Marketers should have one key trend at the top of their shopping lists when looking to optimise their marketing budgets this year: retail media. The online retail landscape, with its vast first-party data, provides an ideal environment for brands looking to target customers in a relevant context while also measuring the impact of advertising along their journey.
By Maren Seitz, Analytic Partners
In the last three decades, digital marketing has experienced two major waves of disruption. It started with the evolution of websites and Search capabilities, followed by the rise of Social Media and content marketing. And now, Retail Media has entered the stage as the next big thing at the top of everyone’s marketing agendas. So what are the main factors that have accelerated the growth of Retail Media?
- The end of the third-party cookie. Having lost the ability to tap into this valuable set of data, marketers have been forced to seek alternatives to fill the void and to continue targeting the right customer, in the right place, at the right time.
- The gradual decline of Reports from WARC, the Advertising Association and IPA confirm the gradual downward trend in TV usage, resulting in marketers seeking additional and alternative options to reach consumers.
- The continued momentum of e-commerce. In 2021, e-commerce accounted for nearly 19% of global retail sales and is projected to continue growing, albeit not as strongly as during the pandemic. By 2026, it is projected to account for nearly a quarter of all global retail sales.
While these three developments have presented challenges, especially for FMCG brands, they have also helped pave the way for the rise of Retail Media and thus accelerated the opening of a new world full of possibilities. A world where retailers let brands benefit from their ability to not only track their shoppers‘ specific transactions, but to also collect valuable and actionable data from things like search queries and clicks on web pages. So let’s have a closer look: How can brands best leverage Retail Media’s momentum?
The Amazon example
Online marketplaces can be compared to weekly street markets, or supermarkets, in the sense that they allow people to browse along (digital) aisles, and use them as search engines to compare prices of different products. Amazon is probably the most well known example of successful retail marketing, with a large number of brands using its retail platform for their product and brand advertising. Anyone who orders a coffee machine on Amazon will also be shown offers from other retailers via the “Products related to this item” category in the same way you might see different product offers on grocery store shelves. This type of advertising, in the context of a sales environment, encourages consumers to fill their shopping carts just with the convenient click of a button. In addition, relevant offers are also frequently embedded in newsletters or e-mail purchase receipts in order to entice customers to return to the platform and buy more.
The impact of these ads is not just limited to Amazon sales however. As part of the large and complex omnichannel marketing universe, we’ve found in our own research that Amazon ads also drive sales on external platforms. In fact, 45% of sales driven by Display ads and 23% of sales driven by Search ads on Amazon happen outside the platform. And the impact is not limited to just product ads either: brand advertisements can also be effective and a nice complement to retail brands’ full-funnel campaigns.
Before you fill your cart
Amazon knows how to play the retail media game. While it is home to many well-known, global brands, it is also an attractive option for smaller and lesser known businesses to have their products noticed. Projections in the US predict that Retail Media’s strong growth will continue in 2023 and will reach $52.21 billion – up 25.8% compared to 2022. So it comes as no surprise that, according to GroupM, 18% of the global digital advertising spend and 11% of all advertising budgets are already invested in Retail Media.
While this momentum in spend is expected to continue, as with any other trending channel brands should keep a close eye on how its effectiveness evolves. As usage of retail media increases and shoppers are exposed to more and more ads on their online shopping trips, there is a risk of advertising overload negatively affecting the user experience and ultimately sales.
Brands should also always keep in mind the golden rule of ‘more is more’ when it comes to the channel mix. Multi-channel strategies, across online and offline media, are usually both more effective and offer a higher ROI than those focused on one or two channels only. To make the most of Retail Media, it needs to be given a clear role and embedded thoughtfully within the overall marketing mix. Tesco and Boots partnering with broadcaster ITV to extend the consumer experience is a great example of an integrative approach to retail media.
Your shopping companion: Data and analytics
Partnerships with retail media networks can feel like a walled garden: the advertising brands receive granular data directly from the provider, which they can then use to target consumers even without cookies. But to then understand the true impact of Retail Media and its return of investment, it needs to be measured as part of the full marketing mix. After all, while the last click before purchasing my coffee machine might have been on a retail media ad, it may have been the interplay of seeing the brand on TV, being reminded on Social Media, and ultimately being triggered by the retail ad that actually did the trick. Many brands are already investing in econometric programmes such as commercial mix modelling, which allow them to understand the impact of all relevant commercial and macro-economic drivers holistically – and hence to optimise their spends much more accurately.
When it comes to understanding the impact of Retail Media, marketers and online retailers alike tend to be interested in two key aspects. Firstly, what is the impact of retail media ads on driving sales on the platform itself – in combination with other marketing and non-marketing factors? For example, marketing experts might want to understand how to best allocate their funds to TV shows, sponsorships and retail media ads to drive sales on the platform during the colder seasons, or if competitors increase their spend.
Secondly, both advertisers and online platforms should want to understand the role retail media plays in driving sales outside the online platform as well. Only when assessing retail media’s impact across channels, and in synergy with other activities, can marketers make the most of its potential. This will be increasingly important as we continue to move deeper into the recession and marketers have smaller marketing budgets to play with.
A real product highlight
Offline shopping may still dominate right now, but if employed thoughtfully, online retail media offers notable growth potential and offers a welcome opportunity in an increasingly privacy focused and fragmented marketing world.. Retailers have first-party data, and often a lot of it, which allows brands to target shoppers in a relevant context, and understand which type of activities are more likely to drive a purchase.
Embedded strategically within the marketing mix, and measured carefully, experimenting with Retail Media can reap real rewards. So the next time you are looking over your marketing mix, make sure that Retail Media is part of your shopping list.
