Why media fragmentation will dampen the retail goldrush
The future of retail media is bright, but a cluttered market threatens to act as a barrier to exponential growth.
Retail media has accelerated in a way that no one would have predicted only a few years ago. Retail media is now said to represent 11% of global advertising and this figure is predicted to grow by 60% before 2027. W
ith many of the largest markets globally in recession and retail operators suffering share price growth turmoil, traditional retailers are looking to retail advertising as an opportunity to drive growth. Some have been spurred on by the success of US players like Amazon and Walmart and other more domestic trailblazers like Tesco.
Data availability has also added fuel to the fire with players such as Facebook hit by privacy changes sending advertisers looking for new opportunities. There have been assertions that the data is so rich in some areas data can be used to spot patterns and diagnose serious diseases.
The high value of the data has resulted in a more aggressive attempt by key retailers to acquire the data of their customers. A shopper can’t complete a transaction without a helpful staffer or machine asking them for their membership card. It’s no mistake, but rather a concerted effort to mine rich data for advertisers. Tesco for example have made many of their offers dependent on having a Clubcard. On the other side, consumers that have been impacted by the cost-of-living crisis are using schemes to access cheaper prices and deals.
Multiple opportunities multiplied stress?
The result are datasets that are richer than they have ever been. We knew retail media would explode. However, the build-up of opportunities and the pace of change was faster than many imagined.
With so many players entering the retail space, the market is getting cluttered with different opportunities bought by different specialists with differing business models. As with many emerging areas, technical aptitude is being pushed to the fore. Some media is being bought by SEM specialists, by ecommerce specialists and others through programmatic teams. To make things even more complicated, some retail media owners have taken the step of insisting that some media is bought through a managed process with limited transparency.
Not only is the market cluttered with opportunities but in some cases it is complicated by the wide array of existing relationships advertisers have with retail partners that have turned into media owners overnight. With shelf space and distribution key to success for FMCG brands, the conversation is high stakes and difficult to decouple from a broader customer and seller partnership into a media transaction.
While the road forward is fraught with twists and turns, there are areas that advertisers and retail media owners could collaborate on now to drive better efficiency as retail media spend increases.
Agencies and planners favour simplicity and efficiency. Retailers need to take a more structured approach to retail media a way to drive crucial growth for the category. This includes both established and new entrants.
Gone are the days where retail media can continue to exist as a range of walled gardens. New players are adding to the pressure, 2023 should see an opening up of walled gardens and a range of new partnerships form between retail media owners and broader players. Data will be made more accessible on the open exchange and more accessible across channels such as social and connected TV.
Given the pressure on budgets across the cost-of-living crisis, retail media has offered a way for advertisers to track returns on investment. ROAS (Return on Advertising Spend) has been the common way for advertisers to analyse performance of communications. Current ROAS has to some degree given retail media owners the ability to mark their own homework.
As retail media opportunities increase, advertisers are going to need a level playing field to determine success. This is not unique to retail but more problematic given the fragmentation. Increasingly media owners are seeing Marketing Mix Modelling (MMM) as a way to provide advertisers with a fair and level playing field through which to analyse performance. Agencies need to augment with their own measurement approaches.
Asset supply is another headache for advertisers that offers an opportunity for retail media owners. Creative specifications vary significantly across categories and restrictions and approval processes differ by media owner.
A focus on driving consistency in this area is warranted. Alternatively, media owners should gear up creative services to help advertisers to edit and adjust campaign assets.
One thing is for sure: that economic head winds are fuelling retail media growth.
While there are challenges for retail media if it is to continue to grow exponentially, we are likely to see pockets of innovation that take on key barriers. It seems it may be time for many advertisers to change their approach towards retail media for good and ensure that they are futureproofing their businesses.
Lawrence Dodds is planning partner at UM London