Yael Kochman
September 3, 2024
We know retail and we know media, but what’s new with retail media?
In the evolving landscape of digital advertising, retail media has emerged as a powerful channel that integrates advertising with the consumer shopping experience at the point of intent.
While much of digital advertising focuses on the discovery phase, retail media provides the powerful platform of targeting a hopper who is already at an ecommerce site, with a higher intent to buy than on Facebook or Google.
By leveraging first-party data and the vast reach of e-commerce platforms, retail media offers brands the opportunity to connect with consumers at the most critical point in the purchase journey – precisely when they’re ready to buy.
Unlike traditional online ads, retail media ads – placements on e-commerce websites, mobile apps, and other digital platforms owned by retailers – are integrated into the shopping experience, often appearing as sponsored product listings, banner ads, or product recommendations. The global retail media market ended 2023 at a valuation of $77 billion and is expected to grow to $166 billion by 2025, growing at a CAGR of 12.5%, and a potential $293 billion by 2029!
And this does not end with online advertising.
Retailers like Walmart, Kroger, and Hy-Vee are already exploring in-store retail media by installing screens that display third-party ads, from entrance to checkout aisles and even in high-traffic areas like deli counters and end caps. These screens provide brands with valuable contextual advertising, reaching consumers at the exact moment they’re making purchasing decisions. For example, in-aisle screens have been shown to outperform those on the outer edges of stores, as they engage shoppers when they are most likely to make a conversion.
While the growth of in-store media presents challenges, such as retrofitting stores with digital infrastructure and ensuring that ads feel native to the shopping environment, it represents a natural evolution from online advertising. As more retailers experiment with in-store retail media, we can expect a wave of pilots and innovations that transform how brands interact with consumers in physical retail spaces.
By 2024, we may see in-store retail media become a significant component of the broader retail media ecosystem, bridging the gap between digital and physical shopping experiences. Overall, by the end of 2024, retail media is projected to grow by 25% year-over-year, driven by the improved targeting capabilities and the expansion of commerce media. This also makes retail media’s growth faster than almost any other form of ad spend.
So how did we go from retail stores with in-store displays to retail media?
Shopper marketing has long been a staple in the retail industry, focusing on influencing consumer behavior at the point of purchase. Initially, this was about in-store promotions, end-cap displays, and product sampling, designed to catch the eye of shoppers and drive sales.
However, with the advent of e-commerce, accelerated by the global 2020 pandemic, brands shifted to digital shopper marketing strategies such as search ads, sponsored product listings, and personalized recommendations. Over time, as retailers gained more control over consumer data and the online shopping experience, retail media emerged as a natural evolution.
Now, retail media is closing the loop by bringing these same principles back into physical stores. Retailers are transforming traditional in-store displays into dynamic digital experiences, creating a seamless blend of online and offline marketing. This approach not only enhances the shopping experience but also allows brands to reach consumers through highly relevant and timely ads, both on-screen and on-shelf.
Overall, retail media combines the principles of shopper marketing with the precision and scale of digital advertising, enabling brands to target consumers with relevant ads right where they shop. It is now the second highest priority for companies (42% importance) second only to paid search (53% importance), with 77% of a focus on the retailer’s ecommerce site.
The trifecta of superpowers in retail have their dominating retail media networks: retailers such as Amazon, Walmart, and Target have capitalized on their first-party data to create highly targeted ad offerings. By analyzing browsing and purchase behavior, they can serve ads that are relevant to consumers, increasing the likelihood of conversion for brands they carry.
Niche retail media platforms are effective for advertisers because they provide access to highly targeted audiences, resulting in potentially higher conversion rates.
Connected retail media platforms integrate with multiple retail companies, enabling advertisers to scale their campaigns across various networks using one account.
Startups are also entering the retail media space, bringing innovation and new opportunities.
How does retail media benefit all stakeholders in the retail space?
Over 85% of major retailers in the U.S. now offer some form of retail media network, with Amazon being the largest player, capturing nearly 77% of the market share. By monetizing their digital real estate, retailers can earn additional income beyond traditional product sales. Retail media helps retailers enhance the shopping experience by offering relevant and personalized ads. For example, if a consumer frequently purchases skincare products, they may see ads for complementary items such as moisturizers or serums, increasing their average order value.
Additionally, retail media plays a huge part in driving revenue for retailers through partnerships with brands that are willing to pay a premium for prime advertising placements. Since retail margins can potentially be low and the majority of the revenue from the sale goes to the brand, this incremental revenue is a game changer for retailers. For example, Walmart’s Connect platform generated over $2.1 billion in ad revenue. In 2024, retailers are expected to earn up to 5% of their total revenue from retail media networks.
By leveraging retailers’ first-party data, brands can create campaigns that reach consumers based on their shopping behavior, preferences, and purchase history. This level of precision significantly improves ad performance, and retail media campaigns in 2024 are delivering up to 4x higher ROAS compared to other digital channels.
While there are so many retail media networks, brands are now also faced with a choice to pick the network based on the audience, but also what the retailer can offer beyond just advertising. For example, some retailers offer additional data, shelf space, awareness, etc. Plus, when thinking about KPIs, like other forms of advertising, it is key to think beyond conversion at metrics like LTV, AOV, etc., as there is a cliff point in retail media beyond which ROAS will begin to decline. A solid understating of what the retail media platform can offer at the evaluation stage is thus key for brands, as summarized at RETHINK Retail GRL + TRE.
Another good example is Procter & Gamble, which utilized Amazon’s retail media network to promote its Tide laundry detergent. By targeting consumers who had previously purchased household cleaning products, P&G achieved a 20% increase in sales during the campaign. Additionally, brands like Unilever have reported up to a 40% increase in ROAS when using retail media networks compared to traditional display advertising.
Consumers also benefit from retail media through a more personalized and relevant shopping experience. 71% of consumers prefer ads that are tailored to their interests and shopping habits, making retail media a win-win for both shoppers and brands. Besides increasing relevancy, it also saves time by surfacing products they are likely to purchase.
Plus, retail media can help consumers discover new products that they might not have otherwise considered. For instance, a consumer browsing for running shoes may see ads for complementary items like moisture-wicking socks or fitness trackers, leading to a more fulfilling shopping experience.
Today, almost every major retailer runs a retail media program. Here, we will explore some of the major retail media networks in the industry, starting from general retail media platforms like Amazon down to connected retail media platforms like Criteo.
Expected to reach $125 billion by year end, over 80% of major retailers have now established their own media networks. So what’s next? There seems to be a trend towards in-store media, particularly through digital screens, is set to expand significantly, with retailers like Walmart and Target investing heavily in these channels to reach consumers at the point of purchase. In-store media, particularly through digital screens, may also expand significantly.
As retail media networks are seeing up to 4x higher ROAS compared to other digital channels its ability to offer precise targeting, new revenue streams, and a better shopping experience for consumers makes it an invaluable tool for retailers and brands. With continued innovation and expansion into new sectors, retail media’s influence is only set to grow.
