When shoppers start counting the pennies during a recession, retailers must work even harder to secure every sale.
For example, there was a 7% drop in sales volumes immediately after Christmas 2022, the lowest volume growth recorded over nine months, reflecting the concerns shoppers have about the cost of living crisis.
And retailers were reaching for the sales stickers even before the cost of living crisis took hold. Way back in early autumn 2022, for example, fashion bible Drapers reported retailers were being panicked into discounting. It said Asos was discounting "almost everything" at 80%", while fast-fashion rival Boohoo held a "75% off everything" sale.
But the gloomy economic outlook doesn't mean you should ramp up your sales and discounts as well. That's the last thing you should consider. A race to the bottom on price slashes margins devalues the brand and is in nobody's best interests. It’s also particularly damaging during a period of high inflation.
Just because there’s a recession, it doesn’t mean consumers stop spending. Instead, they prioritise their purchases. This means you need to understand your customers and work harder and smarter to convince them your goods and services are worth it. Apple is a perfect example of this. Despite its premium price tag, it boasts a loyal band of customers who will buy its tech, no matter what.
During the economic downturn, retailers are increasingly turning to retail media. They're doing this to steer the conversation away from discounts to protect profits. As a result of retail media ad sales, revenues have risen by 24% during the past year.
Epsilon’s CORE ID can help you identify and personalise media to reach more than 200 million consumers globally, accelerating your retail media success. But what is retail media and how can it help you?
In simple terms, retail media is marketing close or near the point of sale. Common retail media use cases include brick-and-mortar store advertising, sampling, loyalty programmes and coupons or vouchers.
When it’s used on your digital sales channels or the open web, however, things start to get exciting. A digital retail media approach enables you to act as a media owner. You can create personalised advertising opportunities either for yourself or for brands. It often brings a new, high-margin, high-value stream of media revenue alongside your core retailer business.
Most big-name retailers have now built, either on their own or with the help of a tech partner, a retail media business. It’s an industry set to be worth $6 billion in the UK alone by 2025.
According to research digital retail media in 2023 is going to grow 7.8 times as fast as the total digital ad market. This growth is due to the quality of retail media data and its ability to deliver measurable impact during the recession.
There are at least three different types of retail media. These are onsite (ads displayed on retailers’ digital channels), offsite (ads displayed on the open web, social channels & email) and in-store (ads in brick-and-mortar stores).
Of these three, onsite advertising offers the highest margin for retailers and the greatest level of precision, measurability, and performance for advertisers. The two most common onsite ad formats are:
● Sponsored products – the promotion of products in a category, search results and product pages. Sold via cost-per-click auction, this is all about driving conversion and securing a share of the digital shelf.
● Display – banners where advertisers can target specific shopper audiences with static or dynamic (including product data and call to action) branded content. This is a mid-funnel format targeting shoppers in the consideration phase.
Creating retail media conversations that convert customers Retail media is particularly effective because content can be tailored to individual customers. This is achieved using a technique called dynamic content optimisation (DCO),This enables you to talk one-to-one with customers about the topics they care about most.
A great example of this is using shopper data to spot customers concerned about the planet. You can then use retail media channels to focus on the green benefit of your products. This might include sustainable manufacture, recycled materials and a low carbon footprint. Other customers may respond positively to well-being messages. In this instance, you can major in the health benefits of your products and services.
Time and channel are two other key considerations. A customer may usually buy a product late at night after several views on their mobile phone. Seasonality is also important. Does your customer spend big during Black Friday, or do they save their money for the Spring bonus season? Once you've gathered this data you can leverage the best trigger topic at the right time using the right channel to win the sale.
Sometimes the effect may be more subtle. Grocery display advertising, for example, seldom results in a 'last-click' attribution sale. When used carefully, however, it can build brand visibility and sales over a longer period.
The benefits are such that 96% of retailer businesses in the UK now have a waiting time for brands who want to place ads on their site. Such is the demand for retail media that long-tail brands are queuing up, as well as larger brands with varied product lines, to showcase personalised ad content.
There are four steps retailers must take if you want to design a winning retail media strategy:
1. First, you need to identify your customers. Before you can deliver killer content, you need to know who you are talking to. Armed with this information you can speak to customers on a one-to-one level.
2. Discover the topics your customers care about. Then use this information to streamline your product lines. You can also identify the best verticals and ensure you keep innovating in those areas. If you do this, your messaging will not only be on point, your products will also remain highly relevant.
3. Communicate product innovation to customers. The product development budget is one of the few areas that isn’t scaled back during a recession. That's because it’s so important to consumers. Don't be shy about innovation efforts, use your retail media network to shout about them.
4. The last action is measurement. Incremental return on ad spend (IROAS) is a key marketing metric, that can be measured in isolation over and above existing paid media channels, no matter where we are in the economic cycle. If you can measure IROAS you'll be able to track campaign performance in your retail media network and adjust your strategy to get the best results.
Retail media is a powerful tool during an economic downturn for two key reasons. It not only helps retailers compete against the likes of Amazon, which has reduced margins. It also gives you a powerful new revenue stream, so you can make money through data and advertising services. This is a big shift in traditional retail business models, but during a recession, you need to find value – and revenue – wherever it may be.
Unless you’re going to invest heavily in a full retail media tech stack it is going to be tough for retailers to maximise benefits. Medium and large-sized retailers will most likely have to outsource elements. That could include CRM, data warehousing and data activation, right the way through to engineering, insights, reporting, and metrics. Retail media is here to stay, so it’s well worth the investment if you can find a partner that’s right for your company.
Is your company struggling to generate value during the recession? Epsilon’s single turnkey retail media solution will help you achieve 30% – 40% incremental lift in customer reach, maximising revenue which can be specifically attributed down to a SKU or product level.
Find out more about Epsilon’s retail media network here:
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