©designer491 via Canva.com
November 4, 2024
What May Stall Retail Media’s Hyper Growth Trajectory?
The three challenges facing retail media’s continued gangbuster growth include a need for consolidation, the lack of standard measurement, and confusion over who controls retail media’s budget, advertisers told Adweek.
The urge for consolidation comes as Amazon has become the dominant player in retail media, with other contenders including Walmart and Target. However, Best Buy, Kroger, Michaels, and numerous other retailers have launched platforms, and travel sites and banks recently started introducing similar online media options.
Adweek said, “The goal is to help advertisers find unique audiences — like someone who does most of their weekly grocery shopping at Walmart but occasionally shops at Target — without needing to manage dozens of ad buys.”
Regarding measurement, advertisers are particularly focused on assessing whether ads can incrementally drive purchases at specific retailers, while also looking for metrics that align with broader advertising goals, like brand awareness. Kristi Argyilan, SVP of retail media at Albertsons Media Collective, told Adweek, “Until we do better content, until we really move up the brand chain and can publish these really rich brand messages that then lead to an option to buy, I don’t think that we have a right to say that we’ve collapsed the purchase funnel.”
Finally, brands’ sales departments have traditionally negotiated ad deals linked to in-store or online sales, but bigger retail media budgets mean chief marketing officers need more control. Adweek said, “The blurred lines mean that retailers can sell overlapping ad campaigns, resulting in wasted ad spend for brands.”
Recent Emarketer analysis identified four challenges to retail media’s growth:
- Lack of standardization: Inconsistencies in ad types and measurement make it difficult to compare retail media networks (RMNs), forcing advertisers to do their own analysis or work with third parties to understand how one campaign performs against another. Amazon, Walmart, and Target, however, don’t appear incentivized to standardize.
- Competing with Amazon: Amazon, estimated to control three-quarters of U.S. retail media ad spend, has an advantage because many brands are supporting sales on the platform via advertising. Emarketer said, “For those who aren’t selling on Amazon or for those focused on off-site advertising, there are still plenty of other RMNs to work with.”
- Off-site integration: About a third of U.S. retail media spend is expected to go to off-site formats (i.e., display, online video, connected TV) this year, but integrating off-site retail media can be difficult.
- Siloed budgets: Retail media is moving up the marketing funnel, but lower-funnel and upper-funnel marketing efforts are traditionally managed by separate teams on the brand side, and retail media’s “true value” for upper-funnel ad dollars needs to be better demonstrated.
In-store media (endcap screens, self-scan devices, ads at point of sale such as at self-checkout, screens on fridge/freezer doors, and mobile app engagement while a customer is in store) also promises to drive retail media’s next leg of growth. However, it faces similar challenges to online retail media as well as significant cost hurdles.
Emarketer recently updated its U.S. retail media ad forecast to reach $129.93 billion in spending in 2028, up from $54.85 billion this year, a compound annual growth rate of 24%.
Discussion Questions
What are the primary obstacles to retail media’s predicted robust growth in the years ahead?
Where should investments or priorities be for retail media networks?
Poll
Loading …BrainTrust
Gary Sankary
Retail Industry Strategy, Esri
Ananda Chakravarty
Vice President, Research at IDC
David Biernbaum
Founder & President, David Biernbaum & Associates LLC
Recent Discussions
More Discussions
How Can Retailers Crack the Gen Z ‘Riddle’?
Gen Z is becoming an increasingly important consumer demographic, but an elusive one to map. How…Does Bath & Body Works’ Scented Holiday Campaign Pass the Sniff Test?
Bath & Body Works is kicking off a new campaign with scent being at the fore…Which Tech Will Solve In-Store Inventory Woes?
Three major tech lineups are looking to solve retail inventory problems. Which is most suited?
Retail media still has a lot of potential, and many retailers are still in the early stages of their offerings, so growth will continue in the near-term. It’s reasonable, however, to expect growth to slow as the whole sector matures. There are also limits as to how many store campaigns retailers can run, and some more established players are bumping up against that ceiling. From the demand perspective, as attractive as retail media is, brands do not have a bottomless pit of money and marketing budgets come with limits that will constrain growth. Basically, I think a lot of the low hanging fruit has been picked here and everyone is going to have to reach higher and work harder for future growth.
With most retailers and national brands just getting their start with retail media, it’s not too early to imagine potential.
Like any other form of marketing and advertising, the cost is expensive, and company budgets are limited, maybe right now more than ever, at least until our industry overcomes inflation, lower consumer confidence, and less cash flow.
So, growth will be gradual, and it might rapidly expand if and when our economy improves, but it will happen!
The growth of retail media will stall because it is short term sales activation work only a not media or advertising in the terms companies need most. At the moment, we are in a period of peak company enthusiasm. eventually, though, they will discover that while shifting money to retail media might drive countable immediate sales, they are diminishing the value and effectiveness of that spending. Retail media is not media but the equivalent of shelf fees and other added expenses of distribution through retail.
Doug – have to disagree with you here. Retail media captures more than just shelf fees and distribution. A targeted ad is worth and usually costs 7X more than generic ads- and that’s what retail media is really about. Engaging with key constituents to drive performance using loyalty program data and digital engagement is far removed from trade funds and product placement kickback. Though I will agree we are in a period of company enthusiasm, it may be more than a flash in the pan.
I confess, I’m not a fan, but then, these are the kinds of things that make me feel old.
Retail Media continues to grow at a rapid clip. My recent IDC MarketScape covers RMN Service Providers that are making a dent in the market. I conducted over 50 hours of interviews with top RMN retailers and dozens of hours with service providers in the space. In addition, what Kristi Argylian mentions on Adweek is spot on- content is king. The bundling of retail media is no longer a direct buy from CPGs and admins, but part of a coordinated buying initiative that agencies and advertiser agents are embracing. While the market seems to be saturated with retailers adopting and launching RMNs, these are early stages and usually only the larger firms have dominated media attention. New players, regional retailers, and a myriad of new ways of retail media are coming to the forefront and leaves a long runway for building the RMN ecosystem. Advertisers will not eliminate their brand budgets, but they will supplement and work with partners – and retailers – to drive performance. The market is ripe to grow and retailers understand they need to fulfill more than just bottom of the funnel value. While I expect continued growth, there is the Amazon anomaly that skews the Emarketer data to the tune of $47B of ad revenue in 2023. That said, growth will continue in the low-mid 20% for a few years. Stay tuned for an upcoming IDC deep dive report next year on the convergence with in-store and with CTV and DOOH with colleague Alex Holtz.
Great points Ananda. What I am interested in following is the evolution of in-store retail media networks (RMNs). At Groceryshop I saw a presentation that stated that while 70% of transactions happen in stores, less than 1% of RMN spending is in-store. RMN spending is dominated by online and off-site advertising and in-store advertising is in its infancy.
At the moment, advertisers and their retail clients are chasing their best consumers across the various channels available, trying to find the best balance between audience, relevance, and investment. Retail media networks have nice appeal given the size of most of these platforms and capitve audience. That said, advertising and marketing starts with an audience profile, who are you trying to reach. Retailers need to be nimble in this space, be ready to move into new channels to reach their target audience and customers where they are.
I look at these numbers and I am reminded of the (paraphrased) old marketing tag line “we know 50% of our marketing spend is working, we just do not know which 50% it is”…all of this technology and marketers STILL do not really know if the spend is driving purchases or how.
Why would the spend continue to go up with no believable measurements?
Retail Media Networks are generally oversubscribed. They need more capacity. Watch for entertainment offerings added to RMN ad offering. This will expand advertising options, shopper engagement and out of store reach.