Retail media has emerged as the fastest-growing digital advertising channel, poised to capture nearly 25% of total media spending by 2027. This meteoric rise has led industry experts to dub retail media and connected commerce as the “third wave” of digital advertising’s evolution, after search and social media.
The industry’s ability to leverage first-party data, coupled with the expansion into offsite advertising and new technologies, positions it as a formidable force in the digital advertising landscape. However, the industry must address challenges related to talent, standardization and transparency to fully unlock its potential.
Retail – and more broadly – commerce media exists at a pivotal point in its evolution. That evolution was clearly on display recently at the IAB’s Connected Commerce Summit in New York, as industry leaders gathered to discuss an array of hot topics related to standardization, emerging technologies and incorporating retail media within the in-store experience.
The maturity of retail media as an advertising channel is evident in the confidence of marketers. A survey found that 89% of marketers rated their retail media programs as average, above average or excellent in maturity. This confidence is reflected in spending projections, with offsite programmatic retail media expected to hit $20 billion this year, a significant leap from the $7.5 billion spent in 2023.
Data download
At the heart of retail media’s success is its ability to leverage first-party data for highly personalized advertising. As Ali Miller, VP of ads product at Instacart, notes, “It is a real expansion, I think, of the value proposition that retail media can provide.” Leveraging first-party data allows for maximized ROAS through unique, highly personalized ads using privacy-compliant customer data. Jenny Holleran, Group Director at Kroger Precision Marketing, and I recently recorded a podcast with the Path to Purchase Institute, where she described first-party data as the “layer” – or maybe more aptly, “layering” – that RMNs provide into the larger media ecosystem outside of their walls.
Consumer privacy is paramount, and while technologies like data clean rooms are not exactly a “silver bullet” solution, they do move the industry in the right direction toward protecting consumers and complying with growing privacy legislation in states across the US, according to Andrew Tobel, Privacy Counsel for Albertsons Media Collective, during a discussion at IAB Connected Commerce.
Retail media is evolving beyond traditional transactions, focusing on enhancing the overall customer experience. This expansion is evident in the integration of retail data with other media formats. Disney’s partnership with Kroger, for instance, allows Hulu to target based on the retailer’s data. By now, those of us on the circuit are more than familiar with the partnerships between RMNs and premium publishers. These growing partnerships form as the industry realizes it needs such partnerships to compete with retail media giants Amazon and Walmart, which are consistently pouring money into building and optimizing their content flywheels.
Despite its rapid growth, retail media faces challenges. Andrew Lipsman, independent analyst and founder of Media, Ads + Commerce, notes, “Getting into the ad-selling space is not a core competency [for retailers] and not all of them have enough talent to support some of these opportunities.” This highlights the need for retailers to invest in talent and technology to fully capitalize on the potential of retail media. Building the right expert teams, both internally and externally with parters like SMG, is paramount to enhancing your organization’s core competencies.
Looking ahead
Retail media is set to integrate more deeply with emerging technologies and consumer behaviors. The shift towards omnichannel, connected commerce media solutions across digital and in-store environments is expected to accelerate in 2024 and beyond. Retailers now see the store as an opportunity to build experiential shopping for consumers as they leverage their brick-and-mortar assets to stand apart.
The industry’s ability to leverage first-party data, coupled with the expansion into offsite advertising and new technologies, positions it as a formidable force in the digital advertising landscape. However, the industry must address challenges related to talent, standardization and transparency to fully unlock its potential. As retail media continues to mature, it has an abundance of opportunities to reshape the advertising ecosystem, offering new revenue streams for retailers and more targeted, effective advertising solutions for brands.
Want to chat about how SMG’s consultancy or white-label services can acclerate your commerce media strategy? Send Justin a message at justin.sparks@smg.team.