Retail media networks are making waves in the advertising and the retail industries with promises of new sustainable revenue streams and customer engagement opportunities. Are they ready for prime time and should brands hold on being investing capital for unrealizable short-term gains?
Table of Contents
Introduction – What Are Retail Media Networks?
What Are Retail Media Networks?
Retail media networks are channels operated or curated by an individual retailer or a multitude of retailers. They can range standalone material like posters, postcards and magazines or more dynamic audio, visual or digital materials. The goal of these network is to showcase brands, products, and services, improve awareness, and generate new sales. All interactions can be measured through clicks, hot map analysis, and shares.
What are the most popular retail media networks today?
The most popular retail media networks are:
Kroger Precision Network
Best Buy Media
Home Depot Media
Amazon Advertising is the most popular network with more than 200 million Prime members in the United States alone and occupy more than 50% of the revenue.
Walgreens along with Bayer and The Trade Desk discussed The Rise of Retail Media via Adweek’s Spotlight Event
Digital screens are employed around higher traffic areas to capture in-store shoppers’ attentions. Activation will be achieved through scanning a QR code on screen or locate the items nearby the digital screens. One more advantage of digital retail media networks is audience measurement using different technologies (e.g., traffic sensors) which was not always available with print media or billboards.
Bain and Company stated that, “With this critical foundation in place, retailers can better target their customers, attract more site traffic, and build a new business with contribution margins as high as 80% in some cases.”
Additionally, Boston Consulting Group mentioned that the retail media can generated up to US$110 billion of new revenue by fiscal year 2026. That’s a rise of 300% from 2021.
Hi. Welcome to Retail Mashup. This is the podcast where we find intersections between customer experience and the retail industry. AnzΩzzΩd I’m Dean. I’m Larry.
Retail Media Networks – A Primer
Larry, I was talking to some industry peers recently. A term kept coming up, I see it everywhere and it’s really starting to bug me. Is store as a medium bringing digital signage into a physical store.
It’s becoming one of those overused terms in the retail industry. So I thought I could chat about that with you today. Sounds good. Just as a little bit of a primer. Stores and media are part of retail media networks. Retail media networks are networks of ads designed to deliver ads about brands, services, or virtually anything out to you and me or to anyone through a number of means.
If you go onto a Google search page, for example, you’ll see ads pop up on any number of things, car,s or an item of clothing. You may have been looking at a blender, a company, or a doctor. Anything that the person, brand, or service has paid to put into this retail media network is to be displayed on search pages, on social media pages, on websites, and virtually anywhere online.
Ads, Ads, And More Ads
You will see ads and you can’t get away from them. My gosh, it’s even come into our streaming services now. When you watch Amazon Prime or Netflix without paying the premium. Well, Interestingly enough now retailers are realizing that they’re getting an awful lot of traffic inside their brick-and-mortar stores.
And wouldn’t it be great if you could sell ad space inside your store just like you do online? It would be a new revenue stream. This is a case of, sounds like a great idea, but is it working? When you look at a company like Walmart, for example, last year, it had twice as many people pass through their physical stores as they had to visit their e-commerce site.
Are Retail Media Networks Ready For Prime Time? // Walmart Connect (Source: Walmart)
Wouldn’t it be great to put ads for those in-store eyeballs? And so Walmart is working on it, putting digital screens into stores to show these ads. Well, that’s great for Walmart because they have such a wide range of ads that they can fill their screens with. Content from their own in-house brands, And the brands that they sell inside their stores.
So you’re in the housewares department and you see an ad for a special on fancy cheese. Well, I’m giving a dinner party, so when I buy this nice serving bowl, I’m gonna run over and buy cheese as an appetizer. Great. It’s much harder for a small or even a medium brand or chain to have that same kind of benefit because they’re not selling a broad range of products. that means they have to either create their own content about their own products or their brand, their value statement, or whatever, or they have to bring in outside brands or services into their store.
What If Content Is Not Readily Available?
Of course, it’s a much harder ask because the content isn’t readily available. Most smaller medium brands don’t have a content management system, a way to manage and control those ads. And so bringing in these screens, Now you have to figure out how to keep those screens filled with content so you’re not having a dark screen somewhere.
You have to figure out which ads to show, and which ads not to show. In a Belvedere store, you would not want an ad for Smirnoff vodka, for example. So, this is really the big challenge if you are a Walmart or Target sized store, it’s great.
It’s gonna work for you. It’s going to boost cross-aisle sales, and boost basket size, but it’s probably not gonna bring you the recurring monthly ad revenue that you thought because these are brands that you’re already selling in your store.
Are Retail Media Networks Ready For Prime Time? // Source: Merkle’s Retail Media Research Report
If you’re a medium-sized store like a smaller grocery chain for example, then you are probably not gonna see the same benefits. the promise of recurring ad revenue, the benefits that star in everyone’s eyes right now, are really not there.
So I struggle when I see all of the talk about the benefits of bringing ads into physical stores when we are still several years away from having the content, the technological resources, the ad revenue, or the money, I guess, to pay for the content to make it work across the board.
It’s a very interesting concept that I think many people, brands included, may not have very deep knowledge about. It sounds like if you see a brand like Walmart, implementing a system like this, you want to jump on the bandwagon because it sounds good to have a consistent recurring revenue stream.
And absolutely. if it’s implemented well, you would be able to. Get more ad revenue perhaps by working with brands being showcased And have cross-promotion partnerships too. But that is not what we are seeing in the marketplace.
Example: Airports And Media Networks
Quite often at airports where a lot of their media screens are controlled by third-party media networks and sometimes I ask myself, “Well, how come the ads are not specifically tailored to travelers? Because it’s very specific. I’m already at the airport, wouldn’t I want to know more.”
Number one, about the airline I’m flying, the airport I’m using, the destinations that I’m going to, or something travel related than something that it’s completely irrelevant. It’s almost that the ads are being shown to me. Given that they’re not useful or personalized, in a way I’m being trained to ignore them.
The more I ignore those ads, the more those ads would not be effective in helping me create more actions to engage and purchase things down the stream. I think that’s important for brands looking into this particular technology to ask themselves how is this technology part of the overall marketing or engagement technology with their customers.
Have they been tested out to ensure ads themselves are filtered or managed? For you so that you Have the best experience possible instead of creating more noise.
I agree. That is a great point, Larry. This is really a conundrum for retailers because it’s getting harder and harder to collect first-party data. Knowing what your customers want so you can understand how to personalize the service to appeal to them is really important for triggering a buy.
First Party Data And Privacy
Apple has already made it. They’ve blocked down their data sharing. It’s going to be harder and harder to collect that first-party data. Bringing people into the store, using cameras and sensors to track behavior is incredibly valuable to a retailer.
Apple introduced privacy features in iOS14.5
But if the content isn’t there, if the ad revenue to offset it doesn’t work out as promised. It really puts retailers in a financial bind when at a time they’re already seeing lower profit margins, tougher supply issues, and pricing constraints with consumer concern about inflation.
it is a tough issue for retailers to try and find new ways to gain that first-party data to understand customer behavior and what products they’re responding to and what products they look at, but never buy.
Retail media looks like a beacon of hope in some very tough times, but I think it is not something that’s operational enough to really deliver on the promises that are being made right now. I think there’s definitely strong potential, but we’re still a few years out.
How Can Brands Make Retail Media Network A Success?
Before we end, do you have any advice for brands looking into buying the technology? How can they make it work?
So starting small is gonna be important. Controlling expectations. Don’t expect money to fall out of the sky to pay for it all and understand that you’re gonna need to put some skin in the game with an in-house person who has the company’s interests at heart able to work with a group of outside vendors.
That would be it. It’s not sexy, but it’s solid.
That’s definitely sounding like a really good first step and we will extend this conversation next time to help brands think about strategy, how best to serve themselves, which platform to use, what content to think about, and also how to measure success.
So another amazing episode. If you like this episode and Retail Mashup The Podcast, please press like and subscribe, and we will talk to you next time.
* We made some modifications to the transcript to improve understandability and flow
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