Retail Media creates new opportunities (and problems) for retailer / supplier collaboration
Retailers need brands to sell and brands need retailers to provide customers to sell them to.
The relationship requires collaboration to ensure the process of selling and distribution runs smoothly but is also contentious particularly regarding distribution, pricing and promotions.
Both parties commercial teams are tasked with managing these complex relationships and both parties have separate marketing teams who respectively focus on brand building and demand generation with little need to collaborate.
Retailers need to acquire customers who otherwise might shop at competing retailers and brands need to acquire consumers who might otherwise buy different brands.
Both do so through a combination of "upper funnel" activity aimed at building awareness and consideration from new customers or consumers as well as "lower funnel" activity that seeks to convert these primed prospects into actual buyers.
Despite the competitive pressure, brands typically sustain higher margins and so have a relatively higher marketing spend per ￡ of sales. And they go to great trouble to create compelling advertising and to ensure this advertising reaches its intended audience cost effectively.
There are a myriad of ways a consumer might see this advertising, could be on one of hundreds of TV channels, on a poster, on one of a million websites or apps , on one of a thousand radio stations.
The task of distributing this advertising to the intended audience and measuring its cost effectiveness is also highly complex and so brands turn to specialist media agencies who have skills in audience finding, format and channel selection, aggregated buying power, and using technology to set up campaigns, measuring the adverts impacts and cost effectiveness.
This process is critical for brands but its also complex, involves multiple parties and is costly. Typically for every ￡ in a brand's media budget only 50p reaches a consumer, and in many cases its the wrong consumer and its very difficult to establish accurately the extent to which the advertising achieved its desired outcomes.
Major retailers are realising that they can solve many of these problems on behalf of brands and by doing so can acquire more customers themselves, increase their own sales, improve their customer's shopping experience, generate big savings for brands and generate a major new "retail media" income stream for themselves.
In some ways this is not new, retailers have always enabled brands to advertise in and around their stores via posters, trollies and magazines.
What's new is the ability that retailers have to enable brands to reach their target audiences not only when they are in their physical shops but when they are browsing on eg 3rd party sites on the open Internet or the retailer's own e-commerce site.
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The ads are highly personalisable. And outcomes are highly measurable , not just in terms of aggregated sales , but at a highly granular level its possible to measure awareness, consideration, intention to purchase, trial and repeat purchases.
This heralds a new era of retailer and brand collaboration but?it also introduces new contentions and complications to manage.
Not least organisational.
For brands, do they spend this new retail media via their commercial teams who mostly don't have experience in advertising or media buying but might be trainable, have access to the data and are low cost??Or do they persist with their media agencies who understand media but are highly expensive, lack the right data and often don't understand the broader commercial opportunities that exist between brand and retailer ?
For retailers, who acts as media seller? is it the commercial teams who are skilled in extracting big sums of money from brands but who typically lack skills in media selling, campaign management and customer analytics? Do they create a separate organisation with the inherent risk of disconnection from the core purpose of serving customers or integrate within existing marketing departments even if their focus is on the retailer brand?
Brands and retailers are all wrestling with these organisational conundrums. Getting the right people, processes and technology in place to exploit retail media will be a source of competitive advantage.
Our experience suggests that the best results from the retailer's point of view are achieved when dedicated teams of media and data sellers acting on behalf of, but governed by the retailer, interact with both category teams and media teams simultaneously.
Most brands are still working through the operating model that works best for them with three groups vying to spend the retail media dollars - commercial teams, media agencies and in some cases dedicated in house retail media specialist teams.
Similarly with retailers who are sometimes creating new dedicated in house teams, sometimes outsourcing and sometimes managing a disparate number of third party media sellers and campaign teams.
Expect to see a lot of experimentation with retail media operating models from both retailers and brands as they both explore new ways to collaborate on the one hand and seek competitive advantage on the other.