The unstoppable rise and evolution of retail media networks

GroupM estimates that global retail media spend will reach $160 billion by 2027 – a 60% growth rate over the next 4 years, outpacing digital advertising's overall growth rate.

Retail media networks are transforming the advertising landscape and boosting retailers’ profits and it appears advertisers can’t get enough with McKinsey & Company reporting recently that 80% of all retail media spend is incremental, coming from net new spend and reinvestment of brand and performance budgets. No wonder media spend is flowing in, with 70% of advertisers reporting higher returns on Retail media spend versus all other channels.

With increased consumer privacy concerns, Apple privacy changes, third-party cookies disappearing and Meta in the cross hairs of EU regulators, it seems that the super efficient programmatic precision targeting that search and social digital advertising has delivered for years has become and will continue to be more challenging in the years ahead.

Privacy changes have had less impact on retailers as they don’t need to collect information from users on other websites and have a first party data relationship with their customers. Unique and large-scale data rich, walled garden audiences, such as retail will only grow in importance for advertisers in the coming years.

The evolution from Retail media to Commerce media

The same (retailer) logic applies to food delivery brands, hotels, travel operators, retail banks and other owners of rich first-party data that have direct relationships with unique insights and reach to their walled garden audiences. Embedding highly relevant product, service or moment fit ads and offers into their consumers path to purchase / transaction.

There are early signs of this next phase with Uber, Deliveroo and DoorDash launching their own media network’s this year, targeting advertisers that sell products through their platform’s with Deliveroo also testing their first non-endemic advertising partnership with a product (Sky Glass) that is not available to buy on the Deliveroo platform but is relevant moment fit to the Deliveroo audience (6 in 10 UK consumers usually watch TV while eating a takeaway).

The implications for retailers

Retail media has been around along time, with retailers partnering with suppliers on channel marketing campaigns for decades but this next stage will unlock considerably more enterprise value for retailers.

We are still in the very early stages of the retail media evolution with a flurry of big-name US retailers entering this space in 2022 and going all in on developing a retail media strategy. The starting gun was fired when Walmart and Amazon revealed for the first time this year how much advertising was contributing to their profit lines, Boston Consulting Group (BCG) estimated a whopping 66% contribution for Amazon and 12% for Walmart back in March '22 with Walmart reporting a 40% YoY growth in advertising revenue in their recent Q3 earnings report. These new profit centres are subsidising retailers' broader commercial strategy, enabling them to deliver lower prices and enhanced customer experiences through technology / capital investments. Big European retailers are also entering this space with Argos and Carrefour ramping up their investments and activity in 2022.

It will take years for retail media to fully develop and deliver on its promise and not every retailer or market will warrant the resources and investment required to build out a dedicated in house advertising agency. Retailers will be mindful of not creating an overly commercialised environment for their shoppers and GDPR considerations will be top of mind but expect "retail media strategy" will become top of mind for retailers over the coming years.

The implications for consumer brand marketers

With the rapidly changing customer privacy landscape resulting is unique audiences getting harder to reach (and follow!), retail & commerce media represents an opportunity to reach consumers at key moments – while they are browsing and shopping for related products and services. Brand marketers will be able to deliver personalised ads and offers that can drive mid-funnel brand lift KPIs as well as bottom-funnel sale / conversion KPIs.

Given the pace of growth of retail media networks and the brands that are leaning into it, brand marketers may need to consider developing a retail strategy to gain or maintain an advantage that keeps them ahead of their peers.

Win win for consumers

According to a recent global consumer study by GfK, 63% of consumers like getting personalised offers from retailers / brands.

As Brands lean into the commerce media opportunity and provided retailers keep their customers experience at the heart of their commercial decisions (curated and embedded into the shopping experience as opposed to being peppered by ads) consumers will be presented with enhanced personalised ads, money saving and or experience enhancing ads and offers.

2022 has been the year Retail media networks came of age with a rush of major advertisers and retailers getting into or doubling down in this space, it will be fascinating to see what 2023 has in store!