The Unique Edge of Retail Media: What Makes It Different from Other Ad Channels?
Retail Media has emerged as a transformative force, redefining digital advertising industry standards and outpacing other advertising channels in both growth and effectiveness.
Simply put, Retail Media involves digital advertising within a retailer's own assets—such as websites, mobile apps, and in-store screens—as well as on external platforms like social networks and third-party publishers. The core of Retail Media’s significance lies in its integration with first-party data, offering unmatched precision in targeting and personalization for advertisers.
The CEO of Instacart highlights the importance of Retail Media, describing it as "an advertising product inside people’s eCommerce shopping cart… the holy grail in advertising."
Up until now, the growth of Retail Media has been driven by retailers’ strategic efforts to enhance their digital footprint, forge new media partnerships, and optimize on-site, off-site, and in-store advertising experiences. Interest in Retail Media Platforms by retailers is still surging, a survey by 德勤 reveals that 64% of executives at large US retail companies are planning to implement a Retail Media Network (RMN) by the end of 2024.
Retail Media investments from brands and sellers collaborating with these retailers are also on the rise, as they seek to expand their customer reach, targeting capabilities, enhance personalization, and drive conversions.
The Staggering Growth of Retail Media
Retail Media is eclipsing Social Media and Search, growing faster than both.
Retail Media's growth trajectory is unprecedented in digital advertising. Particularly in the United States, Retail Media has emerged as one of the largest and fastest-growing ad verticals. Between 2016 and 2021, Retail Media ad spend skyrocketed from $1 billion to $30 billion, whereas video took 9 years, social networks took 11 years, and search took at least 14 years to achieve the same milestone.
In the US, advertising in Retail Media is expected to keep growing rapidly, and for the first time since 2014, last year, Google and Meta had less than 50% of the digital ad spend market share in the US.
Andrew Lipsman , independent analyst and consultant at Media, Ads + Commerce , underscores the significance of this growth, noting that Retail Media has achieved in just 5 years what search ads took 14 years to accomplish. This rapid adoption is indicative of the market's readiness and the maturity of the tools available, which have collectively driven the swift scaling of Retail Media from $1 billion to $30 billion.
Retail Media continues to grow rapidly, with U.S. omnichannel ad spend projected to reach $59.98 billion by 2024. On the European side, Retail Media, the "third wave" of digital advertising, generated ￡3 billion in revenue in the UK in 2023 in just 7 years, much faster than social media, which took 13 years, and search, which took 17 years to reach the same level.
Retailers and advertisers are rapidly embracing Retail Media as a key part of their advertising strategies. This lower-funnel ad format is gaining traction for its ability to drive conversions and deliver measurable results. Retail Media is projected to be the primary driver of growth in search ad spending in the coming years, with a projection of 26.7% in 2024 and a forecast of 37.2% by 2027.
For this growth, Amazon has been a major catalyst with Amazon Advertising. Since its launch in 2012, Amazon has reported $46.9 billion in advertising revenue by 2023. It is projected to hold a dominant 74.2% share of the U.S. Retail Media market by 2024.
The Dominance of Online Retail Sites & Marketplaces in Shopping
Retail sites and online marketplaces have become the go-to destinations for consumers during their shopping journey, drawn by factors such as superior digital experience, ease of shipping, product reviews, wide selection, competitive pricing, and hassle-free returns.
These online platforms are pivotal at every stage of the purchasing decision process, from initial research and price comparisons to reading product reviews and making the final purchase.
Two-thirds of shoppers prefer e-commerce sites, with Amazon being the top choice for 66% of respondents when searching for products. 74% of consumers go directly to Amazon when making a purchase, highlighting the trend of online retailers becoming increasingly popular for everyday shopping needs. Retailers are well-positioned to capitalize on the increasing consumer traffic and reliance on online platforms for shopping.
83% of U.S. power shoppers consider online marketplaces the most convenient way to shop. Additionally, 65% of U.S. consumers frequently purchase from online marketplaces, reflecting a strong preference for these platforms.
The high volume of site visits to marketplaces results in more ads being served, leading to increased ad impressions, transactions, and valuable data for retail networks. This data enables efficient ad targeting, strengthening relationships between advertisers and Retail Media networks. Besides the customer reach on their own sites, the introduction of "offsite" media options by retailers, which allow brands to buy media powered by product purchase data on the open web via programmatic DSPs, further enhances the effectiveness of Retail Media. This strategic move positions retailers to potentially surpass Google and Meta in the advertising domain.
Enhancing Shopper Engagement
Retail Media networks present a significant opportunity to enhance shopper engagement, driven by the increasing influence of retailer websites. Recent research conducted by Intellias , involving more than 1,000 U.S. shoppers, underscores this potential.
The findings in the research reveal that:
Retailers' website ads are twice as likely to impact U.S. shoppers, offering an opportunity to drive engagement and guide consumers through the purchasing process. Engagement plays a vital role in guiding consumers towards making a purchase, whether it's through building brand recognition, sharing valuable information, or igniting their curiosity. Retail Media plays a pivotal role in this process by providing targeted and relevant advertising that resonates with shoppers at various stages of their buying journey.
A study by PubMatic found that retail websites are 50% more effective than social media at driving shopper responses, with 64% of shoppers being responsive to retail ads compared to 43% for social media. This highlights the superior ability of Retail Media to engage shoppers and prompt action.
Capitalizing on the Wealth of First-Party Data
Retail Media leverages an unparalleled wealth of first-party data, including detailed insights into purchase history, browsing behavior, and customer preferences. This unique advantage enables highly targeted and personalized advertising, which significantly enhances ad performance and return on investment (ROI).
Compared to Google or Meta advertising, that’s why Retail Media is rapidly emerging as a more compelling advertising channel. With the ability of retailers to leverage first-party data, Retail Media platforms allow advertisers to precisely identify shoppers who make a purchase after seeing an advertisement on the retailer’s owned and operated assets. This level of data granularity makes Retail Media an exceptionally powerful tool for brands to identify their target audience and create personalized ads for them.?
Unlike 谷歌 , Facebook, and other publisher networks, retailers such as 特易购公司 , Sainsbury's , 沃尔玛 , and 亚马逊 possess extensive data on consumer purchase behavior. This data advantage of retailers and marketplaces enables them to offer more targeted and effective advertising solutions.
Furthermore, Retail Media bypasses the privacy concerns associated with third-party cookies, reducing the risk of brand safety issues and ensuring compliance with evolving data privacy regulations. CPG brands see Retail Media as a powerful ad channel, providing valuable purchase data for predicting future behavior. So, unlike traditional platforms like Meta and Google, Retail Media provides more relevant data, including purchase data, which is a superior predictor of a customer’s future buying behavior. Real-time signals from retailer searches offer better results than general search engines.
Retail Media at the Point of Purchase: Maximizing Conversion
Retail Media ads capture consumers with high purchase intent, enhancing the chances of conversion.
Retail Media ads, displayed within e-commerce platforms, reach consumers precisely when they are in a shopping mindset, thereby significantly increasing the likelihood of purchase. This contextual relevance ensures that ads are aligned with what the consumer is already seeking, unlike social and search ads where users might not be as far along in the purchase funnel.
Retail Media stands out as the most lucrative advertising channel in the market due to its proximity to customers' purchasing decisions. Our internal analysis reveals that the return on ad spend (ROAS) for Retail Media Ads has an impressive range of 20-1000. This is a stark contrast to the 1.5 ROAS rate that brands typically consider good in other advertising channels.
The ability of Retail Media to connect brands and advertisers with conversion-ready audiences is a key advantage.
The influence on shoppers’ purchasing decisions is maximized when the right product ads are shown to consumers who are actively shopping.
Integrating data from digital and in-store channels, loyalty programs, and hyper-segmentation enhances Retail Media effectiveness. Targeting customers who are predisposed to purchase boosts engagement, improves campaign performance, and increases conversions.
Diversity in Ad Format and Omni-Channel Opportunities
Retail Media’s versatility extends beyond online platforms, creating a cohesive advertising experience across various channels. The scope of Retail Media now extends beyond traditional channels to encompass onsite Sponsored Ads, offsite display, Video Ads, social media, connected TV (CTV), and in-store digital advertising, significantly broadening its potential impact. This omni-channel approach leverages both digital and physical touchpoints to engage consumers effectively.
By integrating Retail Media advertising across both digital and physical environments, retailers and brands effectively engage consumers at various stages of their shopping journey.
Sources:
Agius, Nicola. “Ads Served on Retailers’ Websites “Twice as Likely” to Influence U.S. Shoppers.” Search Engine Land, 9 Apr. 2024, searchengineland.com/ads-retailer-websites-twice-likely-infleunce-shoppers-439584 . Accessed 26 July 2024.
Davis, Ben. “15 Stats That Capture the Evolution of Retail Media Networks.” Econsultancy, 5 Apr. 2024, econsultancy.com/stats-growth-retail-media/ . Accessed 26 July 2024.
Gallegos, Dee. “7 Reasons Why Retail Media Revolutionizes Marketing.” Vusion, 15 Apr. 2024, www.vusion.com/insights/7-reasons-why-retail-media-revolutionizes-marketing/ . Accessed 26 July 2024.
Hall, Geoff. “The Rise of Retail Media - and What That Means for Brands and Retailers.” Marketing Procurement IQ, 26 Mar. 2024, www.mxpiq.com/the-rise-of-retail-media-and-what-that-means-for-brands-and-retailers/#:~:text=Retail%20Media%20is%20more%20compelling . Accessed 26 July 2024.
Lebow, Sara. “Guide to Retail Media: Rapid Growth, Expanding Formats, and Emerging Opportunities.” EMARKETER, www.emarketer.com/insights/guide-retail-media/#:~:text=As%20retail%20media%20networks%20make . Accessed 26 July 2024.
Mitchell-Wolf, Evelyn. “Retail Media Will Be the Source of Most Search Ad Spending Growth in the Coming Years.” EMARKETER, 3 Jan. 2024, www.emarketer.com/content/retail-media-will-source-of-most-search-ad-spending-growth-coming-years . Accessed 26 July 2024.
“Retail Media Is 50% More Effective than Social Media at Driving Responses to Advertising | PubMatic News.” PubMatic, pubmatic.com/news/retail-media-is-50-more-effective-than-social-media-at-driving-responses-to-advertising/ . Accessed 26 July 2024.