For generations, it was clear who held the cards when it came to the relationship between big retailers and consumer brands. It was big retailers, naturally, who brands pitched, charmed, and cajoled in the hope that they would carry their products on their hallowed shelves and websites.
But that’s not always the case anymore, at least not when it comes to a retail media network (RMN), where retailers who’ve taken a page from media companies pitch brands—often the very brands they carry—to pay them to advertise their products on their apps, websites, and in their stores.
Quentin George, a partner at McKinsey & Company, was recently consulting with the CEO of a retail company building its RMN. The executive was trying to get his arms around how the dynamic was changing now that his company was trying to sell ads to its vendors.
“‘Wait a minute,’” George recalled the executive saying. “‘Does that mean that if I go to lunch with the vendor that I have to pick up the check?’”
“That’s how it’s going to go now,” George recalled responding. “They are becoming the customer.”
George spoke from the stage at the National Retail Federation’s recent convention, at an all-day program with multiple panels focusing exclusively on RMNs. The event, held at the Javits Center in New York the day before other programming began, was organized by NRF and Stratacache, a retail technology solutions company focusing on RMNs. It required a separate registration fee and drew more than 400 attendees.
George and others who shared their perspectives from the stage had opinions about much more than who should pick up the tab. They spoke about the phenomenal growth of retail media, how to best fashion a retail-media campaign, and how major retailers who haven’t yet thrown their hats in are leaving money on the table.
Guac this way: Much of the programming focused on advertising inside stores themselves, and while e-commerce is nothing to sniff at, attendees were reminded of the primacy of brick-and-mortar stores.
Citing an eMarketer and Insider Intelligence report, Chris Riegel, CEO of Stratacache, noted that the coveted age 18–49 demographic makes up a major share of in-store shoppers:
At Sephora, 83.3% of in-store shoppers are aged 18–49, followed by Target (72.4%), Dick’s Sporting Goods (69.7%), and Walmart (66.8%).
As for what an in-store advertisement can do, Evan Hovorka, VP of product and innovation at Albertsons Companies, who focuses on retail media and ad tech, evoked an avocado display in the produce section, where along with a highlighting a coupon for avocados, a digital display could do much more.
“Here’s a digital screen sitting above [the avocados] with some recipe options, maybe there’s a couple choices, gluten-free or dairy-free,” Hovorka said during a panel. “Now you’ve got the whole inspirational video to show you how to make that guacamole.”
Ad it up: Retail execs also said that RMN strategies often work best when they’re coordinated with other types of advertising.
Dean Harris, who heads up the retail media and member rewards efforts at UK food retailer Co-op, said in his household, he and his wife enjoy Baileys Irish Cream during the winter holidays but don’t think to purchase or consume it other times of the year. Typically, he said, his wife sees a commercial for Baileys on TV and says, “Dean, get some Baileys—it’s Christmas.”
But by the time he’s in the store, he forgets—something he says wouldn’t happen if the product had ads in stores to reinforce the TV spots.
“Those sort of prompts in-store would stop me from getting in trouble with my wife,” Harris said. “That combination really helps with an in-store message.”
Research and rescue: Mark Boidman, a partner and media group head of financial advisory firm Solomon Partners, told the audience that for brands planning their advertising, it’s not ad agencies but rather retailers, who know so much about consumers through their loyalty programs, apps, and e-commerce, that have the best intel.
“Retailers are actually smarter than the advertising agencies they work with,” Boidman said. “In the old days, you called an ad agency and said, ‘Hey, as a brand, where do I advertise? Where are my consumers? What are they buying?’ Now today, those retailers have that data, and the ad agencies are getting it from the retailers.”