The top 10 challenges facing today's retail media network leaders

In most FMCG retailers (eg supermarkets, health & beauty, general merchandise) “Retail Media” has moved quickly from being a peripheral activity that generated some useful cash to a significant profit contributor with high growth potential.

Most major supermarkets have created (or acquired) dedicated in house units that are tasked with growing media sales and profitability.

Capturing the full potential brings strategic & organisational challenges.

From personal experience creating and growing the dunnhumby Tesco retail media team back in the day and from recent conversations with a number of today’s retail media network leaders, we have identified 10 key issues that RMN leaders are wrestling with and whose successful resolution will determine who captures greater than fair share of future profitability.

1.?What is our purpose and scope ?

Many teams are still not 100% clear on their purpose, are beholden to the disparate activities of their e-com, marketing, commercial, IT, legal and financial colleagues all of whom have different agendas and are often not able to control the key elements on which they rely including what type of ads should be shown to which customers, via what channels and at what stage in the shopping journey.

Aligning senior leadership who haven’t grown up with retail media and find its nuances difficult to understand is critical but time consuming

2.??????How should we organise ?

Its not unusual for retail media teams to be 100+ in size, comprised of people with differing skill sets, competencies, motivations, using a wide variety of constantly evolving technologies and with increasing expectations to deliver results for an expanding set of demanding internal and external stakeholders

All organisations are perfectly designed to deliver the results that they do. Defining roles, responsibilities, making work flows efficient, selecting and integrating the right technologies, knowing what to outsource and what tio in house, managing the necessary data?is difficult and critically important.

3.??How to capture media agency spend ?

There are two main sources of retail media income almost all of which comes from brand owners whose products the retailer sells – commercial spend and brand spend.?For the most part commercial spend sits with the brand owners’ sales, e-com or shopper marketing teams and is largely linked to the size of the brand’s overall sales within the retailer. Brand spend is typically controlled by the brand owner’s media agencies who have much greater spending power, are, all things being equal, agnostic about retail media vs other key channels such as Facebook, Instagram Google, influencers and mainstream media etc and really care about performance and results.

Today, 90%+ of retail media spend is commercial spend but this is set to change. Small shifts of spend towards retail media and away from spend in other channels controlled by media agencies will create dramatic profit growth for retailers.

Few retail media teams have been able to so far capture much of this spend. And this is despite agencies willingness to switch channel and spend it. Key barriers include having the necessary connectivity that makes spending retail media simple and easy?(using the right integrated adtech, having the right commercial agreements, personal connections etc).

Size is also a constraint. Facebook and Google offer huge reach, one stop access and are quick and easy to transact with. Retail media is split across multiple retail buying points and is currently “fiddly” for agencies to navigate and full of friction.??

Making it easy for agencies to deal with them is a critical step for retailers but may not be sufficient. We predict that the winners will be those who also form coalitions or networks that give agencies single point of contact access to the audiences they are interested in.

4. How to make the right technology choices ?

Retail media teams typically use a lot of technology including adtech (SSP/DMP), planning & billing, CDP, loyalty software, data analytics etc

The tech is constantly evolving and there isn’t one solution that does everything. Retail Media leaders need to keep abreast of how these technologies are evolving and importantly how they integrate not just internally but how they connect to the technologies used by media buyers.

Scale, ease of use, advertiser connectivity and AI are all key factors against which to evaluate vendors. Criteo is the global leader and the one that challengers must try to beat.

5. How to grow off site media income ?

Onsite retail media seeks to influence the retailer’s website visitors to make certain brand choices. Most of these undecided customers are in buying mode, are highly influenceable and so are an attractive audience for brand owners.?The first priority for retail media teams is to use targeted ads to increase conversion and ad income.

But these audiences can increasingly be reached on other publisher websites as they read news, ?search for information or inspiration. ?

And not only can they be served relevant ad content as they continue to browse online, the extent to which they subsequently acted on the ads by revisiting the retailer’s site and/or making a purchase can be accurately tracked provided the retailer can track customer spend both online and in shops – typically using a loyalty programme to do so.?

Most retailers are still making small steps here but we predict this will be a big growth opportunity and a reason that retailers will continue to invest in growing their loyalty programmes.

6.??????How to manage the data ?

Retail media teams use and generate lots of data. Customer data is used to set up campaigns, target ads and measure their impact. Data flows between the technologies and between media sellers and buyers.

Most technologies enable sophisticated report generation but despite this retailers are still wrestling with how to provide advertisers with the information they ideally need. Its useful to know that a particular campaign worked in terms of return on ad spend (roas) but what really matters for advertisers is the cumulative impact of specific campaigns over time on certain specific audiences. Very few retailers are able to provide this level of insight and very few brands are asking for it or acting on it.

6.??How to separate retail media from the JBP ??

The bulk of today’s retail media spend comes from brand’s commercial teams.

This spend is typically negotiated with the retailers buying team in the form of a “joint business plan” which also contains sales targets, pricing and promotional support and other business agreements.?

Big sums of media money are traded with often little understanding, on either side of the table, of the actual value of that media.

Taking retail media out of the JBP, in a managed transition, is an important step for retailers who want to increasing sales and grow media spend from advertisers.

Similarly, we foresee the creation of dedicated in house retail media teams acting for brands that combine media and commercial expertise ?and are not constrained by annual trading agreements. ?

8. ?How to integrate with retailer’s mainstream marketing and sales activity ?

?Retail media does not exist in a steady state. Audience (ie shopper) numbers ebb and flow, instore and online, ?and tend to peak when the retailer runs its own marketing activity alongside natural footfall growing seasonal activity (like Christmas and Easter) or key events (like major sporting tournaments)

Smart retailers will look to corral supplier media activity under their own activations in order to amplify their impact and defray their costs. Smart brand advertisers should willingly participate as they will disproportionately benefit from the increased footfall that the activity drives.

Making it easy for advertisers to participate in a retailer’s major marketing activity requires careful planning and coordination, but everyone benefits.

8.?????How to measure the right thing – and its not ROAS !

Just as there is a thirst for data, there is an equal thirst for measurement and validation. Unfortunately, the industry has evolved, for understandable reasons, ?to measure the wrong thing and retail media networks have a major opportunity to assert their primacy vs competing channels. ?

Most advertisers tend to measure campaigns and index the cost of the campaign over the associated sales uplift to create a “return on advertising sales” metric. Some campaigns do incredibly well, some not so much. Try and take the learnings from the winners and reapply those going forward – right ?

The complication is that few, if any, retailers or advertisers are measuring what really matters and that is the combined impact of multiple campaigns, over time vs target (multi channel) audiences and disaggregated from other key sales drivers such as availability, price, promotion and positioning on page or on shelf. ?

RMNs have major measurability advantages over all other media channels but are yet to fully assert them. And there is still insufficient pull from brands, to a large extent because media agencies don’t know what they don’t know and insist on the roas metric despite its limitations and weaknesses.

?9.??????How do we know what works ?

Despite having great data and measurability, its still the case that most retailer’s and brands are not totally sure what bits of retail media work and which don’t.

We predict the rise of retail media mix modelling so that RMNs and advertisers are better able to assess value and understand how online display and/or sponsored ads act in combination with instore display and price activity and influence the activity of key audiences.

This requires holistic thinking and the smart organisations will be the ones who are able to solve this despite the atomisation of roles (e-commerce managers tend to focus on e-com activity and ignore what’s happening in shops, vice versa for retail managers and most technologies tend to focus on the bit that their technology impacted – could be a sponsored ad served by one adtech platform or an instore digital ad served by another – rather than the whole picture)

?The future's bright :

Despite the challenges, we estimate that UK RMN leaders are generating between ￡500m and ￡1billion in incremental profits for their shareholders and are all still at the early stages of their respective journeys.

CEO’s/CFOs and leadership teams are starting to appreciate the magnitude of the opportunity.

The future is bright for retail media network leaders but there's plenty to do !