Retail media networks—everything ad buyers and sellers need to know about the $50 billion trend

Editor's note: See our 2023 retail media networks guide here Countless marketing experts for months have projected that retail media will be one of 2022's biggest growth stories, including Forrester, which has forecasted the channel will top $50 billion in global revenue this year. As the year nears a midway point, those growth predictions appear to be right on target for the category, in which retailers sell and manage advertising for brands. Retailers with existing networks are expanding their media offerings as new stores explore the space. And advertisers, hungry for ways to diversify their media and reach new customers, are paying attention. “We’re experiencing a heyday of retail media for a number of reasons—the constantly evolving ecosystem of the web is changing and retailers like Kohl’s are now uniquely positioned to connect brands with consumers,” said Greg Revelle, chief marketing officer for the Menomonee Falls, Wisconsin-based chain. The pace of growth seems to be accelerating even faster than it was late last year, when Dentsu-owned performance marketing agency Merkle Co. found that a new retail media network was created every one to two months. AI marketing blog How brands are using ChatGPT, DALL-E 2 and other tools Read more here Below, Ad Age takes a look at what marketers need to know about retail media networks and where the trend is headed. What is a retail media network? The concept isn’t as new as it might seem. Essentially, a retailer is becoming not just a buyer of ads for itself but a seller of ads for others as well—a company like Target is securing and selling ad inventory to outside brands on its own channels, as well as on outside properties. The retailer manages the advertising on behalf of brands; stores will handle this aspect of the business on their own, acting as a pure-play media agency, or partner with a third-party company like Criteo, a commerce media platform, to help. It’s a lucrative way for retailers to monetize the treasure trove of customer data they are sitting on, helping brands identify and target shoppers who might be more likely to buy their products. Retailers are able to shape products and ads, and offer measurement details as well on how a campaign performed with target shoppers—it’s a full loop report.Read: How to build a media network Read: Why more retailers have media networks How do retailers make money? The financial proposition is a win-win for both retailers and advertisers. Retailers gain a new revenue stream as they sell ads, which is helpful considering that grocery stores and other retail chains typically have low profit margins on product alone. Investing in a media business, where margins are between 50% and 70%, according to experts, could add a significant boost. Advertisers, who are looking for more guidance on customer tracking given the demise of the cookie, are willing to pony up the dough in order to gain a better understanding of their customers and more return on ad investment. Who are the dominant players? Giants like Amazon and Walmart have been offering advertising as a service to brands for years—and have the financial reports to show how lucrative the business is. In February, Walmart reported it had generated $2.1 billion from its advertising network last year—the first time the retailer announced revenue for the category. Amazon Advertising is even bigger, of course. The e-commerce company sold $31.1 billion in ads last year. There are other longtime players. Target first began recognizing the value in working as a media agency back in 2016, when it isolated shoppers based on purchasing data and ran a campaign for GlaxoSmithKline’s Flonase allergy product. Three years later, Target rebranded its media business, previously referred to as a “Guest Access” platform, to Roundel. The division is now helmed by Sarah Travis, who joined last year from Google. EBay also has a thriving ads business, which was recently ranked the best retail media network by ad buyers in a report from eMarketer that analyzed key attributes such as traffic, first-party data, return on ad spend, and ease of use of the platform. And let’s not forget Kroger, the grocer that has been in the business for nearly five years. Cara Pratt, senior VP of Kroger Precision Marketing, spoke on a recent episode of the Marketer’s Brief podcast about how retail media is moving beyond promotions to brand awareness. “It’s not just about bottom funnel,” she said. “It’s about full funnel.” Listen: Behind Kroger’s thriving retail media network Who is new to the space? You’d be hard-pressed to find a retailer not looking into the retail media category. These days, nearly every store that sells more than one brand is thinking about how they can make media work for their business. For example, Dick’s Sporting Goods has yet to launch a media network, but it appears to be only a matter of time. As Ed Plummer, the sporting chain’s chief marketing officer, recently told Ad Age, “I will tell you that it’s something we are looking into seriously.” Albertsons, which runs grocery chains such as Acme and Safeway, recently tapped Kristi Argyilan, former head of Roundel, to build its media business. Lowe’s debuted its One Roof Media Network last fall, following rival Home Depot, which is rapidly scaling its program. Discounter Dollar Tree also sees the value. And the action might have started with consumer packaged goods, but clothing stores are also getting in on it. Macy’s quietly launched its media network in 2020, and the business has rapidly become a revenue driver. Last year, CEO Jeff Gennette predicted the network would generate more than $35 million annually. Yet a recent report from Macy’s has blown that prediction out of the water—Macy’s brought in over $105 million from the offering last year. Nordstrom is also on the rise—executives at the department store said recently that its media business will evolve further this year after it generated $40 million in 2021. Meanwhile, Kohl’s unveiled its new media offering at its recent Investor Day. How are retailers growing their offerings? Experts have said that the next phase of growth for the industry involves expanding media offerings. Such placements used to be limited to channels such as web site and email ads, but there is now an opportunity to deliver other options for advertisers. Since the majority of consumers still do their food shopping in person, grocery stores can offer more ad placements within physical stores using TV display screens that change, or in-store audio ads. Gas stations are also exploring screen incorporation at the pump. Connected TV, where large retailers already have big partnerships in place—Kroger with Roku, Amazon with "Thursday Night Football" and Target with Disney—is also ripe for more ads. Albertsons is looking into livestream shoppable video partnerships to draw in more advertisers. And let’s not forget samples. Some retailers are also exploring the idea of product sampling for advertisers, a category that companies such as Gopuff, the Philadelphia-based delivery company, have benefitted from. As a newcomer, Kohl’s is focusing on fine-tuning its measurement techniques and growing its staffers. “We are in a phase now where we stood up a whole product suite across a number of different areas and have been working hard on the plumbing behind the scenes that allows us to better measure the performance of our media,” said Revelle. “We are still early in our evolution of our product portfolio—we are actively growing our base of advertisers, investing significantly in technology capabilities, and investing in our team.” Read: What’s next for retail media networks amid explosive growthRead: How in-store music can play a role in retail media networks What’s the future? Since advertisers generally have fixed budgets, it can get increasingly more competitive as retailers compete with each other for ad dollars from brands. To compete, retailers will better hone their personalization strategies to make ads less obvious—better first-party data can help make ads even more seamless and valuable to potential customers, experts say. A recent study “The Future of Commerce Needs a New Media Approach” from Forrester and Criteo found that “Facing a dizzying array of media management platforms and partners, marketers can feel limited in their ability to effectively optimize media performance and delight customers.” The report added that retailers should seek to “broaden and deepen” offerings for ad buyers “by assessing new inventory opportunities, welcoming non-endemic advertisers, considering additional ad formats, and developing strategies designed to appeal to those with more upper-funnel goals.”

Retail media networks—everything ad buyers and sellers need to know about the $50 billion trend

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