What is retail media? One of the biggest growth trends in retail right now

Richy Ugwu
June 24, 2022

Retail media is one of the biggest trends of the moment. It presents a massive opportunity for both brands and retailers. Read on to find out how retail media works and how brands and retailers can benefit.

What is retail media and how does it work?

Retail and advertising are both continuously adapting to the digital age. Retail media has evolved from using in-store signage to promote products to using ad space on eCommerce websites and apps. At its core, retail media is still powered by a mutually beneficial relationship between retailers and brands. Retail media brings advertisements to shoppers who are close to the point of sale, wherever that may be.

Retail media allows brands to promote their products to high-intent consumers through advertisements sold by retailers. Retailers offer advertising space to brands through their advertising platforms, called retail media networks. 

Essentially, retail media refers to advertising placed on a retailer’s platform. Online ads can be on the retailer’s own e-commerce website and app, or through a demand-side platform like Amazon DSP, which extends the reach of ads to other audiences as well. Ads can also be offline, through in-person ad displays at brick and mortar retail stores, for example. 

In addition to retail media ads, brands also get access to valuable first-party data from retailers to help marketers understand and target consumers more effectively across the customer journey.

Retail media is a growing trend and opportunity

Retail media networks are among the biggest growth trends in retail right now, according to AdAge. Many retailers have already started their own successful retail media advertising programs, including Target, Nordstrom, and Best Buy. Last year alone, Walmart made $2.1 billion from its retail media network offering. 

BCG estimates that, by 2026, retail media ad spend will reach beyond $100 billion and represent nearly 25% of digital ad spend by brands. The landscape of retail media companies will become more competitive as more retailers create their own retail media programs, making it harder for new entrants to get a share of that marketing spend.

The retail media market will grow by 25% in the next five years in the US alone. Just think about this same number on a world scale.

Retail media is becoming a crucial part of retail marketing strategy for brands

Retail marketing is the process by which brands get their products in front of consumers online or in a physical retail store. A retail marketing strategy is a plan for how to reach consumers with a brand’s product. It is based on knowledge of the brand’s ideal target customer and involves decisions about what product to sell, where to sell it, how to price it, and how to promote it. 

Retail media fits into retail marketing as a new strategy for promoting products for brands. Harvard Business Review recently pointed to retail media networks as a new way for marketers to utilize data and creativity to drive value in 2022. Many brands are already taking advantage of retail media advertising, including well-known brands like Microsoft and Anheuser Busch.

Advantages of retail media for brands

Here are the perks of retail media that brands can harness today:

  • Ability to reach target customers through retailers
  • New ad placement options and formats
  • Improved ad targeting
  • Access to sales data and consumer insights from retailers

With retail media, brands can advertise products through retailers where their target customers prefer to shop. Retail media allows marketers to reach consumers at an opportune time and place, near the point of sale where buying intent is high. Beyond targeting and increased conversions, retail media also provides other advantages.

Marketers can use retail media analytics to inform their retail marketing strategy. Data gathered from retailers can provide useful insights into the behavior of shoppers and their product preferences. Closed-loop measurement allows marketers to attribute sales to retail media advertisements. Insights can be used to improve ad targeting and performance. The data can also be used to inform decisions on product and pricing strategy. Access to data from retailers will become even more important as third-party cookies are phased out.

Retail media is becoming a new and growing source of revenue for retailers

Retailers are an important partner for brands executing their retail marketing strategies. In addition to in-store product promotion, retailers can offer brands advertising space in their digital storefronts, as well as valuable consumer insights.

In turn, retail media can become a new, high-margin revenue stream for retailers. And, retailers can become long-term, preferred marketing partners for brands by leveraging consumer data.

Advantages of retail media for retailers

Here are some pertinent perks that retailers can leverage when they understand the full potential of retail media:

  • New source of revenue
  • High margins
  • Long-term partnerships with brands
  • Leveraging consumer data

Retail media presents a massive opportunity for retailers to grow their annual revenue, according to BCG. Predicting a “seismic” shift in marketing budgets toward retail media, their research estimates that around $100 billion is up for grabs. Major retailers like Amazon, Walmart, and Target are already working to get their piece of the pie. This trendy new revenue stream also has very high margins (up to 80%) compared to in-store margins (usually 10-20%), making it even more attractive for retailers. 

Major retailers like Amazon, Walmart, and Target have already realized and worked towards attaining the high margin retail media has.

Consumer data is another reason why brands will want to spend more of their marketing budget with retailers. Retailers can track consumers’ interactions with ads and product purchases, revealing insights about behavior and preferences. As new privacy standards force marketers to rely less on cookies, retailers’ consumer data will only become more valuable to brands.

Retail media partnerships set up brands and retailers for success

For forward-looking retailers and brands, retail media presents significant opportunities. 

Retailers stand to benefit from a new stream of high-margin revenue. In addition, they have the potential to build long-term relationships with brands, helping them leverage data to grow their ad performance and ad spend over time. 

Brands also benefit from collaborating with retailers. Retail media is becoming an increasingly important part of retail marketing strategy for marketers, especially as data from cookies becomes a thing of the past. Retail media allows marketers to reach consumers with targeted ads and access retailers’ first-party data on consumer behavior and purchases.

By establishing mutually beneficial retail media partnerships, retailers and brands can position themselves for future success.

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