Retail Media. Everyone is talking about it. It’s like the 2024 version of omnichannel strategy or IOT, or the Metaverse, literally a hashtag But what is Retail Media, really? It’s not just banner ads and sponsored products– the 1950s equivalent of the sale aisle and an endcap. It is so much more interesting than that and can be a deeply customer-focused strategy when executed properly. Over the next few posts, I’d like to talk about my experience in retail media, particularly as it applies to balancing the rise of marketplaces and 3P products, and how to get it right. .
So Where Should a Retailer Looking To Get Into the ‘Retail Media’ Business Begin?
As easy as it sounds for everyone who doesn’t already know, it’s always with DATA. And as I know from working with some of the biggest fashion brands and retailers in the world, assuming that data:
- Is being collected
- Can be surfaced in a meaningful and legal way
- Can be configured to leverage to implement a retail media strategy
…isn’t always something that can be taken for granted.
I’ve Always Referred to This As ‘Data Shame’
During my many years at Zalando and Tradebyte, I would sometimes even marvel that people were walking around with clothing on given how much manual work sometimes had to be done in the background to even get a product online, let alone make it to the customer walking down the street. There is an entire industry around helping brands configure their product master data to fit retailer master data, and another to even create that data to even begin, and another to optimise it, and the chain goes on. Often the data of the first party and even the onboarding of those products sits in different parts of the business, so making the assumption that you have the right data, whether it’s about the product, the customer, or their interests, is the first big ask of your business.
On the very simplest level, as it was once succinctly put in a business meeting with a brand, someone said ‘I can either push your shitty product with discounts, or I can push it with marketing, so I need to find out which gives me a better margin’. That, in a nutshell, is the simplest level of retail media and not doing it right, just allowing any brand to buy banners wherever they like, and for the retailer to discount wholesale when they please, and the brand to discount 3P when they please (obviously within the new laws surrounding discounting practices). All with little regard for how the customer might feel about it–Amazon is currently under investigation for monopolisation, which includes allowing (or forcing) listed brands to ‘pay to play’ through sponsored products and other monetisation of space on the site, among other claims.
So How Can We Do It Better?
That starts with the customer, and what we know about them. And should always begin with the customer.
How old are they? Where do they live?
Is this a customer group that is growing or shrinking?
What brands have they ordered and not returned in the past?
Are they loyal to certain brands or are they into discounts?
Are they in a group that is being underserved by the current range of products?
Being able to surface data from your customer base as a retailer, both 1P and 3P, is the first step. If you want to be able to monetise retail media, a brand needs to be able to understand what impact that spend is making, and whether that meets an expected ROI. And it’s easy to sell a bit of sponsored product for a few quid, but what if you’ve sponsored a product and paid to put it there when it would end up top anyway because of performance algorithms? That’s a waste. And what if you put a sponsored product up that is so off the mark that it annoys the customer, and they abandon the shopping process? That’s also a waste, both for the brand and for you. And in some cases, they may never return.
The Brand Needs To Know What Is Happening With Their Brand and Their Products
What is selling best? What is being returned the most? In which geographic areas are they selling the most? Do products with videos on a model perform better than those without? Which age groups are buying their products, and is that the group they INTENDED to sell it to, and are they (and the customers) happy with that?
Much of this can be collected from site traffic, customer information and purchase data, and generally ecommerce platform data, but the access and the surfacing of it to brand partners is just as important. It should be clear, transparent, and be focused on the customer, ideally in an accessible portal where they can filter and evaluate the data available–access to this data can be chargeable as a retail media service.
But there is data you can’t collect just from the website. You may want to start collecting information from customers that relates to the brands you’re partnering with–for instance, for athletic customers– if they were to buy a running shoe tomorrow, which brand of a select list of brands would they buy? Which brands do they find to be a leader in technical quality? Which images appeal most to them? If one athletic brand is interested in such data, others may be as well.
Once data is collected, it needs to be applied to meet the strategic needs of the retailer and the brand. The retailer may be trying to hit a target margin across 1P/3P/marketing fees, or increase total revenues, while the brand may be trying to reduce % discounts, grow a customer base in younger customers, or be perceived as the best performance product in their category by their target customer. Not all targets are purely based on revenue. For you as a retailer, you also need to be watching for key trends that serve as warnings or opportunities for your brand partners, as this is where you can become a trusted advisor, and not just another retailer trying to upsell them on extra margin.
And that’s what leads us to the next ingredient in the secret sauce: PARTNERSHIP
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