Retailers are in a tough spot. With the launch of digital commerce, they have to worry about their direct competitors and numerous new challengers chipping away at their revenues.
On the one hand, brands are increasingly reaching out directly to consumers (D2C) in an attempt to avoid steep retail margins. On the other hand, e-commerce giants are continuing to gain traction in the market thanks to their one-stop-shop approach, which more focused retailers simply can’t match.
Thanks to retail media, retail companies have a way to stay ahead of these challengers while keeping their customers happy and coming back for more. This is not only a new approach to advertising; it’s an entirely new source of revenue for retailers.
In this article, we’ll cover:
What is Retail Media
Retail media refers to retailers offering brands advertising space on their digital and physical properties. This can include everything from banner ads on an e-commerce site to digital signage in brick-and-mortar stores.
Brands love retail media for one simple reason – it lets them leverage the treasure trove of first-party data that retailers collect from their customers. This data allows brands to target specific target groups, leading to high-precision marketing campaigns with lower costs and higher ROI.
More on the importance of retail media in the next section.
Why is Retail Media Important
Retail media has the potential to boost retailers’ revenues monumentally. According to IAB Europe, retail media ad spending in Europe is set to grow by 36% in 2024 to €14.3bn compared to last year. Globally, the spending is projected to be $141.7bn, led by the US and China.
However, retailers are not the only group benefiting from retail media.
As we’ve already hinted, retail media involves three main stakeholders:
- retailers
- brands
- consumers
The first two groups are active participants, going into retail media to secure their business success. Retail media provides a significant edge for retailers facing a highly competitive market. It turns their platforms into advertising hubs that generate additional revenue while increasing customer loyalty and engagement.
For brands, retail media provides a direct line to customers who are already shopping. This increases the chances of making a sale because the audience is in a buying mindset.
Finally, while customers are only passive participants in this process, it doesn’t mean this group has no benefits from it. Retail media gives customers more relevant and personalized shopping experiences and promotions based on their preferences and past behavior.
As you can see all three groups benefit significantly from retail media, making it a crucial part of any retailer’s efforts to stay ahead of the competition.
Main Retail Media Formats
The concept of retail media isn’t entirely new – retailers have provided brands with opportunities for in-store promotions for a very long time. However, with the advent of digital technology, these opportunities have expanded exponentially.
Now, retailers can offer a wide range of advertising formats across digital and physical platforms, creating new revenue streams and enhancing the shopping experience.
We can roughly group the different retail media formats into three categories based on where the advertising is being served:
- online store ads
- e-mail and social media ads
- in-store ads
Next, we’ll talk about each one of these in more detail.
Online Store Ads
Online store ads are a cornerstone of retail media. These ads are strategically placed on e-commerce websites to capture shoppers’ attention as they browse.
Their main benefit is that they are a direct line to potential buyers already in a purchasing mindset. This increases the likelihood of conversion because the audience is primed for a shopping experience.
E-mail Ads
E-mail marketing, in relation to retail media, represents an untapped goldmine for retailers. With customer data from their website, retail marketers can personalize their marketing e-mails with just the right promotions and offers.
Combining retail media strategies with e-mail marketing campaigns can help retail marketing in two ways. First, it increases e-mail open rates and boosts click-through rates, resulting in more effective e-mail marketing. Secondly, it allows retailers to re-engage customers who browsed their website looking for a particular product but dropped out before completing the purchase.
Social Media
Social media often plays a crucial role in retail media strategies, thanks to its real-time engagement and the ability to serve targeted campaigns to the right audience. For example, retailers can use their website data to target followers who recently visited a brand’s product page with a time-limited personalized offer.
And if you add influencer campaigns or user-generated content into the mix, you get a highly effective way to skyrocket sales and increase brand awareness.
In-Store Digital Signage
In-store signage and online retail media might seem like a strange mix. However, with modern digital displays and interactive kiosks, retailers can transform how customers browse for and purchase products in their stores.
Unlike static promotion channels, in-store signage can now show different messages and offers at various times of day. Very useful if, for example, retailers know that a certain demographic visits their store frequently during specific hours.
Challenges of Retail Media
After everything we’ve covered, you’re right in wondering why more companies aren’t jumping on the retail media train. There are several challenges, both technical and organizational, preventing more retailers from adopting this new approach.
A common barrier to retail media is the size of the company and the number of its regular customers. As we mentioned, the power of retail media lies in their access to first-party data, so you need a certain number of customers to be able to extrapolate valuable insights.
On the technology side, the main challenge to successfully implementing retail media is the existence of data silos. Data silos are created when a business keeps data in different places across the organization. This can include anything from presentation decks to customer demographics and purchase history. As a result, it is unable to have a unified view of the customer, often called 360-degree customer view.
However, by investing in integrated systems such as a customer data platform, you can ensure all customer data is kept safely in one place. This not only creates a comprehensive view of your customers but can also trigger different engagement and personalization systems, making retail media on a mass scale simple.
Final Thoughts on Retail Media
Retail media stands at the cutting edge of modern marketing, offering scalable, data-driven opportunities for retailers and advertisers. By effectively leveraging first-party data, retailers can create deeply personalized shopping experiences, elevating brand loyalty and ultimately driving sales.
However, for retail media to truly be effective, you need a way to unify that data into a single solution and use it effectively. And that is where customer data platforms can provide unparalleled value to retailers.
