Why digital media in the retail sector will be the most significant wave yet

Why retail media will be the third and biggest wave of digital …

The Emergence of Retail Media

It’s interesting to note how digital advertising has morphed and evolved over the past few years. We started with search and social, moved on to mobile and video, and now retail media is causing a stir in the industry, threatening to disrupt the status quo. Retail media represents a strategic shift in digital marketing as it combines the effectiveness of ecommerce platforms with targeted, personalized advertising.

Brands are leveraging retail media platforms to advertise their products directly on ecommerce websites and apps. This allows them to capture customers’ attention at the point of purchase — a critical moment in the consumer journey. Also, such platforms provide brands with rich insights about customer behavior, which can be used to refine targeting strategies and create more relevant, powerful ads.

Let’s consider how well-known e-commerce giant Amazon, for instance, leverages its colossal database of consumer behavior. Brands can cherry-pick from this data trove to construct high-impact advertising campaigns based on purchasing habits, increasing chances of conversion and sales growth.

  • As per recent report, 60% of online shoppers start their product searches on Amazon, highlighting the potential reach of retail media on such a platform.
  • Amazon offers a variety of ad formats ranging from sponsored ads to video ads that brands can employ to target specific segments of consumers.
  • These sophisticated advertisement techniques played a crucial role in Amazon’s advertising revenues crossing the $21 billion mark in 2020.
  • More importantly, it wasn’t just the big-name brands that didn’t hesitate to jack up their spending. Small and mid-sized businesses also shelled out 30% more on Amazon ads in 2020 compared to the previous year.
  • The result? Some SMBs saw a 100% increase in sales from Amazon ads amid the COVID-19 pandemic.
  • This is not surprising considering that Amazon controls around 50% of the US online retail market.

Why Retail Media is the Next Big Thing

Retail media is going to be the largest wave of digital advertising, a bold statement, but not without good reason. The promise of retail media lies in its inherent benefits that elevate it as an effective and efficient choice over other forms of digital advertising, such as search or social.

The core advantage of retail media is its proximity to the point of purchase. When consumers view ads on a retail media platform, they’re just one click away from adding items to their cart and completing the transaction. This consolidates the buyer journey, reduces friction, and heightens chances for instant conversions.

Another key feature of retail media is the granularity of data it provides. Ecommerce platforms have detailed insights about customers’ browsing and purchasing habits, invaluable information that no other form of media can offer. Let’s consider Walmart. The multinational retail corporation has embraced retail media wholeheartedly.

  • The Walmart Media Group allows advertisers access to first-party shopping data from both online and offline channels across America.
  • This means brands can identify what products a customer browses or purchases, when, and how often.
  • Brands can leverage this information to create targeted campaigns for specific customer segments.
  • In 2020, Walmart launched its self-serve ad platform, allowing advertisers more flexibility and control over their campaigns.
  • Walmart’s Pickup & Delivery service became the retailer’s prime digital real estate for product searches and led to a 3x increase in conversions for brands advertising on Walmart.com.
  • Walmart, with its strategy revolving around integrating online with brick-and-mortar models, reports that four out of five of its shoppers shop both ways, revealing the potential for omnichannel retail media strategies.

Retail Media’s Edge Over Other Advertising Channels

What sets retail media apart from traditional digital advertising channels? Its ability to seize and monetize micro-moments, leveraging user data to personalize ads that resonate with the audience, leading to improved conversion rates. It’s not just about bombarding consumers with ads, but about offering them value in the form of personalized product recommendations.

Retail media platforms by their nature are already customer-centric. They engage users who are actively looking to purchase a product or service, unlike social media networks where advertising can sometimes be perceived as intrusive. The chance of converting prospective customers is exponentially higher with retail media.

Here’s how Chain Reaction Cycles used Google Shopping ads, a prominent retail media platform, to enhance its advertising reach and generate more sales.

  • Chain Reaction Cycles, a global leader in online bike sales, used Google Shopping ads to reach more cycling enthusiasts.
  • The brand gained more visibility by showing up on relevant product searches.
  • These specific and strategic ad placements resulted in a 30% increase in revenue from Google Shopping for this brand.
  • Furthermore, it led to a 22% increase in profitability on an average order value basis, a 20% increment in return on ad spend compared to text ads, and motivated the company to expand their advertising campaigns across various countries.
  • This case shows that product-focused search engine advertising is becoming a key part of brands’ digital marketing strategies.
  • As a result, Google’s parent company, Alphabet, saw a whopping 124% increase in retail industry spending on YouTube ads in Q4 2020.

Future Potential for Retail Media

The future of retail media seems bright with endless possibilities. As e-commerce continues to grow at unprecedented levels, especially fueled by pandemic-driven changes in consumer behavior, more brands will cruise toward retail media to bag the benefits it offers.

This advertising model doesn’t just pave a path for brands to reach consumers directly at the point of purchase; it also opens avenues for ecommerce platforms to maximize their monetization strategies. Investors too are encouraging this change, realizing that retail media is a gold mine waiting to be tapped into.

Imagine a retailer like Target utilizing its proprietary same-day services, such as Drive Up and Order Pickup, to improve its advertising strategy.

  • Target’s sales grew by over $15 billion in 2020, more than the previous 11 years combined, driven largely by its digital strategy.
  • By unlocking the potential of retail media, brands advertising on Target’s platform could target (no pun intended) customers ordering for Drive Up or Order Pickup, offering them personalized product recommendations based on their current order preferences.
  • Apart from allowing advertisers to implement effective last-minute add-ons to their campaigns, Target’s data-centric approach can provide amazing insights into customers’ offline behaviors as well.
  • It’s not a surprise, then, that Target’s multi-channel customers shop three times more frequently and spend three times more than store-only customers.
  • This presents an unmissable opportunity for brands advertising on Target’s platform to reach a larger and more engaged audience.
  • They can use this opportunity to create personalized ad experiences across all channels, thus bridging the gap between online and offline retail.

Challenges and Opportunities Ahead for Retail Media

Although retail media seems to be a glowing prospect in digital advertising, it does face certain challenges. These challenges might stem from data privacy concerns, navigating the complex landscape of digital advertising, or breaking through the cluttered online space to resonate with oversaturated consumers.

However, the opportunities outweigh the challenges. Retail media allows brands to engage users at a critical juncture in their buyer’s journey. Plus, as ecommerce explodes and more data becomes available, retail media strategies can be tweaked and optimized for greater success.

An instance of this is the DIY marketplace Etsy. It introduced Offsite Ads, making it one of the many platforms injecting vigor into retail media landscape.

  • Etsy’s Offsite Ads program promotes sellers’ items on various digital advertising channels like Google, Facebook, Instagram, Pinterest, and Bing.
  • Through this program, Etsy incurred the advertising cost up front, charging sellers only when they made a sale through these ads.
  • This led to a substantial increase in gross merchandise sales from Offsite Ads for thousands of Etsy sellers.
  • Etsy’s retail media approach provides an important promotional platform for small businesses often lacking in marketing resources.
  • As an automated advertising solution, it not only improves ease of use but also optimizes ad performance across different platforms.
  • Etsy’s initiative shows how retail media can create value for both the host platform and the advertisers, marking a new milestone in the democratization of digital advertising.

The Power of Collaboration in Retail Media

The evolution of retail media has opened up opportunities for collaborations between retail giants and tech companies, with both parties aiming to capitalize on this burgeoning market. These collaborations help brands achieve direct engagement with consumers while providing retailers with an additional monetization route.

Collaborations could range from strategic partnerships to acquisitions or investments, creating a synergized environment where growth can be fostered and prioritized. A perfect example of this lies in Walmart’s partnership with Microsoft.

  • In 2020, Walmart joined hands with Microsoft in a bid to acquire the then-buzzing app TikTok, a smart move aimed to strengthen its burgeoning retail media arm.
  • Though the deal didn’t materialize, it offered a glimpse into the vast potential of such collaborations.
  • Walmart was already nudging major brands to move their online ads onto its digital platforms. A partnership with Microsoft would have given it access to enhanced AI and data analytics capabilities.
  • This collaboration could have catapulted Walmart’s ad business to new heights by creating an integrated ecosystem between ecommerce, advertising, and social networking.
  • Despite the setback in the TikTok deal, Walmart continues to push for these integrations, as seen in its more recent partnerships with leading ad tech providers.
  • The goal is clear – Unlock exponential growth in retail media using technological advancements that these partners bring to the table.

Retail Media: The Advertiser’s Dream

The shift towards retail media isn’t just about finding a new channel for advertising; it’s about enabling a better way to market products, targeting customers who are not only interested in your type of product but are also in ‘shopping mode.’ This evokes the need for brands to recognize the power of retail media and align their marketing efforts accordingly.

With the retail media primed to dominate in the digital space, advertisers must acquaint themselves with its intricacies, embrace its abilities to magnify their ad messages, and dive into this increasingly relevant pool of opportunity. If done right, retail media can be a game-changer in a brand’s digital advertising arsenal.

One brand that has capitalized on the potential of retail media is Procter & Gamble.

  • In 2020, P&G increased its spending on Amazon advertising by over 50%, focusing mostly on search-related ad placements. This decision has resulted in better visibility and improved sales for P&G’s assortment of products.
  • The world’s largest advertiser recognizes retail media’s value in terms of reaching consumers at the precise moment when they’re ready to convert.
  • As a result, P&G has become one of the largest advertisers on Amazon.
  • The brand’s focus remains on leveraging shopping data to reach customers with personalized messages right before they’re ready to make a purchase decision.
  • Venturing further into retail media is a strategic move for P&G as it continues to work on improving the efficiency and effectiveness of its advertising expenditures.
  • As a pioneer in the field of digital advertising, P&G’s move signals a shift in how brands view and utilize retail media platforms today.

Conclusion: The Overarching Significance of Retail Media

In conclusion, it is undeniable that retail media will become an intricate part of the digital advertising tapestry moving forward. Its ability to integrate customer intent with targeted advertising creates a rich marketplace for consumer-brand interactions, thus pushing for higher conversion rates and improved customer satisfaction.

The dual benefits it offers to both retailers and advertisers indicate a win-win situation that amplifies its appeal in this ever-evolving ad space. As more brands experiment with and experience the potential of retail media, we are looking at a much-coveted third wave of digital advertising that dwarfs its predecessors.

To understand better why retail media stands poised to take over other channels, let’s look at a supermarket chain like Albertsons.

  • Albertsons has introduced Albertsons Performance Media powered by Quotient, leveraging its vast amount of transaction and loyalty data to deliver relevant product suggestions to shoppers.
  • It offers brands targeting, optimization, and measurement capabilities utilizing data from 2,300+ stores across America.
  • Within just two years of launch, the platform was directly connected to over $120 million in influenced sales.
  • A national beverage brand advertising on Albertsons Performance Media saw a 39% lift in sales and a robust return on ad spend.
  • These compelling results highlight retail media’s game-changing potential for advertisers, providing them with not just visibility, but also the tools to measure and augment their returns significantly.
  • By integrating the sheer power of retail analytics with media selling and buying, Albertsons brings tangible proof that retail media is a force to reckon with in the digital advertising landscape.
Retailers Advantages Potential Growth
Amazon, Walmart, Target) Proximity to point of purchase, personalized ads, valuable insights from customer behavior data. Continued growth foreseen due to growing e-commerce market and shift towards data-centric advertising approaches.