One of the most significant and transformative developments in recent years is the rise of retail media. There are now more than 200 retail media networks worldwide, with retail media hitting £3 billion in revenue in the UK 2023 and US retail media spend to grow by 30% in 2024, reaching a fifth of US ad spend (source).
Not sure what retail media is exactly? Retail media refers to the advertising opportunities that retailers offer within their online platforms. This includes on-site ads, sponsored products, personalised email marketing, and more. Retailers are successfully harnessing their vast first-party customer data and extensive digital real estate to create powerful advertising platforms that rival traditional digital giants like Google and Facebook.
Co-op launched the UK’s first retail media network in the convenience sector earlier this year and recently revealed that retail media is boosting its sales ‘fourfold’. The success is due to being able to reach new audiences and improve the relevancy of adverts for shoppers, with retail media typically offering very lucrative margins between 70-90%. Superdrug also launched its own retail media network last year and ASOS signed a three-year deal with Criteo to supercharge their retail media formats and targeting.
Why is retail media growing so rapidly?
- First-party data advantage: Retailers possess rich, first-party data that provides deep insights into consumer behaviour, preferences, and purchasing patterns. This data enables highly targeted and personalised advertising, resulting in more effective campaigns and better ROI for advertisers.
- Closed-Loop attribution: Retail media allows for closed-loop attribution, which means advertisers can directly link their ads to actual sales. This transparency in measuring the effectiveness of advertising spend is a game-changer, offering clear visibility into what works and what doesn’t.
- Trust and engagement: Consumers are more likely to trust and engage with ads on retail sites and in the stores that they frequently visit and where they already intend to make purchases. This higher level of trust and intent translates to better ad performance and increased sales.
- Data-driven insights: Brands can gain valuable insights from retail media campaigns, such as customer preferences and buying behaviours. This data can inform broader marketing strategies and product development efforts.
Challenges and considerations:
- Data privacy and compliance: With increased use of customer data comes heightened responsibility to ensure privacy and compliance with regulations like GDPR. Retailers and brands must prioritise data protection and transparency.
- Ad clutter and consumer fatigue: There is a risk of ad clutter, where excessive advertising can overwhelm consumers and lead to ad fatigue, particularly as more retailers are launching retail media placements in-store via digital displays. Striking the right balance between monetisation and maintaining a positive user experience is crucial.
- Integration, standardisation and scalability: Integrating retail media solutions into existing systems and scaling them across different channels can be complex. Retailers need robust technology infrastructure and expertise to manage this effectively but there is still a lack of standardisation when it comes to measurement and ad formats across retail media networks.
The Future of Retail Media:
The future of retail media looks promising, with continued innovation and growth. Advances in artificial intelligence and machine learning will further enhance targeting capabilities, making ads even more personalised and effective. Additionally, the integration of retail media with other digital channels, such as social media, CTV, in-store digital displays and mobile apps, will create a more cohesive and omnichannel advertising ecosystem. As retail media continues to evolve, the key to success will lie in leveraging data responsibly, maintaining consumer trust, and delivering value through relevant and engaging advertising. Retailers and brands that can navigate these complexities and seize the opportunities will be well-positioned to thrive in the dynamic digital landscape..
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