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Retail media is the engine, not the destination
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Headline after headline in 2020 read “rise of the retail media network.” And for good reason.
In December, Walgreens launched Walgreens Advertising Group (WAG), a media network that allows the convenience retailer to sell advertising on its owned online properties and other websites. As Walgreens’ VP of integrated media and head of WAG Luke Kigel puts it, the company is transitioning from “traditionally minded” to “digital first and audience first.”
Walgreens isn’t the only one. Ever since Amazon launched its media network in 2012, retailers have been following suit—from CVS to Target to Walmart to Kroger to Home Depot to Instacart to eBay to Wayfair to Best Buy.
It’s understandable of course why larger retailers would want to get in the media network game, but what’s in it for these smaller and midsize retailers?
Simply put, over the years, the big retail players have shown the smaller retailers what’s possible in terms of revenue. Amazon reaped approx. $10B in retail media network revenue, and Walmart, Target and Kroger have seen similar gains. There’s a tremendous opportunity here for retailers to get onboard—but in a different way than their larger counterparts—and unlock their first-party data and generate profit.
And the list of reasons to prioritize a media network is getting longer by the minute. Two major industry shifts from 2020 make the opportunity all the more attractive:
Many retailers already have some form of a media network in place (whether it’s a more classic co-op advertising or shopper marketing framework), but those are outdated models in the new digital-first context—a “traditionally minded” retail media network, as Walgreens’ Kigel might put it. Advertisers are currently faced with a growing list of media networks from which to choose to spend their shopper marketing, trade and even brand advertising dollars; an outdated model just won’t cut it in today’s competitive digital frontier.
In this article, we’ll take a look at the basics of retail media networks, how they’re evolving to meet the modern consumer’s and brand partner’s expectations, and what retailers need to consider before kicking off development. Let’s dive in.
Let’s start with the basics so we’re all speaking the same language. A retail media network allows a retailer to provide brands access to their customers. This leverages a retailer's key assets—their first-party customer data and their owned channels, including website. A retailer’s first-party data allows brands to reach in-market buyers across formats and owned channels at the point of purchase.
And with the deprecation of third-party cookies, retailers’ first-party data is becoming even more attractive to brand partners looking to glean new insights on their customers.
It has long been recognized that retailers can generate more revenue by managing a retail media network than by just selling their products through traditional channels. And with the effects of the pandemic, more commerce is moving online and creating even more of an opportunity for digital media.
Traditionally, retailers have focused on monetizing their owned channels through co-op advertising for in-store and online promotions, like:
So, for instance, a beauty retailer may work with a brand partner to create a point-of-purchase in-store display promoting that partner’s product, and then perhaps offer them a digital ad space to display their product on their website’s homepage.
The concept started with retailers wanting to monetize in-store real estate (like end caps, visual display, audio, etc.), but the issue is that the value is inherently dependent on how many shoppers are in the store. In our current environment, in-store traffic is at an all-time low as consumers turn to digital experiences to meet their needs. This necessitates a shift in the co-op framework to a digital-based retail media network mindset.
The modern media network goes beyond the traditional co-op mindset, and instead really leans on the value of scale in a digital setting. This helps to create new opportunities to connect with consumers. Of course, focusing on in-store promotions and owned channels is not incorrect—it’s just incomplete by consumers’ new standards. There are so many customers who spend time online—rarely visiting retail websites—but still want and need to buy certain products.
The technology available to retailers today allows them to reach consumers across their many digital interactions—creating a complete network across on-site and off-site opportunities to connect with consumers and drive more site traffic.
It’s natural to think about just monetizing ad space on your owned website when transitioning from traditional in-store co-op advertising to the digital realm, but there’s a world of customers you can only reach by advertising off-site. Off-site advertising is a critical component of a successful modern media network.
The opportunity for customer reach is far greater on the open web than it is on retailers’ owned properties alone. In fact, according to a January 2020 survey from The Harris Poll commissioned by OpenX, American consumers spend about 66% of their time on the “open web” (which they define as any online property, website or app not owned by a major tech company such as Facebook, Amazon or Google).
Here’s how a media network that includes both on-site and off-site solutions drives more value for your brand and your partners:
It’s a symbiotic relationship. And the numbers show how well the relationship works:
The modern retail media network—one that will appeal most to brand partners—needs to reach all customers where they are. Having a fair amount of first-party data is one thing, but also having the scale required to reach enough customers to make a true impact is another entirely.
However, implementing the off-site advertising component is not necessarily a cake walk—should you choose to do it alone.
To be blunt, staying in-house to build and manage your retail media network is not advised. Managing the brand relationship is the most critical task for any retail brand. But there are additional factors with an off-site strategy for which retailers need to account:
All these aspects are complex and require extensive expertise, time and resources. Plus, when working with multiple different fragmented solutions, as would be necessary when trying to build a media network in-house, you end up losing data as you transfer between systems. Ultimately, this leads to you not recognizing and reaching everyone you could. This is solved by working with a partner who offers an integrated solution.
The conversation needs to come back to: What is your core competency as a marketer? Is it in building your own programmatic adtech stack? What’s more, many partners already do this—really well. We recommend working with a partner that has on-site and off-site capabilities to ensure connectivity across your whole network—whether someone is on your site or browsing CNN.
And with the present urgency of building a media network, time is of the essence. An experienced partner will be able to help you get up and running—without potentially hiring a single net-new resource—in days instead of the months (potentially years) you would need to build an entire media network on your own.
First things first: If you don’t have any form of a media network in place, it’s high time to prioritize the lift. And if you only have traditional co-op advertising, you’re not leveraging the full value and scale that a true retail media network can offer.
Embracing a “digital-first” mindset is crucial for the modern retailer. How will your strategy evolve to meet the needs of today’s customers and brand partners?
See how we’ve consistently delivered lifts in revenue and average order values for CDW: Powering win-win outcomes with digital co-op advertising
