There are many factors weighing heavily on marketers as they look at their 2022 investment plans. In the search for reliable performance and brand safety, retail media has become an increasingly attractive proposition, sitting so closely, as it does, to the Point of Sale. Forrester predicts that by the end of 2022 retail media revenue will top $50bn (£37.5bn) in global revenue.
For consumers, this means more ads while shopping which can lead to a jarring experience unless the retailer’s advertising formats, placement strategy and relevancy rules are well executed.
Amazon’s booming advertising business demonstrates that advertising and a positive customer experience are by no means mutually exclusive. Marketplace Pulse notes that where customers might once have expected to see the customary one or two ‘sponsored’ or ‘promoted’ products, the reality today is that “of the first twenty products a shopper sees when searching on Amazon, only four are organic results.” More succinctly put: “Everything on Amazon is an Ad” and still its overall gross sales grew 22% in 2021.
What does a successful retail media look like?
Retail media typically falls into three broad categories: onsite (ads displayed on retailer’s website or app), offsite (ads displayed on the open web, social channels & email) and in-store (ads in the physical store environment).
Of the three, onsite advertising offers the highest margin for retailers and the greatest level of precision, measurability, and performance for advertisers. The two most common onsite ad formats are:
- Sponsored products – the promotion of products in category, search result and product pages. Sold via CPC auction, this is all about driving conversion and securing share of the digital shelf.
- Display – banners where advertisers can target specific shopper audiences with static or dynamic (including product data and CTA) branded content. This is a mid-funnel format targeting shoppers in the consideration phase, sold via CPM or tenancy.
By blending these advertising formats through the customer journey, retailers are creating engaging and relevant experiences while ensuring advertiser objectives are met. A great example is Douglas.de:
Finding the sweet spot between quality and quantity
Amazon is able to deliver a high volume of ads without decreasing relevancy for customers because over time it has built up vast advertising demand across a huge variety of products. With brands and sellers queuing up to pay for eyeballs on just about every search term and sub-category imaginable, they can serve predominantly advertising content without disrupting the customer experience by showing irrelevant products.
Retailers with less mature programmes and a smaller pool of addressable advertisers should take a data-driven approach to measuring relevancy to determine the right number of ads to show. Click-thru-rate (CTR) is the best proxy for relevancy; monitoring this metric helps retailers identify the right moment to expand the number of slots they want to allocate to advertisers:
Enabling small brands to rise to the top
While large advertisers have traditionally led the way in retail media, as retailer media networks mature, it is customer experience – rather than budgets – that determines ranking. As retailers develop smarter predictive algorithms and more personalised experiences, smaller brands with an understanding of digital marketing, auction dynamics and audience targeting can quickly make themselves as discoverable as their larger counterparts.
Opening the door to ALL brands
When we think of retail media, we often think in terms of ‘endemic’ brands i.e. product-manufacturers who sell goods immediately related to the retailer’s category – food and drink if you’re a grocer, for example.
Retailers opening inventory to non-endemic brands is another way to make the digital shelf more diverse and competitive. If we look to the leaders of the retail media space, like Walmart, Best Buy and Asda, they are enabling retail media opportunities for all kinds of brands e.g. financial services firms, automakers, travel and other businesses:
As retailers begin exposing ad inventory via traditional programmatic networks and granting advertisers access to their first-party data via audience curation tools, the applicability of retail media to almost any type of advertiser is becoming an exciting reality.
Retail media 3.0
Achieving this type of blended shopping/advertising experience is not a case of simply flicking a switch. Retailers need the technology to be able to rationalise thousands of audience interests and retain a high level of control over the customer experience. Unlocking this starts with AI-powered relevancy controls and robust business rules that protect customer experience by analysing the context of every impression, so customers see the best ads for each stage of their journey.
In its final form, ’Retail Media 3.0’ is a tool for future decision making beyond just advertising. Brands will be able to leverage retailer insights based on their retail media investments to inform product and marketing decisions, ultimately enhancing shopping experiences.
As retailers get a clearer view of their customers using first party data, exciting opportunities are created for advertisers to diversify and improve the digital shelf, while remaining relevant to shoppers in every stage of their experience.