The Next Big Wave of Digital Advertising: Retail Media Networks

As the digital advertising landscape continues to evolve, Retail Media Networks (RMNs) have emerged as the next big wave in the industry. With the sustained rise of e-commerce and online shopping, retailers are looking for innovative ways to capitalize on this shift in consumer behavior.?

Throughout my time as the EVP & Global Chief Revenue Officer of Marketing Cloud, Commerce Cloud, Retail and Consumer Goods at Salesforce, I've witnessed the rapid evolution of digital advertising firsthand. I believe the rise of RMNs is an emerging trend that will profoundly impact the advertising industry for years to come.?

RMNs are gaining momentum as they empower brands to engage with consumers throughout the purchase journey. As cookies decline and privacy takes center stage, RMNs can thrive due to their in-depth understanding of consumer behavior and ability to tailor marketing messages.?

The Growing Potential of Retail Media Networks?

Let’s start by defining what exactly a retail media network is. Besides just being an advertising platform that is owned and operated by retailers, RMNs allow brands to promote their products directly on the retailer's website, app, or other digital channels. Essentially, RMNs act as a potent advertising medium that connects brands with consumers at the point of purchase, fostering a seamless and relevant shopping experience.?

Well-known examples in the current landscape of RMNs include Amazon Advertising, Walmart Connect, and Target's Roundel. In recent years, these platforms have gained considerable traction, enticing advertisers with their unique capacity to deliver highly targeted, data-driven ad campaigns that bolster sales and foster brand loyalty.?

According to GroupM, it’s estimated that retail media advertising will grow by 60% by 2027.? McKinsey predicts ad spending will increase to $100 billion in the United States alone by 2026.?

With RMNs, retailers have found a lucrative opportunity to generate new revenue streams with high margins. In fact, RMNs provide operating margins in the range of 50-70%. It allows retailers with single-digit profit margins to leverage their shopper interactions, touch points, and intelligence to unlock significant economic potential.?

Components for Success?

For RMNs to thrive and attract brands, retailers must focus on three essential components that contribute to their success:?

• Comprehensive consumer insights: To create a successful RMN strategy, retailers must have a profound understanding of consumers. This means that retailers must determine the appropriate message for the right audience and deliver it at the most opportune moment to drive increased sales.?
• Effective programs and solutions for brands: Brands already have numerous marketing channels at their disposal. In order to capture advertising dollars, RMNs must offer strategies that cater specifically to the target consumers of the brands. This will enable the brands to effectively connect with their audience and succeed in their marketing efforts.?
• State-of-the-art retail tech: Finally, to achieve the above-mentioned targets, exceptional retail tech is equally important. The ideal solution for a successful RMN should be an integrated platform. It should provide an exceptional user experience for consumers while aggregating all consumer data to create a unified and single view of the consumer for the brand. With such a platform, brands can access consumer insights to drive personalized engagement and customized ads to the target audience.?

Potential Challenges and Hurdles?

As retailers seek to develop and scale their RMNs, the most significant hurdle they face is effectively communicating the value of a RMN to brands. Their skyrocketing adoption may hit a wall if brands are not seeing the true ROI on RMNs as promised. Therefore, RMNs must provide a higher ROI for both the brand allocating the funds and the retailer hoping to sustain and continue this high-margin revenue opportunity.?

Another big challenge is the hassle brands face as they manage and track their RMN advertising inventory. Forrester's "CMO Pulse Survey" revealed that 45% of advertisers face challenges due to the number of RMNs they have to handle, while 40% struggle with comparing the performance across RMNs.?

Furthermore, launching an RMN as a new retailer and keeping pace with market leaders and other large retailers is not for the faint of heart. Even large retailers are essentially competing with Google and Meta for a share of the lucrative digital advertising market. Therefore, companies must act swiftly and decisively with the right partner supporting them to surmount this challenge.?

Final Thoughts?

Based on my conversations with industry experts and my own experience, RMNs are here to stay. To me, and many other industry experts, they represent the future of digital advertising and offer immense growth potential.?

By focusing on comprehensive consumer insights, delivering robust programs and solutions for brands, and investing in advanced retail tech, retailers can capitalize on this growing trend and overcome any challenges they may encounter along the way.?

As a Salesforce leader, I am eager to witness how this trend unfolds and the inventive ways retailers utilize these networks to enhance customer experiences and drive business growth.?

Are you a marketing or retail industry expert? If so, I'd love to hear your thoughts and perspectives on the expanding world of RMNs. As we all navigate this ever-changing landscape, your insights and experiences will be incredibly helpful in shaping the future of digital advertising and RMNs. Please feel free to reach out to me and we’ll keep the conversation going!?