What if your shopping cart could tell brands exactly what you wanted—before you even knew?
That’s the power of retail media networks (RMNs), and it’s changing the retail game for good.
From clicks to carts, retail media networks are unlocking a new era of precision marketing, delivering ads that matter exactly where and when they matter most.
As such, retail media networks are becoming an integral part of digital advertising, offering brands access to valuable first-party data while enabling more targeted advertising across retailers’ digital properties. With retail media ad revenue projected to reach $52 billion in 2023 and expected to hit $61 billion in 2024 in the US, and $125 billion by year end globally, over 80% of major retailers have now even established their own media networks.
Truly, RMNs are capturing a significant share of digital ad spending.
Disparate from traditional online ads, retail media ads are integrated into the shopping experience, appearing as sponsored banner ads, product listings, or product recommendations. The global retail media market is expected to grow to $143 billion by 2028, growing at a CAGR of 12.5%, and a potential $293 billion by 2029!
RMNs: Where Shopper Marketing Meets Digital Strategy
The transition from traditional shopper marketing to retail media has been swift, driven by a mix of technological advancements and shifts in consumer behavior.
RMNs allow brands to advertise to highly targeted audiences through retailer-owned digital channels, such as online display ads, paid search, and even off-site placements on social platforms. As the impending phase-out of third-party cookies looms, RMNs offer a viable solution by leveraging first-party shopper data, making them an increasingly valuable asset for brands navigating the privacy-focused digital landscape.
However, despite these benefits, 88% of brands feel pressured by retailers to invest in RMNs. This has led to an environment where RMNs are seen as a “must-buy” rather than a strategic investment, particularly as they pull from existing shopper marketing and trade budgets rather than creating new spending opportunities.
Let’s assess how this rapid growth is causing a mixed reaction for marketers, many of whom feel they have little choice but to participate while others rejoice the targeted outlook for advertising.
“There is a multitude of retail partners launching RMNs, and as such, multiple shades of grey for us to digest in terms of technical capabilities, measurement and data transparency, and strategic alignment.” says Celso Borges of Pepsico.
Source: https://www.emarketer.com/content/in-store-retail-media-2024
A Data-Driven Ecosystem: The Appeal of Retail Media Networks
One of the key draws of RMNs is their ability to provide brands with rich, first-party data that fuels more targeted advertising campaigns. Platforms like Amazon, Walmart, and Target are leading the charge, with Amazon alone accounting for 89% of U.S. retail media ad spend.
These networks enable brands to engage with consumers at multiple touchpoints throughout their shopping journey, offering opportunities for both immediate conversion and long-term brand building.
Additionally, RMNs have proven to be highly profitable for retailers.
Operating margins for these networks range from 50% to 70%, far exceeding the single-digit margins typically seen from product sales. For retailers, this has transformed RMNs into an essential revenue stream, further incentivizing their promotion to brands.
The Next Frontier: In-Store Retail Media
And it doesn’t end with e-commerce.
While digital channels remain the primary focus of retail media networks, there’s growing investment in in-store retail media. Retailers like Walmart and Kroger are already incorporating third-party advertisements on digital screens within stores, offering another way for brands to connect with consumers. These screens provide brands with contextual advertising, reaching consumers at the exact moment they’re making purchasing decisions. They 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.
As retailers continue to explore how they can merge digital and in-store experiences, this in-store component of RMNs is expected to grow, enhancing the omnichannel shopping experience. It is now the second highest priority for companies, second only to paid search, with 77% of a focus on the retailer’s ecommerce site. By 2024, we may see in-store retail media become a significant part of the broader retail media ecosystem, and by the end of 2024, retail media is projected to grow by 25% year-over-year, driven by better targeting capabilities and the growth of commerce media. As such, retail media’s growth is faster than almost any other form of ad spend.
Source: https://skai.io/reports-and-whitepapers/2024-state-of-retail-media-report/
Source: https://www.ana.net/content/show/id/77513
Challenges: Lack of Standardization and Complexity
Despite the clear advantages, there are significant challenges when it comes to using RMNs effectively. 56% of brands are working with five or more different RMNs, with 73% expecting to increase their investments in the near future. However, the lack of standardization across platforms poses a major hurdle. Marketers cite the absence of consistent measurement and transparency as barriers to fully optimizing their campaigns, with many expressing frustration over the complexity of managing multiple RMNs simultaneously.
“I think one of the biggest challenges with retail media today is that retail media networks are growing everywhere: new retailers, new capabilities, new tech allowing to make more of it,” says Bianca Diaz of Reckitt.” But from brands point of view I don’t see the budgets growing so easily in the same proportion. I think this is an obstacle for the proper integration of the full funnel media right now.”
Brands also remain conflicted about how much value RMNs truly deliver. While two-thirds of marketers use them primarily to drive short-term sales, only 12% view RMNs as a tool for long-term brand growth. This focus on immediate conversions has led some brands to worry that investing heavily in RMNs may come at the expense of building lasting brand equity.
“A big challenge is ensuring we’re delivering the expected superior ROI, which implies truly implementing campaigns in a full funnel manner and having comparable ROI techniques and metrics,” agrees Celso Borges of Pepsico.
However as a step to combat this, IAB released the first set of in-store retail media standardizations on Wednesday September 18th 2024. This is to encourage cross-channel integration between traditional media (like TV) and in-store media, and to develop alignment between buyers’ and sellers’ needs for transparency and consistency, as in-store advertising has lacked uniformity in the past. The guidelines create terminology for in-store media components for retail media formats, store zones (e.g., entry, checkout), and ad placements for overall consistency. Key metrics include ad loops, impressions (using “opportunity to see”), and store traffic. While advanced measurements (like “likelihood to see”) are possible, they come with technological and privacy challenges.
How Retail Media Benefits Multiple Stakeholders
Despite some skepticism, retail media offers significant benefits for retailers, brands, and consumers alike.
“I only see Retail Media playing an even bigger role in marketing in the future, being more sophisticated while creating value for shoppers, retailers and brands,” emphasizes Bianca Diaz of Reckitt. “I’m sure we won’t have to answer that question about the incrementality anymore!”
And how do RMNs benefit each party?
- Retailers: Retail media opens up new revenue streams by allowing retailers to monetize their digital real estate. By delivering relevant ads, retailers can enhance the shopping experience and increase the average order value. For instance, Walmart Connect generated over $2.1 billion in ad revenue, and by 2024, retailers are expected to earn 5% of their total revenue from retail media networks.
- Brands: Retail media campaigns often yield 4x higher return on ad spend (ROAS) compared to other digital channels, thanks to the precision offered by first-party data. Procter & Gamble, for When thinking about KPIs, like other forms of advertising, it is important to think beyond conversion at metrics like LTV, AOV, etc., as there is a cliff point in retail media beyond which ROAS will likely decline, as summarized at RETHINK Retail GRL + TRE.
- Consumers: Retail media improves the shopping experience by delivering more relevant and personalized ads. According to research, 71% of consumers prefer ads tailored to their interests and habits, making the shopping journey more efficient and fulfilling.
“RMNs are very profitable to retailers, and hence, a strong economic incentive for them to keep investing in digital commerce traffic growth; that effect coupled with the rise in income from Millennials and GenZers will fuel the growth for the foreseeable future,” concludes Celso Borges of Pepsico, optimistic about the adoption of RMNs.
Leading Retail Media Networks
The retail giants have already established their dominance in retail media networks. These retail media networks allow advertisers to tap into highly valuable first-party data, making their ad campaigns more targeted and effective.
In addition to the large networks, niche retail media platforms provide access to more specialized audiences:
- Home Depot’s Retail Media+: This network focuses on the DIY and home improvement sector, offering both on-site and off-site ad opportunities.
- Wayfair: For the furniture and home goods market, Wayfair’s platform delivers targeted product ads to its millions of monthly visitors.
- Saks Media by Saks Fifth Avenue: This luxury retail media platform enables advertisers to reach affluent customers who shop for high-ticket luxury goods.
- Chase Media by Chase: Chase’s retail media network connects brands with the bank’s customer base of over 60 million digitally active customers.
- T-Mobile Advertising Solutions: T-Mobile’s retail media network reaches over 100 million wireless tech-savvy consumers, offering mobile-first ad placements.
- PayPal Media Network: PayPal’s retail media platform leverages its 400 million active accounts to deliver personalized ad experiences during the payment process, a key part of the purchase journey.
Moreover, connected retail media platforms like Criteo and CitrusAd allow advertisers to scale their campaigns across multiple retail sites using a single platform, making campaign management more efficient.
Several startups are bringing new innovations into the retail media space:
- Mabaya specializes in e-commerce retail media solutions that enhance product discoverability on e-commerce platforms.
- Catch provides a platform focused on influencer-driven campaigns and targeted advertising, leveraging influencers who align with shoppers’ brand values, creating authentic and engaging marketing content.
- weR offers a platform that merges in-store experiences with online channels, using advanced spatial computing technology to create immersive environments where consumers can interact with products both physically and digitally.
- buywith enables retailers to create TikTok-style shoppable video snippets for use on their websites. These video ads convert at a 48% higher rate than static ads, offering a more engaging way to advertise products.
Read more about retail tech startups on the Re:Tech blog.
Some of these have clear views of where retail media is blossoming and where its not, often varying a bit by if its managed in house or externally. “Many ecommerce websites that experience the massive growth in revenue and profit of retail media networks are reaching a point where they ask themselves if they should bring it in-house (tech, sales teams or both) or connect to retail media networks and use standard tools and platforms,” says CRO and co-founder of Mabaya, Dan Chen. “The in-housing and walled gardens create fragmentation and lack of standardization that makes it hard for the market to evolve and eventually work with a few selected retailers in their territory.”
Sources: https://www.thoughtworks.com/insights/articles/retail_media_networks_are_they_the_future_of_digital_advertising
The Future: A Balancing Act Between Sales and Strategy
Looking ahead, retail media networks are expected to continue growing in importance. 52% of brands believe RMNs will be viewed more positively over the next two years, despite current challenges. As advertisers adapt to the evolving digital landscape, RMNs will likely play a crucial role in helping brands navigate the complexities of a post-cookie world, particularly as first-party data becomes even more valuable.
However, for RMNs to reach their full potential, greater standardization and transparency will be necessary.
Brands need clearer insights into how their investments are performing, especially if RMNs are to be used for more than just short-term sales boosts. And yet, as retail media networks are seeing up to 4x higher ROAS in comparison to other digital channels. The ability to offer precise targeting, new revenue streams, and a better shopping experience makes it an invaluable tool for all stakeholdrs.
As the industry evolves, RMNs have the potential to become powerful tools for both conversion and brand building, provided these concerns are addressed.
