There’s a lot of buzz around retail media at the moment, with new opportunities for brands and advertisers continuously emerging. So, could 2022 be the year of retail media? Read on to find out more…
At Croud, we define retail media as paid advertising and content opportunities that exist on websites and apps, where other products are also being offered for sale. It’s that simple. Amazon is a great example, but many other retailers are now including multiple ad placements alongside other products on the digital shelf, in search results, and/or on other pages and touchpoints in the shopper journey. Commonly these placements are bought using an auction-based bidding model. This creates both an additional revenue stream for retailers, and new opportunities for brands and advertisers.
New momentum
Retail media is currently a hot topic, predicted to account for nearly 20% of all digital ad spend in the US by 2023, making it worth in excess of $40 billion dollars. Some are going so far as to say 2022 will be the year of retail media. Whether you agree with that or not, it’s fascinating to see the way this space is shaping up and to examine some of the driving forces behind this new-found momentum.
Retail media ad placements are not new by any means. For many years it has been possible for advertisers to buy placements to accelerate visibility of their products on retail sites, via direct deals and/or by using retail network platforms like CitrusAd and Criteo Sponsored Products (formerly Hooklogic). However, more limited ad inventory alongside fears regarding the degree to which the sales driven by these ads were actually incremental, meant many advertisers have been taking a cautious approach.
So, while it’s not a totally new opportunity, we’ve reached a tipping point where brands need to be investing in retail media if they’re serious about growing, and defending the digital shelf and their market share.
New revenue streams for retailers powered by ad tech and network platforms
Retail can often be a low margin business, so retailers are increasingly starting to see the opportunity in building an additional revenue stream by monetising their hard earned, loyal shopper audiences and data. Amazon, for example, has been very successful in gradually increasing their paid placements over the last decade while trying to protect the user experience along the way.
Today their search model is almost completely pay to play. In fact, of the first twenty products a shopper sees when searching on Amazon today, only four of them are organic results. Moreover, Amazon data tells us that 35% of shoppers click on the first product in the search results while 70% never even make it past page one. This shows just how difficult it is to stumble across an organic product placement these days. Very recently, Target.com revealed it will be making its top two product placements in search results available to advertisers for the first time, another clear sign of Target’s intent to follow in Amazon’s footsteps – like many other retailers.
Similarly, the first two product placements in search results on Tesco.com are now available to advertisers and typically drive a 44% share of sales. When you buy a product in this way, it’s also worth noting that the purchased products then feature in the shoppers’ favourites for a rolling period of 12 months. This gives brands an extra incentive to use advertising to go after those high intent, undecided shoppers with a good opportunity to also drive repeat sales.
Brands can no longer afford to be passive
We’re also starting to see brands allocate and prioritise retail media budgets alongside their other key marketing channels in a way many haven’t before. This is driven by a realisation that we’ve reached a point on many retailer sites where the premium product placements are now paid for. A failure to invest in advertising in these key placements damages your visibility, and means your click traffic and share-of-shelf will eventually push your sales and market share into decline.
In previous years, investment in these retailer ad placements was largely driven using budgets made available by the retailers themselves, as part of the partnership deals made with the brands. That often meant that the job of placing and optimising the ads was not given a high priority, and it ended up being done without any real care or attention. For most brands, these platforms are now considered an important marketing channel due to the evolution of the retail media space. So, they are being planned, budgeted and optimised alongside other business critical paid-media channels like PPC, Paid Social, Display and Video.
This in turn is bringing new performance advertising and data opportunities firmly into focus for many consumer packaged goods brands, who perhaps thought direct response digital advertising was reserved only for those who sell directly to consumers.
For those brands who have become comfortable dominating prime digital shelf space on retailers’ sites for years, retail media represents both an opportunity and a threat. As these platforms grow in sophistication, so do opportunities for challengers to make strategic gains through the smart use of different placements, targeting methods, technology and the fast adoption of new products and features. It’s important for big brands to keep up.
What does the UK opportunity for advertisers look like?
But… is the expansion of retail media good news for consumers?
Yes! We shouldn’t assume that the huge increase in paid-for advertising dominating pages and search results across retail sites and apps is a bad thing for the consumer. These new placements, content opportunities and the increasing levels of data being made available, means that brands have an opportunity to customise and personalise the experience to a much greater degree. Done correctly, this should lead to an improvement in user experience for shoppers. Retailers must be careful to roll this out in a way that enhances the experience.
A second benefit for the consumer is that it’s also privacy-safe – retail media ads are powered by retailer owned, signed-in first-party data, meaning there is no reliance on third-party cookies. This makes retail media advertising more future-proof than some of the other digital ad channels which have a less certain future in a cookieless world.
If you’d like to learn more about opportunities to boost your findability or brand presence on retailers sites in the UK, Europe or the US, get in touch with Croud’s ecommerce team.
