What Is Retail Media And Why Should Marketers Care?
Explore what Retail Media is, why it’s important for marketers, and how it works.
December 6, 2022
Retail Media is a relatively new form of advertising in which retailers leverage their digital assets and first-party data to deliver targeted, personalized advertisements to consumers on behalf of advertisers. Understanding Retail Media advertising is important for marketers, as it provides a new, highly effective way to reach consumers. In this blog post, we will explore what Retail Media is, why it’s important for marketers, and how it works.
What is a Retail Media network?
A Retail Media network is a platform that connects retailers, advertisers, and consumers. Retailers use their digital assets, such as websites, apps, and email lists, to deliver advertisements from advertisers to consumers. This allows advertisers to target specific groups of consumers with highly relevant and personalized ads while opening up an additional revenue stream for retailers.
One of the key features of Retail Media networks is their use of 1st party data and bidding technology. Retailers like Amazon and Walmart have access to a wealth of customer data, including their purchase history, browsing behavior, and preferences. This data is used to target ads to the right consumers at the right time, increasing the likelihood of a successful campaign. Additionally, like the major walled gardens, Retail Media networks often use advanced technology, such as artificial intelligence and machine learning, to optimize ad delivery and improve targeting.
These foundational components come together to form what is being called "the third big wave of advertising". According to e-marketer, US digital Retail Media ad spending will grow by +31.4% to reach $40.8 billion in 2022. By 2024, the total will grow to $61.15 billion, making up nearly 20% of all digital ad spending.
Why should marketers care?
Retail Media networks offer several benefits to marketers over traditional advertising channels:
First, they allow you to reach consumers in ways that were not possible before. Retail Media not only opens new advertising placements and audiences, but offers strong contextual targeting capabilities with ad placements native to existing shopping experiences. For example, if your brand sells bike cleaners, you can now advertise on bike-related websites or marketplaces like Amazon and sell directly to customers as they shop for bike-related products. These advertisements are often direct product placements that enable consumers to purchase seamlessly through the retailer's existing digital experience.
Second, Retail Media networks can be highly effective. Given the retailer owns the customer data, ad impression data, AND very often the end conversion (i.e. purchases), Retail Media networks offer the closed-loop attribution capabilities that will be necessary for teams to overcome signal loss associated with the deprecation of third-party cookies. Thanks to this closed-loop attribution, major retailers like Amazon can effectively leverage Machine Learning to optimize campaigns to maximize each advertiser's return on ad spend (ROAS) - often more effectively than their walled garden counterparts.
How do Retail Media networks work?
The main components of a Retail Media network include the retailer, the network (often owned by the retailer but not always), and the advertisers. The retailer provides the customer data and digital space for the ads, the network manages the platform and connects the retailer and advertisers, and the advertisers pay to run their ads on the retailer's platform.
Data is a crucial part of the process for Retail Media networks. They use data to offer precise targeting and measure the effectiveness of campaigns. The retailer's customer data is used to understand the demographics and behavior of the audience, which is then used to target the ads to relevant consumers. The network also collects data on how consumers interact with the ads, such as whether they click on the ad or make a purchase, which is used to measure the campaign's effectiveness. Using this data, Retail Media networks can help advertisers reach the right consumers with their ads and optimize their campaigns for better performance.
The Martech Weekly PRO. Used with permission.
Who are the largest Retail Media networks?
Amazon is by far the largest player in the Retail Media space dominating 77.7% of US digital Retail Media spend in 2021. The online giant's Retail Media network, Amazon Advertising, offers several different ad placements across its online marketplace, ranging from Sponsored products to Homepage brand sponsorship and Display advertising on partner sites and platforms like Twitch.
Walmart's Retail Media network, Walmart Connect (formerly Walmart Media Group), is second to only Amazon Advertising from a revenue standpoint. The retailer connects with 90% of US households and, over the course of the last two years, has actively invested in building additional digital capabilities that helped lead it to an impressive +30% YoY growth.
Instacart launched a self-service retail ad platform called Instacart Ads in 2020 as the Covid-19 pandemic fueled massive amounts of growth for the grocery delivery application. With 9.6 million active users and a wealth of demographic and behavioral information from each user (thanks to its model as a gated application), Instacart has a highly qualified data set that allows it to rival others in the space, like Target Roundel and Kroger Precision Marketing.
What's next for Retail Media?
Retail media's recent boom is not going to slow down anytime soon. As privacy regulations tighten and the cookieless world becomes a reality, more and more marketing teams will shift digital advertising dollars and marketing efforts to platforms and marketing channels that center on first-party customer data.
Amazon Advertising will continue to dominate Retail Media. However, many existing players, as well as new challengers, will force rapid innovation in the space. One innovation worth keeping an eye on is how Retail Media will adopt the rapid rise in data clean rooms - enabling parties to cleanly and effectively share customer data to enable enhanced audiencing and deeper insights.
Want to learn how your organization can prepare for this cookieless world? Book a conversation with our team here.