Retail Media : reflections on 2023 and thoughts on 2024

December 20, 2023

Its been a good year for participants in the retail media space.

Retail Media Networks are thriving

Retail media is a key topic in the board rooms of almost all major UK branded retailers. CEOs and senior leadership teams continue to invest in people, technology, loyalty programmes and adtech in order to grow capability and share. Long established Retail Media Networks like Tesco/dunnhumby, Asda Media and Sainsburys/Nectar360 have all grown and continued to innovate with new propositions emerging to enable advertisers to reach customers instore, on apps, while shopping online, on social media or even watching connected TV. Newer networks like Boot360 and Morrisons Media have established themselves and have been joined by new arrivals including Superdrug, Currys Connected Media and B&Q. Even the discounters are building media offerings.

The challenge for retailers is to maintain high growth in retail media income, take share from established media channels and ensure that their media propositions enhance customer’s shopping experiences.

Brands are wrestling with the opportunities, complexities and organisational challenges that retail media creates

Brands also continue to invest in retail media capability and spend. The commercial teams at big branded suppliers are investing in media specialists, data scientists and technologies that enable them to successfully navigate the increasingly complex media offerings that major retailers are providing. They must wrestle with the challenge of growing sales and share within the retailer without compromising margins. They must contend with competing brands who might be better resourced or more adept at using the retailer’s media to their advantage.

Brand’s marketing teams are for the most part still looking at retail media with a sense of detachment and curiosity. Spend on retailer’s media has traditionally been seen as a more complex extension of promotional spend, or an alternative to spend on shelf or display space, and so the domain of Commercial teams and not traditionally a place for marketing budgets.

They rely on Media Agencies to ensure that brand spend is focused on those activities that build brand equity or generate “incremental sales” and wrestle with ways to prove that this spend is effective. Many rely on short term media mix models that don’t include retail media within their scope, to justify continued spend on traditional (non retail) media channels and find it difficult to prove whether spend within these channels is successful at building brand equity. Many are wary that retail media is just a clever way for retailers to grow their share of the available margin.

Leading Brand teams see an opportunity for competitive advantage if they can prove that retail media builds brand equity more effectively than other channels and can manage the necessary organisational, data, insight and commercial complexity to realise it more effectively than their competition.

Media Agencies want to manage Brand’s retail media spend

Media Agencies have organised themselves to optimise client spend, and protect agency margins within traditional channels but most sense a major opportunity arising from retail media. Innovations in programmatic buying give Media Agencies a technical buying advantage vs Commercial teams (but a cost disadvantage) and they are under much less pressure to drive short term sales or prove a sales uplift than that their Commercial counterparts. They see in retail media the opportunity to grow their scope and influence within clients and generate fees from managing some or all of a Brand’s retail media and trade spend. The complication for buying agencies is that they are organised by channel (Outdoor, Digital, Radio etc) and Retail Media Networks amalgamate all channels (with typically lower reach per channel). RMNs act independently of each other and this makes it time and resource intensive for agencies who want to buy audiences, irrespective of retailer, quickly, easily and at scale . They also are not yet skilled in working with retailers, especially instore, where 80% of sales take place and where audiences can be reached at scale. Specialist instore retail media buying agencies such as @Capture have emerged to provide the neccessary instore marketing skills and are likely to challenge traditional media agencies for control of Brand's total retail media spend.

Technology & Solution providers are proliferating

Retail media, adtech & loyalty programme solution providers have also had a good year. Criteo (Asda, Morrisons, Boots, Currys,) & CitrusAd (Sainsburys, Waitrose, Ocado,B&Q) continue to battle it out for the onsite adtech top dog slot whilst noting that Tesco, following the lead of Kroger in the USA, have opted for a DIY approach. It’s a similar battle between Clear Channel and Decaux for retail digital screen supremacy with the action increasingly moving from outside to inside the store. Inside the store, companies like Advertima, SES-Imagotag, Ocean Outdoor, Stratacache and Mood Media are all bringing innovative solutions to market.

Loyalty programmes continue to digitise and for most major retailers Eagle Eye are the key solution provider of digital coupon issuance and redemption at scale, albeit challenged by POS/till system providers and others like Ecrebo or in house teams. There is continued innovation in the deployment of loyalty data,  whether to find things out in order to better inform campaigns or to use customer permissions to enable offsite targeting via social media, third party websites or connected TV.

Digital clean room providers are emerging as key data enablers, allowing retailers to leverage their loyalty programme data in non retail channels in GDPR compliant ways. Criteo, Liveramp, Infosum, Epsilon and Snowflake all battling it out with differing propositions, business model types, demand generation and channel partner strategies.

As we close out 2023, here are some thoughts on the year ahead :

a)       Retail Media Networks will continue to grow share of total ad spend and play an increasingly important role for their retail owners from both a commercial and customer experience perspective.

b)      RMN solution providers will continue to innovate both technically and commercially as they compete for a higher share of retailer and brand spend. New challengers will emerge, business models will evolve (saas licences, co-selling and revenue share agreements, agency fees and hybrids of the above will all evolve) and AI and data analytics will enable smarter insights and actions for those able to deploy them effectively.

c)       Supplier commercial teams will seek to squeeze more growth from existing commercial budgets whilst seeking to augment them with brand marketing funds. In doing so they will wrestle with a potential loss of control to Media Agencies who will argue that their programmatic tools and media buying skills should be used not just on digital media but on instore media as well.

d)      Brands and Media agencies will explore ways to divert spend from traditional channels,  prove that retail media can grow brand equity and will seek greater control and influence over commercial spending.

e)      Winning Brands will be those who best manage the scope, organisation design, governance, skills and insight challenges that come with this interdependency between Commercial and Brand/Media Agency teams and the complexity it brings with it.

f)        For all players in the retail media space, people will continue to make the difference and leaders will continue to invest in retail media people & skills development.

At SG-retail we have had a busy and productive year and we look forward to helping retailers, brands, media agencies and solution providers to win in the rapidly growing world of retail media.

Happy Christmas and best wishes for New Year

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