bidding is a crapshoot, targeting options are rudimentary, off-site tracking + tagging is questionable at best, pricing is all over the place and the ML powering some platforms is downright dreadful. But these are the same challenges we faced a decade ago with Facebook Ads; the difference is that there is an existing playbook to resolve them, and retail media networks have partnered with tech platforms like the Trade Desk, Basis and Citrus to help them close the gap in short order.
- Fractured Ecosystem – Unlike Facebook or Google Ads, where there was one dominant interface to access the channel (paid search / paid social), there are 50+ retail media networks (and more coming online every week), each with different interfaces and nuances and limited-to-no interconnectivity. This is a new challenge for most digital marketers – we’ve never had to manage 15+ platforms – let alone 50+ – at a given time. I do think this will (slowly) resolve itself, particularly if someone can effectively build an aggregation platform that is supported. In the interim, I’d recommend using a neutral third party (we have partnered with Incremental – who is the best of the bunch for my money).
- Measurement Is A Challenge – one thing that was painfully obvious to me during GroceryShop is that most retail media networks and virtually all brands have not cracked the code on connecting Retail Media Ads to transactions. This is a maddeningly difficult problem to solve, especially given the fractured ecosystem – but, advancements in things like Code Interpreter and Automated MMMs will help, assuming we can standardize the data from different networks (which is a big assumption). Again, we’re very much in the infancy of this, so advertisers will need to get creative.
- Co-Creation Required – With Google, Meta, LinkedIn, etc., audiences are there, ready and waiting for you to action them. With retail media – that’s not always the case. Some networks have created pre-built audiences – usually at the request of other advertisers/brands, but most (Amazon being a major exception) don’t have a ton of them. So, if you try advertising on Walgreens, but can’t find exactly what you want, you’ll have to ask. And, in most cases, retailers are happy to help. Again, they don’t know what you want or need.
- Inference + Insights Needed – One of the great things about search is that it can be fairly straightforward – if someone is searching for “attorneys near me” – odds are, they need an attorney. In many cases, little-to-no inference was needed. For retail media, that’s not the case. You’ll need to think more critically and carefully about how to structure your targeting, especially if you’re using these networks for lead generation or for non-retail products. If you’re trying to reach (for instance) people who are trying to lose weight or go on a diet, you’ll likely need to build a segment of people who:
- Were regular consumers of less-than-optimal things (chips, soda, fried foods, candy) within the past 60 days
- But have recently shifted their buying habits within the past 30 days toward better-for-you options (diet soda, kombucha, water, fruits/vegetables, lean proteins, meal replacement shakes).
Doing that will take some good, old-fashioned customer insight work, along with genuine partnership with your retail media partners to build the segment. But once you do, what you’ll have is something that’s every bit as accurate as what you’d get from Search, at a fraction of the cost (since retail media CPMs tend to be quite attractively priced).
Within the next 18-24 months, retail media will be a $75B a year business (it was $45B in 2022) – and dozens of new networks have come online since then. It represents the new frontier in digital advertising for B2B and B2C brands. We’re already exploring integrating retail media into the mix for some current clients, and are looking forward to helping new partners build out their offerings over the next 3-6 months.
Over the past 2-3 years, countless people in our industry have bemoaned the duopoly of Meta & Google. I think retail media is the thing that will disrupt the entire digital landscape. It’s a brave new world.
Thanks for reading!
Sam
