Retail Media Networks Are the New Advertising Frontier

The Digital Counterpart to In-Store Ads

Amazon and Walmart dominate the online retail media segment, offering a breadth of consumer goods directly and via third-party suppliers. As early entrants, they have grown organically and through significant advertising investments. Amazon Prime members number over 200M, spending an average of $1,400 annually, with 88% of all shoppers, and 91% of Prime members, choosing Amazon without looking elsewhere. Those statistics demonstrate Amazon’s customer loyalty, with shoppers only choosing Walmart, Target or Best Buy if products were unavailable at Amazon.

Retail Media Networks (RMN) offer the additional benefit of being a “store-within-a-store,” creating a place ripe for advertising to customers who already find themselves on a site with products they enjoy. Leveraging this advertising space has led to the growth of Retail Media Networks, which can offer third-party product advertising in a digital format.

Retail Media Networks drive increased brand awareness by as much as 20%, according to a Yahoo study. With data based on the digital buyer’s journey, personalized advertising is now preferred by 88% of consumers. In addition, in 2021, over 23,000 businesses spent over $3 billion advertising via Retail Media Networks.

Retail Media Network advertising can reach customers at every step of their buying journey to recommend new products and increase existing product sales. Retailers leverage buyer journey insights, tracking them across the marketplace and use this data to offer valuable products.

Amazon sold nearly $31B in advertising in 2021, the most in Retail Media, followed by Walmart with $2B in ad spend. These two giants hold the highest market share in the retail sector, with Walmart commandeering 6.7%, followed by Amazon’s 6%. However, the Retail Media Network model has prompted competitors to enter the market, including Best Buy, Dollar Tree, Kohls and Lowes.

The Retail Media Network model is attractive due to high margins, with retail advertisers reinvesting these profits to build technology infrastructure, lower prices and enhance the customer experience. Retail forecasters anticipate the U.S. Retail Media Network market will exceed $52 billion in ad sales by the end of 2023.

Retail Media Networks offer advertisers a unique opportunity to reach highly targeted audiences and drive sales, while also providing measurable results and cost-effective advertising options. Instead of relying solely on product sales, retailers can now generate additional revenue by allowing brands to place targeted advertising on their platforms. Retail Media Networks offer several advantages to advertisers, including:

• Targeted Advertising: Retail Media Networks enable retailers to use their first-party shopper data to offer highly targeted options to advertisers. Advertisers can leverage consumer data collected by the retailer to target their ads to specific demographics, interests, behaviors and purchase history with the right message, increasing the effectiveness of their advertising campaigns.
• Brand Awareness: Advertising on Retail Media Networks can help advertisers increase their brand visibility and awareness among consumers. By advertising on the retailer’s website or mobile app, advertisers can reach consumers when they are actively browsing for products and considering making a purchase.
• Increased Profitability: Retail Media Networks can drive sales for advertisers by placing their ads in highly visible areas on the retailer’s website or app, such as on the homepage, search results pages and product detail pages. This can increase the likelihood that consumers will click on the ad and make a purchase.
• Improved Customer Experience: By displaying relevant ads that match the interests and needs of the shopper, Retail Media Networks can enhance the customer experience and create a more personalized shopping experience for the shopper.

Facing Potential Retail Media Obstacles

While there are many benefits of partnering with Retail Media Networks, generating increased revenue is number one. Retailers can gain revenue through these ad channels via pay-per-click advertising, sponsored product listings and display advertising.

While the Retail Media Networks industry is experiencing significant growth and holds tremendous potential for profitability, it is faced with several obstacles that must be addressed in order to sustain continued success.

1. Privacy concerns: As the use of data to personalize and target ads becomes more prevalent, consumers are becoming more concerned about their privacy. This has led to increased scrutiny of data collection and usage practices, which could make it more challenging for retailers to gather and use consumer data to inform their advertising.
2. Competition: As more retailers continue to enter the Retail Media Networks arena, the competition for advertising dollars will become more intense, and margins could shrink. This could lead to consolidation within the industry or the development of new revenue streams.
3. Ad-blocking: The rise of ad-blocking software has made it more difficult for retailers to reach their target audience with digital advertising. Retailers will need to find new ways to reach consumers, such as through influencer marketing or sponsored content.

The Retail Media Networks industry is poised for growth, but it will need to navigate these obstacles to continue to be successful. Retailers that can develop effective strategies to overcome these challenges will be well-positioned to thrive in the years to come.

DEFINITIONS:

A Retail Media Network is an advertising infrastructure that comprises a collection of digital channels (e.g., websites, apps) that are offered by a retail company to third-party brands for their various advertising purposes.

Another benefit of using Retail Media Networks is access to first-party insights rather than third-party insights, which can help better inform the brand’s marketing campaigns. Beyond insights, Retail Media Network can also help brands better link their ad spend to conversion.