The State of Retail Media - Summer 2024

Retail media is currently the talk of the town. It was the darling of Cannes recently, highly mentioned at Madfest in London, ATS in Singapore, and has dominated all the recent US conferences.

So, retail media is flying high, right? Well, yes, it's definitely growing. Yet, I think the reality will surprise many who are not in the know.

Here are some observations based on my experience working on three large RMNs in the US in the past year, two UK RMNs, and now running strategy for a retail media data company. I am well-connected with RMN companies, vendors, buyers and pioneers. These are my observations and opinions, so please share in the comments if you disagree.

Retail media is indeed growing at a huge pace. All those revenue growth charts you see are accurate. Yet, the first observation to make is that these numbers are dramatically skewed towards the largest players. Amazon takes the lion's share, followed by Walmart and other US giants. Retail media success is very well correlated with company size.

Aside from the giants, another area of retail media doing very well includes those that dominate a niche. Think of those with a big market share in areas like health and beauty, luxury fashion, pharma, etc. Having a clear reason to drive adoption is a big advantage.

The strength of first-party data through having large numbers of customers who regularly sign up online and/or use online/offline loyalty schemes is a retail media superpower and again separates the wheat from the chaff.

Despite the levels of industry growth, almost all RMNs are posting numbers that fall behind expectations. This is partly because the expectations were set very high from the start. It also reflects some of the technical and operational barriers that have held back growth.

While revenues are below expectations, costs are higher. There has been a big investment in technology and a bit of a free-for-all from some vendors to take a slice of the pie. Operational costs too have been high, adding pressure on companies that would, in many cases, rather be shedding resources (not saying that's a good thing, but it is a thing).

Brands are definitely spending on retail media. Yet, adoption is still early in the curve, and planning and agencies are still working to catch up. Many brands, large and small, do relatively little in the space, and most of what happens is with Amazon and maybe one other. This creates massive opportunities for the early adopters but also shows how early we are in the adoption cycle.

Traditional in-store, onsite retail media, and offsite retail media are quite different channels and opportunities. They are converging, but merging them is a mix of cultures and practices, just like combining traditional media with CTV. This applies both to the retailers and to the brands and agencies that buy from these organizations. Convergence is growing, but there is a lot of road to travel.

Technology and integrations in retail media are definitely nascent and in need of improvement. The high adoption rate of Google's GAM for retail media, despite it being largely unsuitable for RMNs, shows this. Since then, Google has actually made its systems less retail media-friendly, and a big correction in tech adoption needs to happen based on this.

Independent technology has done better. However, it's still early in the sophistication curve. Almost every tech vendor would be rated by clients as either overpriced or under-featured (in some cases both). The newer, more advanced technology can lack scale. Pretty much the whole space lacks talented service and rollout resources.

Identity changes mean that most offsite RMN tech needs an upgrade. Growing scale and sophistication mean that onsite tech is also in need of an upgrade. This creates an enormous opportunity for tech companies. The challenge is that it probably needs to be a zero-sum game with low adoption costs, as the retailers and brands don't want to be spending on incremental technology for the most part. To get in, you need to get someone else out and show seamless adoption as well as big benefits.

Talent. A lot of people talk about retail media, but actually, the talent required is very thin. Particularly around data and technology resources on one hand and true traditional retail media experience on the other. The combination of true retail experience and brand relationships alongside data and technology expertise is the sweet spot for the service layer.

From the brands' side, there is a lot of demand to do much more here, particularly with the data opportunities. Yet, brands are a long way from the promised land of being able to really unlock the benefits of RMN data, particularly outside one or two big relationships. Sophistication is growing brand-side but is constrained by a lack of talent and legacy structures.

These are my takes on the retail media industry. Hugely bullish, but I think a bit more open to the challenges than most takes. What are your thoughts?

I leave you with four huge opportunities in the space:

1. New data offerings that allow buyers to seamlessly activate commerce intent data and measurement.
2. Unlocking tier 2 retail media opportunities. How to help the tier 2s compete with the giants and use their own unique audience and reputation.
3. Assisting brand adoption at scale with all the data utilized for planning and measurement.
4. A new wave of technology and data offerings, provided they can be utilized in a turnkey fashion and displace existing vendors.