Retail Media as the Future of Digital Marketing

5 June 2023
Reading: 6 min

Retail Media is an invention of the era when digital native platforms actively compete for customers with traditional retail. In essence, it is a brand advertising placement on an “endless shelf,” similar to promotional placements on an “analog shelf” in a store.

Business processes built in a digital environment have many opportunities to automate functions. That’s why the requirements for retail media are high — to become a data-driven platform, to work in real-time, and to consider the interests of brands, retailers, and advertising agencies.

In this article, we’ll explore the intricacies of retail media and try to understand why we should have a closer look at this marketing channel.

What is retail media?

Retail media is online product advertising that is placed directly on the websites and apps of e-commerce players. Such advertising allows monetizing store traffic and thus generates additional profits.

All three sides of the marketing relationship make money through the platforms:

  • Brands collect the leads through display ad views, to whom they sell products and services.
  • Retailers earn money for advertising space sold on their sites.
  • Consumers don’t have to go all over the Internet looking for products and promotions. Personalized advertising constantly pops up on proven, trusted sites, offering picks, discounts, and promotions.

Retail media have different advertising formats. For example, sponsored merchandise, display ads, branded pages, and in-store mailing list ads. The ads themselves can appear on any page on the retailer’s site and in any placement. The brand chooses a specific location when setting up the ads.

Retail Media as the Future of Digital Marketing

Types of retail media

Retail media is a new, but nevertheless rapidly developing area of marketing. Today we can distinguish two main formats of it:

  1. Retailers’ own platforms where brands can buy advertising.
  2. Aggregators. These are intermediaries who have created advertising offices on their resources and networked retailers.

In the first case, retailers build the media entirely on their resources, and all the data used in advertising is collected by them personally.

In the second case, the intermediaries gave the retailer the ability to advertise on their site and app through their platform for a fee. Now, brands don’t go to the retailer directly, but to an intermediary.

If you are wondering which format to choose, we will not give you a definite answer. You need to test the two types of advertising and draw conclusions yourself. As with any innovative approach, experts will need some time to experiment and analyze the benefits of different formats in the long term.

Retail Media as the Future of Digital Marketing

Advantages and disadvantages of retail media for brands

As we have already discussed, retail media is a relatively new format that we haven’t explored yet. However, those marketers and affiliates who have gained experience in this promotion direction have highlighted a number of pros and cons. 

Advantages of retail media

Targeted ad customization. Regular advertising algorithms are not perfect, so some of the leads for very narrow audiences are not targeted. As a result, the brand will not attract enough customers, and the advertising costs will not recoup.

The owners of retail media have already collected a variety of customer data — from age to product preferences. And not through questionable tools or cookies, but directly from their online stores, marketplaces, or mobile apps. This data helps brands target specific customer groups and offer products to the people who are most likely to buy them.

Personalized offers. On retail media platforms, brands can personalize their offers, gain coverage and earn more. For example, use data about the most recently purchased items to make ads with related or complementary products. Or use push notifications, coupons, and mail promos that retailers provide on their platforms.

Retail Media as the Future of Digital Marketing

Short sales cycle. Through retail media, a brand shortens the sales cycle. There is no longer a need to earn users’ attention, warm up with newsletters, engage with content or lure in low prices.

On a retailer’s platform, consumers are already in the “ready to buy” stage. This makes sense, since they’re already on the platform, flipping through the catalog and looking at product cards. If a brand’s ad flashes in front of their eyes and hits their needs, consumers will buy it, and the brand will get a one-click conversion.

Detailed performance reports. Since the brand advertises and sells on the same platform, through reports he can analyze how advertising affects sales. Based on the numbers in the reports, the brand decides on the actions in advertising strategy: cut back, invest more money, or leave it as it is.

Disadvantages of retail media

Marketing scale. Retail media are adapted for big brands because the retailer is interested in selling more expensive ads to increase profits. And the big players in the market have money for large advertising campaigns. This is the main problem of interaction with retail media — small or medium brands, which are short of money, will get less traffic for advertising.

Why should we pay attention to retail media?

Websites, online stores, and apps of major retailers have been around for decades. In that time, they’ve collected a mountain of customer data, from locations to purchase history, behavior on the site, and customer preferences. This data helps target ads to specific consumer groups.

It seems like you don’t have to buy an ad from a retailer, but rather collect similar customer data on your own. But it’s not that simple:

  • It takes a lot of time. A brand’s site has to be online for 5 to 10 years to collect enough data.
  • It’s expensive. A brand would need large budgets to promote its site to the top of search results and to attract paid traffic.

Obviously, it’s much easier to go to a retailer’s platform, buy ads, and use everything at the ready. Thanks to algorithms, ads on the platform will be shown only to those consumers for whom they are relevant. That’s why brands value retailer platforms.

In addition, retail media is the fastest-growing segment of advertising today. It’s squeezing the familiar monopoly of Meta and Google, whose share has begun to shrink. Such advertising is becoming a powerful revenue driver for the services themselves. The other day, Instacart reported a 30% growth in advertising revenue and earned $740 million on advertising alone in 2022. And Amazon is reporting advertising as a 10% share of its revenue.

Retail Media as the Future of Digital Marketing

Final thoughts

A progressive approach is always appreciated in the field of promotion, maybe now is a good time to look at the growing field of retail marketing. This advertising segment benefits everyone: brands get targeted coverage, retailers profit from the sale of advertising space, and consumers get relevant offers. In addition, it has many advantages in ad set-up and can solve many problems that have long troubled affiliates. Try adding retail media to your list of advertising channels and it will definitely boost your conversions.

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