Retail media inflation ‘through the roof’ and set to continue

Retail media inflation ‘through the roof’ and set to continue

Retail media demand has  soared in the past year, according to new figures.

Agency sources have also told The Media Leader costs are becoming very inflationary.

Retail media relies on positioning brand advertisements within retailer category pages and search listings, and leveraging audience insights based on first-party data held by media owners and, in this case, retailers.

The likes of Tesco and Boots in the UK work in this way and have also launched their own media platforms, while ASDA, Currys, and Very are other examples in the UK of this practice.

Criteo’s study found surveyed marketers saw this type of retail media investment as providing great impact in terms of relevance to actual purchase (58%), sales growth (53%), and audience targeting (51%) when compared to walled garden environments. These were also placed above apps, social, search, and marketplaces in terms of brand safety by participants in the survey.

The findings on retail media also revealed marketing budget allocations towards “walled gardens”, namely the big four tech platforms (Google, Meta, Amazon, and Apple) had increased 29% in the UK compared to the previous year.

Marketers still planned to invest an average £303,000 in these advertising ecosystems this year, with bigger brands with more than 1000 employees upping that to £459,000 on average.

Amazon retained the spot of “most desirable” online retail environment to display ads with 40% of respondents, with Boots at 30%, AO at 26%, the Very Group and Littlewoods at 22%, and ASDA at 18%.

Media agency sources also reported a 27% rise year-on-year in the walled gardens cost per conversion, with 91% of respondents predicting cost of campaigns to continue to increase over the next twelve months.

This was mostly attributed to audiences being “harder to understand” within these platforms.

The study found more than three quarters of marketers (78%) planned to invest more in first-party data led retail media given the options offered in walled gardens.

Retail media inflation not even comparable to TV inflation

Mudit Jaju, global head of ecommerce at Wavemaker, told The Media Leader retail media was “booming” both in terms of availability and cost.

He put this down to many more brands entering the space due to how easy it is to launch marketplace brands nowadays, the greater focus on e-commerce and the “instant gratification” of retail media where a brand manager or marketer can say a campaign delivered a rise of 3.5, for example.

Jaju commented Wavemaker had to do budgeting from scratch in retail media as they cannot compare costs year-over-year or even quarter-over-quarter in some cases.

He added: “In some parts of the world we talk about inflation like “we’ve managed to keep inflation under 200% in generic search, how fantastic”. So TV inflation is nothing compared to retail media inflation.”

He added there were new players to the retail media market every two to three months, ramping up demand with limited supply.

This inflation has become so “rampant” he said, that in a couple of cases he has told brands to rethink how much they are spending in retail media as they are spending too much.

He added: “There’s just a lot of money that is entering the system, some from new entrants, some from existing entrants, that are spending more and the cost is rising, the ad loading has increased slightly but not as much as the demand has increased. So supply is slightly up, demand is wildly out of control and prices are through the roof.”

So why choose retail media?

Despite inflation, retail media still offers benefits to brands and advertisers.

Tim Bonney, strategy director at Electric Glue explained: “The report shows that Amazon has been used to great sales effect by brands, and the power of its success lies in the access and depth of its first party data.

“You have a direct deterministic link to someone’s buying habits. You know what they like, when they like it, it’s powerful stuff. But we’ve been yearning for more creative but controlled spaces to open up the media options.

“The really interesting space here is how retailers can take their own first party data to inform content to inspire more than just active browsers to purchase, use it to inspire and drive mental availability amongst new segments, expand your audience – look at it a bit more long-term.”

Ben Walton, the7stars, commerce and digital transformation put the growth in retail media down to the growth of ecommerce alongside the prospect of a world without third party cookies making first-party data opportunities for secure data targeting in a brand safe environment more attractive.

Retail media allows brands to “disrupt the shopping journey”, drive greater accountability and generate rich amounts of insight around product performance and audiences that can inform future retail media strategies, Walton added.

Stuart Johnston, UK omnichannel commerce director, Publicis Commerce, described retail media as “the nirvana of lower-funnel inventory” as it is closest to the point of the sale, providing advertisers and brands the opportunity to get as close to active in-market customers as possible and in term driving performance in and improving media spend, insight, and strategy.

“Over and above anything else, retail media enables us to maximise our visibility amongst a highly motivated and engaged ready-to-buy audience,” he said, adding: “We can be somewhat more confident of the direct impact of our efforts than other channels which struggle to measure direct sales impact.”

He also said retail media offered more transparency and visibility, which at the end of the day equalled sales and standing out on the digital shelf has never been more vital for brands.

Opportunities to test and learn multiple media executions and optimise messaging in real-time has also contribute to its rapid growth, Johnston said.

What’s the outlook for retail media?

In the short and medium-term, Jaju predicted this retail media inflation would continue, but in the long-term inflation would come down brands will find other ways to do it and retailers would widen their offering beyond search and DSP.

Jaju also pointed to incoming high fat, sugar and salt regulation increasing inflation in retail media going forward as the wording of the new bill makes retail media exempt from this regulation.

He said the website for the new bill says “advertising aimed at making a direct sale online is exempt” but it’s “up for debate” on how broadly you define making a direct sale online, whether that includes a search app, a display ad with click-throughs, Amazon PDP for example, but in any case “everyone is going to be pushing retail media” when HFSS brands can no longer advertise on TV.

Johnston added the biggest potential challenge sat with the retailer implementing the media inventory as even the smallest of changes in customer-facing experiences can have sizable impacts upon behaviour and performance.

He added: “It’s simply not enough anymore to merely show up and activate retail media in the hope to protect or steal share of shelf from competitors. We need to think about our approach far more holistically and arguably creatively.”

Brands should do their due diligence of the fundamentals in place in order to be confident their product content is best optimised with competitive pricing and excellent availability he said.

Johnston concluded: “We need to think in a less siloed way about what customers are saying about our products too in reviews to maximise our media spend but relevance and credibility too for customers, which benefits retailers every bit as much as brands and advertisers.”

Criteo’s Future of Commerce- The Rise of Retail Media on the Open Web report surveyed 500 UK brand marketers and decision makers in media agencies.

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