Source: iStock | Khunkorn
Will Retail Media Networks Ever Get Into Brand Ad Budgets?
Retail media networks are on a roll. Ad revenues are expected to increase 9.9 percent to $125.7 billion in 2023 making retailers’ websites the third-fastest growing channel for advertising, according to a new report.
GroupM’s 2023 Global Mid-Year Forecast puts retail media’s growth behind digital out-of-home and CTV, which are a fraction of its size. The media buying agency forecasts that revenues from retail media will surpass television ad revenues, including CTV, in 2028.
A separate report from eMarketer projects that retail media ad sales will grow 19.7 percent this year to $45.15 billion. Annual growth is forecast to accelerate in the coming years leading to ad sales rising to $106.12 billion by 2027.
The dollars flowing into retail media coffers continue to be dominated by trade funds. A study of 500 consumer packaged goods marketers by Wakefield Research found that 64 percent planned to increase their retail media spending with most of those funds coming from the sales promotion side. Eighteen percent of CPG’s total ad budgets will flow into retail media networks this year.
Results from Association of National Advertisers (ANA) members earlier this year found that 88 percent felt pressured to buy ads on retail media networks. Forty-four percent said retailers exerted “a lot” or “complete” pressure to get media buys. Forty-one said retailers had some influence on purchasing, and eight percent said a little.
The report said that those interviewed said that using RMNs was rarely a “choose to use” decision but a “have to use” one. Numerous factors influence buying decisions including product sales, shopper marketing and joint business planning goals.
Search has driven the “lion’s share” of retail media ad spend, according to an article in March by Andrew Lipsman, principal analyst, Insider Intelligence.
Mr. Lipsman foresees retailers being able to reach into CPG brand budgets going forward with the evolution of retail media networks (aka RMN 2.0).
“As RMNs get serious about using first-party data for targeting display, video, and streaming TV ads—often by partnering with third-party publishers and media companies—brand dollars are migrating into these formats. That means retail media will become as much about branding as it is about performance advertising,” he wrote.
Fifty-three percent of advertisers in the Wakefield study said that they purchase retail media to reach a wide audience of consumers. Forty-seven percent do it to target a specific audience.
Discussion Questions
DISCUSSION QUESTIONS: Do you see retail media networks being able to tap into brand ad budgets in a meaningful way in addition to trade funds? What will need to occur for this to happen?
Poll
Loading …BrainTrust
Ken Morris
Managing Partner Cambridge Retail Advisors
No Data = No Dollars. Full Stop. Brand dollars will be limited without showing the impact of retail sales from retail media networks. Digital and in-store attribution is required to make retail media grow bigger into brand budgets.
I see this retail media network spend increasing exponentially going forward, pulling spend from both TV and trade funds. This is an evolution that closely follows the customer journey as we shift to a more media-savvy clientele. Traditional media viewing and coupon usage are relics of the past, and brands are following the money and customer preferences.Â
That being said, retailers’ brands are both powerful and fragile. The revenue stream from ads is great for the bottom line, but retailers need to proceed with caution. Cluttering pages could hurt conversion rates both online and in stores. Analytics will be essential here.
RMNs are already taking budget from traditional ad budgets. Given the size of the audience for tier-one retailers and the granularity of the audience data, I can’t help but think this will continue to grow and expand.
By driving product discovery, brand awareness and sales, retail media will attract more brand ad dollars.
Brands need to smash silos, and align efforts and budgets across all omnichannel media opportunities. Retailers need to make it easy for brands to see all media opportunities and measure ad performance.
Unification, visibility and measurability will help brands and retailers succeed in retail media.
As the digitization of stores accelerates and non-endemic opportunities proliferate, retailers will get dollars coming and going. Retailers’ influence will extend outside of traditional touchpoints. Nothing is off the table. Great insights about this in my latest podcast episode with Criteo and Brandcrush. https://www.spieckermanretail.com/podcast/turning-up-the-volume-criteo-and-brandcrush-on-amplifying-retail-medias-next-act
Most brands we see in the store are already heavy in trade spending. Many spend nothing on advertising at all. Walk down a supermarket aisle and note the last time you saw an ad for each product, if ever. The real question is, will marketers increase their overall budget to accommodate the networks?
Another way to ask is, will companies increase their prices to make funds available for trade networks? IMO, not likely.
For the health of companies and advertisers, we need to hope they don’t. Retail website media is a very short term play – the online equivalent of stocking fees and coop ad dollars. This advertising is fundamentally a direct response ad at the point of purchase.
I know that it’s tempting for retailers to pursue extremely aggressively. But wise retailers will pay attention to the role it plays and not over promise. Wise retailers will also pay attention to how the “retail media” at Amazon is killing the value of searching on Amazon. It has been a long time since a search for a brand product on Amazon has turned up that product in Amazon’s first two pages of results. Why? “Retail media”.
Let’s take care with this shiny bauble.
So true, Doug. We can call these “media networks” but in the traditional sense, it is simply promotion.
Thank you for saying this. RMN sits at best halfway down the AIDA funnel – not helping with general awareness but perhaps being effective tactically. But that means ad buyers will need to adjust their in-store media constantly, which drives up production cost and management overhead. Not safe waters for small-medium product vendors to be swimming in.
No retailer in their right mind wants their “endemic” advertisers to merely shift dollars from the trade marketing budgets into their retail media networks. That maneuver would mean a dramatic increase in complexity for zero increase in revenues – a losing formula.
What retailers do want is to capture new dollars from traditional advertising and promotion budgets that are not already invested in their physical or digital stores. In exchange, they are willing to provide brands with enhanced access to first-party shopper data.
Brand marketers are responding because they can prove their gains from closed-loop measurement that is built in to the platforms. That is, when they advertise on an RMN, they can expect to see hard numbers reflected in the web and transaction logs. No such direct measurement is possible with traditional media advertising.
It’s well documented that RMNs are already capturing chunks of many brands’ ad budgets. Brands do feel some pressure, to be sure, but the retail media sales teams are deliberately separated from the category management teams to keep the two conversations separated.
RMN spend is already part of many marketing budgets and allocation is not tied only to shopper marketing or trade funds. Matter of fact a high percentage is allocated to new marketing spend which effectively are branding budgets. Fewer trade funds are moving into RMNs, although some retailers continue to see it. However, it is likely that RMN value will move up the funnel and not simply be focused on conversion at the bottom. We’ll see more new dollars spent from branding as well- depending on the advertiser.
The issue is less that Ads closer to the point of purchase work better, it’s simply that they can more easily be attributed to the sale. Ad money has been moving closer to the POP since 2002, this was always the logical end point. RIP Brands.
Retail giants have access to first-party data from customers, so naturally they would try to monetize this data by providing retail media opportunities to other businesses. Customers who browse popular online platforms are actively seeking products to purchase, presenting brands with the opportunity to enhance their visibility through investing in RMNs. When a brand’s advertisement appears repeatedly on different platforms, it creates strong brand recall in customers’ minds.
RMNs have the potential to sneak into brand marketing budgets, but retailers cannot rely solely on RMNs in the long run. It’s true that businesses want to form a partnership with retail giants because of their access to first-party data, however, they must create their own avenues for gaining this data.
What is the solution? I think focusing on providing omnichannel buying experiences will help, allowing brands to reach out to their customers wherever they are and in turn build strong relationships with them.