Retail Media Networks Utopia – Look Into the Future

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Advertising via retail media networks is booming. The new budding market is here to grow.

The migration of both shopping and advertising to digital had been accelerating each year even before the covid-19 pandemic. The pandemic gave the e-commerce industry an even stronger boost with global retail e-commerce traffic growing from 16.06 billion visits in January up to almost 22 billion visits in June in 2020. At the same time digital advertising is growing too and predicted by Zenith to exceed 60% of global adspend for the first time in 2022. These changes give retailers more enthusiasm for searching new online promotional strategies, and it has led to the boom of retail media networks. This new model of advertising looks promising despite the fact that it’s full potential is yet to be explored.

The place of retail media networks in marketing

Retail media networks are the digital counterpart of physical in-store advertisement. In offline stores we are used to seeing brands’ ads between shelves, on digital screens, in leaflets, and in other tangible formats. When a retailer decides to turn its digital channels into media networks, it means they will be used as online advertising platforms. For instance, the ads will appear on the home page, the search page, and other pages of a retailer’s website.

Today the model of a retail media network is adapted by Amazon, Home Depot, Walmart, Target, Macy’s, Instacart,  and other huge retailers. Most likely, the number of players will be constantly increasing. Even though this new way of advertising is already making a lot of buzz in the marketing world, it doesn’t have a long history, which means it has room for growth. 

Started from Amazon, now we’re here

The worldwide e-commerce leader Amazon is often named as a pioneer of retail media networks. It launched its own retail media platform in 2012 as Amazon Marketing Services, since 2018 known as Amazon Advertising. Now it’s the 3d largest  digital advertising platform in the United States.

Amazon’s sellers use it to grab customers’ attention within Amazon’s e-commerce platforms. With the enormous variety of products being sold through Amazon, brands have to take measures to be more visible to consumers. Especially due to the fact that 70% of Amazon users never go beyond the first search page on the retail giant’s website.

Amazon Advertising has proved itself to be a success. It grows rapidly, its value is projected to reach $39.45 billion in 2023. The service offers its clients a diverse set of tools including headline search ads, product display ads, and video ads. The platform already has a lot of guidelines coming from understanding how its digital ads work better based on data analytics collected through years. People may have different attitudes towards Jeff Bezos, but his company often outpaces competitors.

The benefits of retail media networks

Retail media networks are gaining popularity in recent years, especially since online shopping has become more of a necessity than a choice, thus turning it into a new widely spread habitual pattern. The mechanisms of this advertising model helps brands reach shoppers at any step of their customer journey and influence them at the point of purchase.

Consumers are more prone to pay attention to ads while shopping because at this moment they are interested in searching for new products and hints on what to buy. According to The Future of Retail report by The Trade Desk, 53% of consumers, who shop online, notice ads on retail websites. Criteo’s research states that generation Z is more likely to be influenced by digital ads when deciding what product to purchase. These young consumers have a strong tendency to buy products they see in digital ads.

Then again, ads in void space won’t work, which brings us to another significant advantage of retail media networks. To achieve substantial results, it’s crucial to understand what, how and for whom to advertise, and in the digital world it requires big data. Retailers have a lot of data. Take Walmart, it has millions of registered users and, consequently, data about their shopping activity.

More importantly, retailers receive data about their customers first-hand, and first-party data is clearer and more precise than data collected by third parties through other methods, for instance, by cookies (and now people less and less like cookies and more frequently turn them off for the sake of privacy). So, it provides deeper insight into customers’ behaviour and richer consumer intelligence. It means better personalization of ads and more definite targeting. Besides, retail media networks are shortening the connection between an ad and a purchase which helps to better measure success or lack of it and correct campaigns if necessary.

Of course, money is another reason for the boom of retail media networks. For retailers this advertising model creates an additional source of revenue and is a door to the global $622 billion ad market. Boston Consulting Group believes that retail media networks may bring a company $100 billion annually. The research and advisory firm Forrester reports that in 2020 advertisers spent $5 billion in retail media networks such as Amazon, Target, Walmart, and others.

Future prospects

The potential of the retail media networks market is yet to be estimated, but it surely is destined to grow. The U.S. happened to be the pioneering country here, but other countries are starting to catch up. More retailers will be joining the industry, it will scale. The rising competition will eventually drive innovation, and new forms of advertising within this model will appear. Google’s attempts to play the field of advertising for retailers will add acceleration to this process.

Retailers need to learn how to work with the insights better not to lose the race. It’s important for them to be prompt with measurement data because today consumers’ behaviour changes fast and is prone to short-living trends, and data quickly loses relevance. It will require better technologies which may cause an increase in costs, and the advertisers will have to adjust.

To strengthen their game, retailers will have to be looking for more digital channels to be included in their advertising package. They’ll be expanding beyond their own websites to external traffic sources to make everything possible to help their vendors to increase sales. Retailers may turn to in-app advertising, social media outlets, OTT/Smart TV, digital audio or even to traditional TV placements. The fight for consumers’ attention online is now crucial to any business, and tactics and strategies should become more diverse.

Vitaly Gerko is a CPO and Co-founder of OTM, a technological programmatic platform acquired in 2021 by VEON global digital operator.
Over 15 years of experience in AdTech and MarTech industries, leading development of tech products. Solid expertise in product management, unit economy, and paid marketing which resulted in 5+ years of journey in startup mentoring and investing.



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