Retail Media Networks : Build or Buy ?

As retailers new to retail media seek to create a Retail Media Network (RMN), they must carefully consider what to manage in-house and what to outsource.

It might seem appealing to outsource everything to a one stop shop service partner and sit back and watch the cash flow in.

But this is not a feasible option.

RMNs are ecosystems of people responsible for developing advertising propositions—whether for in-store, on-site, or off-site channels—selling them to suppliers, media agencies, or other buyers, executing the ads, measuring their performance, and billing advertisers.

These efforts are supported by, and dependent on, a variety of core technology solutions and service providers. For example, a retail media operating platform enables advertisers and client teams to request and set up campaigns, informs ad execution teams or solution partners about the "when," "where," and "what" of the execution, and helps the insight team or solution partners with measurement and analytics. There are also tech solutions for tasks such as on-site adtech, audience targeting, and off-site ads.

These solutions interface with the retailer’s core in-store and e-commerce systems, and the technology providers will almost certainly insist on contracting directly with the retailer, not through an outsourced partner.

In addition to high-tech solutions, low-tech service providers also play key roles. For instance, companies are needed to design, print, and affix cardboard advertisements to supermarket trolleys and shelves—tasks that will almost certainly require outsourcing.

When it comes to the people side of things—sales, client management, and ad execution—these roles are easier to outsource. However, we strongly advise against outsourcing the proposition management team. These individuals are critical for ensuring that the propositions align with the retailer’s overall strategy, add value for customers, work as intended, are competitively priced, and can be appropriately measured.

We also recommend that the leader of the RMN—responsible for the overall strategy, processes, results, and outcomes—be an internal appointment.

The companies that provide people outsourcing are distinct from the tech solution providers, who are different again from the low-tech service partners. No single tech or service provider covers all the needs of an RMN, so practically speaking, a one-stop shop option does not exist.

We lean toward in-housing wherever possible, with the option to outsource some of the people-related roles, particularly if a large sales, client management, and ad operations team is needed.

In-house teams new to retail media can be supported by external advisors and experts to accelerate their knowledge, skills, and capabilities. This also helps ensure that outsourcing decisions are made in the retailer's best interest, not the outsourcer’s.

In the supermarket sector, Tesco and Sainsbury’s both started with hybrid models, outsourcing large elements to dunnhumby and Nectar360, respectively. In both cases, these operations have been brought back in-house, though they continue to operate as separate business units with distinctive brand identities and cultures.

Asda, Morrisons, Boots, Very Group, and Co-op have outsourced large parts of the people side of their RMNs to SMG, while contracting directly with adtech solution partners like Criteo and Epsilon and others, who sometimes also provide people support for sales and operations.

John Lewis Partnership/Waitrose has outsourced elements of its RMN operations to dunnhumby.

Ocado’s team is in-house, as are, to our knowledge, the RMNs operated by Superdrug, Currys, and THG.

Outsourcing comes at a cost but can bring expertise, speed to market, and scalability.

Retailers must think carefully about what to manage in-house versus outsource. These decisions will vary from retailer to retailer, depending on their strategy, level of ambition, self confidence, available talent, and financial considerations.

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