Retailers that have recently launched their own retail media businesses should learn from what the established leaders already do. The biggest player, with 60% of the $45 billion market, is Amazon, followed by the likes of Walmart and Target, which, combined with a few other large players, are expected to take a combined 25% of the space, according to Boston Consulting Group.
The four key strengths that retailers need to build or to nurture are: data depth; data quality; a simple process for media buyers; and a technology stack that enables data management, audience building, tracking, measurement and billing. In this way, retailers will act more like media houses and thus engender the trust of CPG advertisers.
However, reading around the subject can lull some retailers into the view that they need to do no more than create an internal agency and then leave all the work to third-party advertisers. In truth, only by taking complete control of every process initially can they then start to work effectively with — and, crucially, deliver ROI to — third-party brands.
There are a number of key elements of a retail media network that are essential to success, ones that the large U.S. retailers all offer.
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A Deep Understanding of Your Audience
At the heart of a successful retail media strategy lies a deep understanding of the audience. These retailers harness the power of consumer data to create detailed buyer personas, identifying the preferences, behaviors and demographics of target audiences. This knowledge will not only facilitate more effective advertising but will also enable personalized messaging that resonates with individual consumers.
Seamless Omnichannel Sales Attribution
Running campaigns depends on specialized, integrated software that provides a platform to buy and sell media, manage campaigns and optimize omnichannel advertising experiences across print, digital, streaming, out-of-home and digital-out-of-home media.
Retail media networks also need to offer seamless omnichannel sales attribution if they expect to attract CPG advertising budgets. According to Insider Intelligence, Kroger came out on top for omnichannel sales data: “With 96% of transactions linked to its loyalty card, Kroger has established a best-in-class capability of measuring in-store sales and surfacing that data in campaign reporting. Kroger’s data arm is known for its detailed customer insights and omnichannel sales reporting.”
Form Collaborations to Create Scale
Naturally, large retailers have an advantage in attracting advertisers because of their scale. Smaller retailers must therefore compete on their ability to enable advertisers to access verified, individual, conversion-ready shoppers and the purchase data behind them. Collaboration with advertisers is important in order to forge mutually beneficial partnerships. This approach fosters a win-win scenario where advertisers achieve their desired outcomes and retailers capitalize on increased revenue and enhanced brand positioning.
As in Most Things, Quality Over Quantity
Quality of advertising is also key. While it may be tempting to flood retail media networks with advertisements, quality should always take precedence over quantity. Optimize ad spaces to deliver relevant, engaging content that adds value to the customer experience. A cluttered advertising environment can be overwhelming for consumers, diminishing the effectiveness of campaigns and diminishing the value that can be leveraged from that audience in the long-term. Strike a balance by curating high-quality content that aligns with the brand and resonates with the audience.
Prioritize Privacy and Security
Data privacy and security is paramount in building trust with customers. Retailers must prioritize the security and ethical use of consumer information. Establish robust data protection measures, comply with relevant regulations and communicate transparently with customers about how their data will be utilized.
Leverage ML and AI to Offer Personalized Experiences
The preeminent retailers in retail media all aim to provide dynamic targeting so that campaigns can be tailored in real time, using machine learning algorithms and artificial intelligence to analyze consumer behavior and preferences. By delivering personalized content at the right moment, retailers improve the chances of converting leads into customers and retaining existing ones. Retailers also should explore embracing emerging technologies such as augmented reality, virtual reality and immersive experiences to captivate audiences.
Innovation is the Key to Growth
Lastly, innovation is key to staying ahead in a fast-changing market that is already among the fastest-growing U.S. advertising channels, up 22% YoY according to the IAB, and set to double over the next five years to $107 billion.
While it’s okay when starting out to follow the masters, the next step is to differentiate as the route to growth. As McKinsey explains, the ideal retail media network should be able to deliver performance and scale that can’t be sourced elsewhere, and reaches audiences that third-party brands otherwise would not be able to reach across all sales channels. However, it also must provide transparency through granular, accurate and timely reporting and, ultimately, be able to show ROAS (return on ad spend) and close the loop between sales attribution. As the retail industry continues to evolve, those who adapt and innovate will find themselves at the forefront of success in retail media.