Retail Media

June 13, 2022

Following my NAMNEWS article last month, in which I described Retail Media as the “third wave” of digital advertising, several people got in touch to ask various questions. Here is the handy guide that you may (or may not) have been waiting for.

What is Retail Media?

Put simply, retail media means ads at the point of purchase. If consumers are already in a purchasing mindset, then, surprise surprise, ads are more effective than elsewhere. If I’m sitting on the tube on the way to work (admittedly I’d usually be standing and running late) then an offer on coffee (say) is unlikely to land. If, on the other hand, I’m doing my weekly grocery shop and I see that same ad in the coffee aisle then (ka-ching!) - sale made.

This principle applies both in-store and online. Examples of the former include tv monitors, posters, tannoy announcements, in-store radio, ads on shopping trolleys or point-of-sale placements in the aisle. Some of these have, of course, been around for a long time, but they are being used in new ways. One successful example is the use of clearly marked price differentials for Clubcard holders at Tesco. This not only encourages supplier-funded offers (and possibly even brand Ad-spending) but it plugs the Clubcard programme at the same time. Clever.

Online options are even more interesting and include banner ads, display ads and sponsored products. These can be placed in a variety of places: the storefront; category or subcategory pages; alongside search results; or even at the checkout. Dig a little deeper and these can be as highly tailored as a Saville Row suit, helping both the retailer and the brand to achieve their respective marketing goals.

It's all about personalisation, is that right?

It should really go without saying that a significant advantage of the online world is the ability to customise what a customer sees. The digital world can and should be highly personalised and, wherever possible, retailers or publishers (owners of websites with inventory to sell) should make use of their first party data to ensure that ads stay relevant for customers. This creates a double-positive for the publisher. Firstly, well-placed personalised ads will help to enhance, rather than disrupt, the customer journey – “oh, thank you, actually I did need some rye bread!” This leads to increased customer satisfaction, loyalty, and an uptick in spending. Secondly, relevant ads help to assist conversion rates for brands, leading to increased revenue for the publisher through both the sales margin and, more significantly, the increasing marketing spend of the brand.

The successful personalisation of ads requires more than just a high-quality flow of data. Publishers also need a large ad inventory to fall back on. In other words, there’s no point knowing that you should be serving up an ad for coffee if you don’t actually have an ad for coffee. Doh! Choosing the right AdTech provider is essential in this regard. Unless publishers have pre-existing direct relationships with advertisers, it is advisable to use an AdTech company such as Criteo who already have brands (and ad agencies) plugged into the system. This unique facility means that ad inventory will rarely be a problem, speed to market will be improved, and the risk of building a retail media network that nobody bothers to use will be mitigated.

Regardless of the chosen AdTech provider, any publisher who fails to tailor the customer experience successfully and instead bombards their audience with a mix of irrelevant ads will lose sales and, eventually, those hard-earned customers.

What is funnel positioning and is it important?

The simple answer is yes; brands can often target specific sections of the sales funnel through detailed targeting options. For example, Instacart (online groceries) divide their ad sales into the following four categories: storefront, search results, aisle and check-out.

General brand awareness can be pushed effectively through brand-orientated storefront banners, although with such a high funnel tactic, the ROAS and conversion rate may be hard to track. The same banner need not appear to every shopper of course: a banner advertising Pepsi might appear only to those who have previously bought Pepsi; or only to those who have never bought Pepsi; or only to those who have previously bought Coke (competitor targeting); or not at all because the customer doesn’t buy soft drinks and instead sees an ad for Highland Spring. This is where analysis of first-party retailer data and assessing previous shopping behaviour really hits home (it’s 'the real thing', as it were).

The efficacy of product ads in “aisles” (Instacart’s terminology for a category page) is much easier to track and ROAS and conversion should usually be higher for these mid-funnel high-intent shoppers.

What are sponsored products?

Every time a customer hits the website’s search button then a list of results will be displayed and, as we all know, it is hugely advantageous for any product to be at the top, or near the top, of that list. According to Criteo’s Retail Media Academy, 90% of all ecommerce revenue comes from products that are displayed on the first page of the results. In which case, reason the retailers, why not make the brands pay for that privilege?

This “sponsored product search” process can be quite sophisticated. Instacart use curated landing pages for specific keywords displaying between 3 and 20 products – these will feature a mix of organic search results and sponsored ads. The data loop provides continuous information to publisher and brand on conversion rates by keyword. Keywords can be used to defend a company against its competitors (eg if you enter “washing powder” you only see P&G products) but non-brand keywords can also be used in order to attract unfamiliar customers.

How long does all of this take?

All of this personalisation happens in milliseconds, in the time it takes for the page to render. Modern online retailers use AdTech solutions that enable brands to enter a real-time auction with automated bidding processes (the fancy buzzword for this is programmatic retail media). The ad eventually served to the customer will depend on a mix of the pre-agreed relevancy rules and the bidding.

What’s in it for the retailer – let me guess?

Ads are lucrative. Google and Facebook have long understood their value. According to Statista, Google's ad revenue in 2021 amounted to $209.49bn while Facebook earned $114.9bn. These ads are high margin. Retail Media gives retailers the opportunity to grab a significant element of the spend that normally goes to Facebook and Google. The Boston Consulting Group call this the “The $100 Billion Media Opportunity for Retailers.”

Spotting the opportunity early, Amazon Advertising was launched in 2012 and now makes $31.2bn a year. To put this in perspective, The Financial Times estimates that this sum is roughly the same as the entire global newspaper industry’s Ad business. Criteo estimate that 68% of Amazon’s ad revenue will hit the bottom line as net profit.

Where Amazon lead others follow. Walmart have rebranded their ads business (Walmart Connect) and launched Walmart DSP in August. With ambitions to become a top-10 advertiser, they split out their financial results earlier this year to show their ad revenue for the first-time ($2.1 bn). Best Buy recently joined the stampede by launching Best Buy Ads.

These are huge retailers, but the principles hold good for most smaller enterprises too so if you’re a retailer and you aren’t doing retail media, it’s probably high time that you give this area your consideration

I’m a retailer and want in. How do I get there?

Retail Media needs to be endorsed by the top brass. Without backing from senior leadership, the endeavour will be likely to fail as cross-functional and multi-functional teamwork and prioritisation are essential. Retail Media requires a strong leader, or initially at least a wise consultant, who understands the relevant strategies and is able to set a vision, align multiple departments to the vision (Marketing, Trading, IT, Operations and Finance to name but a few), deliver a P&L, and create value for customers and advertisers. In any event, get good advice before you commit. There’s a huge number of AdTech companies out there each purporting to be the one you need. Good luck!

Alex Knapman, SG-retail

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