Retail media isn’t the post-cookie digital marketing utopia you want it to be… yet
Opinion
Challenges that will shape its future include the need to simplify the offering, retailer consolidation and building infrastructure that connects the physical and the virtual.
If 2024 is remembered for anything by marketers and agencies, it’ll be the surge in interest and investment in retail media, not the demise of the third-party cookie.
But the two stories are intrinsically linked.
How so? To answer the question, you need to focus on a future a few years hence and consider how the fundamentals of digital marketing are changing.
Google will switch off third-party cookies most likely in early 2025. The industry is still seeking sound alternatives and has tended to fixate on infill solutions that rely on fixes and alternative information to patch together a picture of audiences and outcomes.
But what about more structural, permanent alternatives? This is where retail media comes in.
Retailers could restructure media
Observers predict that, in the UK alone, brands will spend $4bn on retail media this year and that this will double to almost $8bn by 2027. Worldwide investment in retail media is on track to be bigger than TV and there are now well over 200 retail media networks (RMNs), with more on the way.
Brands are interested in the use of data and measurability across omnichannel environments intrinsically linked to commerce or in-store point of sale, especially if it’s possible to build a brand as well as sell product.
Retailers are committing investment because margins for advertising on their owned media are well in excess of their core retail operations. And they are seeing huge potential in retailing their data to enhance their loyalty programmes as well as the overall consumer experience.
In recent months, Tesco revealed it has 1,800 screens across its stores, Co-op announced the launch of the UK’s biggest convenience store RMN, Morrisons is expanding its in-store screen and loyalty offering, Asda is also beefing up its media offering and Sainsbury’s Nectar has teamed up with The Trade Desk.
It’s not all about FMCG/CPG though. T-Mobile has just announced the creation of a US-based RMN across 2,000 stores.
Amazon is by far the most dominant retail media presence in the US and Europe, and it continues to innovate in interesting ways, especially in integrating its ad-support Prime Video estate with its enormous retail data resources and robust tech stack. In the US, Amazon Live recently launched a shoppable free ad-supported TV channel.
Given the attractive margins available to retailers from media revenues, all the signs are that we are seeing the creation of a vast and important advertising realm that could provide a highly measurable alternative to other technology platforms.
Let’s not get carried away
It’s clear that there are a multitude of stumbling blocks standing in the way of retail media realising its full potential as a digital marketing utopia.
So what challenges will shape the future of retail media and what will a more mature ecosystem look like? Whose job is it to simplify the retail media offering to advertisers?
While agencies are forming ecommerce specialist teams, those within them may miss the nuances of fees riddled by the adtech required to keep the operation straight. Although programmatic partners like The Trade Desk are best-placed for all parties, for some retailers a conflict of interest may mean it is not a suitable option. Finally, supply-side platforms give advertisers a single point of entry to plan and execute, while also offering automated buying paired with advanced targeting capabilities — but cost transparency may be an issue.
No option is a silver bullet and the most likely solution is a combination of supply-side platforms, demand-side platforms and retailer-specific platforms based on the needs and priorities of each advertiser.
The need to create more streamlined access and a shortage of first-party data for all but the larger retailers will drive consolidation. If you consider the scale of data — not to mention the advertising technology — that Amazon has in relation to even a fair-sized retailer in the US and the UK, there is no comparison.
In the US, only a handful of the biggest retail brands and one or two in the UK have the scale to offer brands truly effective first-party-data-driven opportunities.
But competition between, say, supermarkets will limit these opportunities to collections of non-competing retailers of various sizes. The quality of RMN infrastructure, customer data and its distinctiveness may be factors that determine retailers’ ability to participate in retail ad networks.
Connecting virtual and physical
With these “co-operative” networks established, it’s possible to imagine a move towards more programmatic investment. But remember that in the UK roughly three-quarters to 90% of grocery sales still happen in a shop. So the big focus will be on creating in-store measurement and content-delivery technology infrastructure, as well as the pipes to join online estates with physical spaces to create omnichannel propositions that brands will pay for.
Some groupings will be bigger and better than others. Larger retailers will invest in technology to have more control of the data, activation and measurement. They may also expand their media offering beyond their digital outputs and focus on in-store, video and audio. This will see a more manageable market emerge.
While the publishing of the first Retail Media Measurement Standards for Europe is a positive step, there is still a way to go as the IAB addresses the need for standardisation of audience measurement, creative formats and brand-salience metrics.
The idea that retail media could become some kind of advertising utopia offering a cohesive single alternative is wide of the mark. But, by the end of the decade, we could be looking at an enormously powerful ecosystem providing another focal point for scaled investment alongside search and social, but this time offering performance marketing.
Nick Graham is a senior consultant at Kepler