Retail Media: Opportunities and strategies for retailers and brands

In a world where digital advertising is rapidly evolving, retail media is emerging as a powerful and adaptive strategy. This approach, which enables retailers to monetize both their physical and digital spaces, relies on the use of first-party data to connect with consumers at critical moments in the buying process. By integrating ads into retailer-controlled platforms such as websites, apps and physical stores, brands can reach their target audiences in a more effective and personalized way. 

In this article, we will explore what retail media is, its importance in the advertising space, the monetization opportunities for retailers, the various strategies and formats available, and the challenges and future trends that will define this dynamic sector.

TABLE OF CONTENTS

• What is Retail Media?

• Drivers of demand for retail media strategies

• Retail Media strategies to maximize the effectiveness of advertising campaigns

• Benefits of retail media for all stakeholders

• Retail Media challenges and opportunities

What is Retail Media?

Retail Media refers to the advertising strategy in which retailers monetize their physical and digital spaces by selling ads to companies and brands. These ads can be displayed on websites, apps, physical stores and other platforms controlled by retailers. Retail media advertising uses first-party data collected directly by retailers to connect with target audiences throughout the entire customer journey, from consideration to purchase.

Importance in advertising

1. Monetization of space: Retail Media offers retailers the opportunity to generate additional revenue by selling advertising space on their digital and physical platforms. This becomes a natural extension of their core business, using their existing assets and data.
2. Use of first-party data: Retailers possess a wealth of first-party data about their customers, such as purchase histories and browsing behaviors. This data enables accurate and personalized targeting, improving the effectiveness of advertising campaigns and respecting privacy regulations.
3. Accurate targeting: The ability to use detailed consumer data allows brands to target specific audiences with greater precision, increasing the relevance and effectiveness of ads.
4. High purchase intent: Retail Media advertising is shown to consumers at critical points in the buying process, increasing the likelihood of conversion. Ads can be integrated into the retailer's website in strategic locations, such as the home page, product categories, search results and product details.
5. Measurement and attribution: Retail Media makes it easy to measure return on investment (ROI) by directly linking ad spend to realized sales, providing a clear view of the impact of campaigns at the individual SKU level.
6. Adapting to the post-cookie era: With the disappearance of third-party cookies, Retail Media is positioned as an effective solution for digital advertising, as it relies on the retailer's own data, ensuring the continuity and effectiveness of campaigns in a privacy-friendly environment.
7. E-commerce growth: The rise of e-commerce, accelerated by the pandemic, has driven the growth of Retail Media. Brands are looking to be present on the platforms where consumers are most active, benefiting from the increase in online shopping.
8. Innovation and technology: The integration of technologies such as artificial intelligence (AI) and marketing automation allows retailers and advertisers to optimize the use of data and improve the personalization and efficiency of advertising campaigns.
   
   

Monetization opportunity for retailers through advertising in physical and digital spaces

Monetizing physical and digital spaces through advertising represents a significant opportunity for retailers. This strategy, known as Retail Media, allows retailers to generate additional revenue by leveraging their existing assets and consumer data. Here we highlight the main opportunities this practice offers:

1. Generation of new revenues

• Increased margins: The revenues generated by Retail Media have very high margins, ranging from 50% to 90%. This is particularly attractive compared to typical retail margins.
• Incremental revenue: Advertising in retail space adds an additional revenue stream without the need for large infrastructure investments.

2. Maximizing the value of existing assets

• Digital spaces: Retailers' websites and mobile apps are valuable assets that can be used to display relevant ads to consumers.
• Physical spaces: Physical points of sale can be used for in-store advertising, such as digital displays, point-of-purchase signage and sponsored displays, thus increasing the value of these spaces.

3. Efficient use of first-party data

• Accurate segmentation: Retailers have detailed data on their customers' behaviors and preferences, enabling much more precise audience segmentation and targeting.
• Personalized advertising: The ability to use first-party data allows retailers and brands to create personalized and relevant advertising experiences, increasing the effectiveness of campaigns.

4. Increased relevance and conversion

• High purchase intent: Consumers on retailers' websites and stores are close to the point of purchase, significantly increasing the likelihood of conversion.
• Appropriate context: Ads are displayed in the right context, such as on relevant product or category pages, improving relevance and impact.

5. Adaptation to the post-cookie era

• Privacy and compliance: With the disappearance of third-party cookies, Retail Media enables retailers and advertisers to comply with privacy regulations using first-party data.
• Continuity of targeting: Retailers can continue to offer effective targeting options in a privacy-friendly environment.

6. Facilitation of strategic partnerships

• Brand partnerships: Retailers can build stronger relationships with brands through advertising opportunities, offering greater transparency and performance-based pricing.
• Appeal to diversified advertisers: Varied advertising options can appeal to different types of advertisers, from those looking to increase brand awareness to those looking to drive targeted sales.

7. Technological innovation and competitiveness

• Integration of AI and automation: The incorporation of advanced technologies such as artificial intelligence and marketing automation allows optimizing advertising campaigns and improving personalization.
• Competitive advantage: Retailers that implement Retail Media strategies position themselves as leaders in innovation, staying competitive in a constantly evolving market.

8. Expansion of advertising reach

• Offsite advertising: In addition to in-store spaces, retailers can use their data for advertising on other websites, thus extending the reach of campaigns and increasing advertising impact.
• Channel diversification: The combination of in-store, onsite and offsite advertising allows retailers to diversify their advertising channels and maximize their reach.

Monetizing physical and digital spaces through Retail Media offers retailers a unique opportunity to increase revenue, maximize the value of their assets, efficiently utilize their first-party data and remain competitive in a rapidly evolving advertising environment. This strategy not only benefits retailers, but also provides brands with an effective way to reach consumers at critical moments in the buying process, improving the relevance and conversion of advertising campaigns.

Drivers of demand for Retail Media strategies

The demand for retail media strategies has emerged and grown significantly in response to various phenomena and trends in consumer behavior and the digital environment. Below, we will look at why this demand has increased and highlight the key factors that have spurred its growth.

1. Cord-cutting

The cord-cutting phenomenon, led by Millennials and Generation Z, refers to the trend of abandoning traditional or linear television in favor of on-demand content. This transition has led to a decrease in the effectiveness and reach of conventional television advertising.

With the rise of digital and streaming content consumption, advertisers are looking for new platforms and methods to reach consumers. Retail Media offers an effective alternative, using first-party data from retailers to target precise and relevant ads.

2. Changes in consumer behavior

The COVID-19 pandemic accelerated the shift from physical to online shopping. Consumers became accustomed to shopping online, resulting in an increase in the average ticket for digital shopping.

Modern consumers value personalization and relevance in the ads they see. Retail media enables retailers to use their data to deliver personalized ads that resonate with consumers' interests and behaviors.

3. Investment in digitalization by retailers

To stay competitive, retailers have increased their investments in digitization, data analytics and technology. These investments enable retailers to offer more integrated and efficient shopping experiences, and leverage retail media as a natural extension of their core business.

Digitization allows retailers to track and analyze the entire customer journey, providing opportunities to insert ads at key moments in the buying process, thereby increasing the effectiveness and relevance of advertising.

4. Innovation in the business model

Advertising on their own platforms is a natural extension of retailers' core business. It gives brands more visibility and uses first-party data to create highly targeted and effective campaigns.

Retailers are adopting different advertising models, such as onsite (on their own websites and apps) and offsite (using their data to advertise on other platforms), thus diversifying their revenue streams.

5. E-commerce growth

The steady growth of global e-commerce, which is expected to grow 9% annually over the next three years, is driving demand for retail media. As more consumers shop online, the opportunities for digital advertising on retail platforms are increasing.

While onsite advertising represents the majority of the current market, offsite advertising is expected to grow significantly, providing new monetization opportunities for retailers.

6. Deleting Third-Party Cookies

The elimination of third-party cookies, scheduled for early 2025, has created the need for alternative methods of ad targeting and segmentation. Retail Media is positioned as an effective solution, using first-party data that complies with privacy regulations.

The elimination of cookies drives advertising budgets towards Retail Media, especially for offsite advertising, where it is estimated that 20% of these budgets will be incremental.

7. Technological advances

The implementation of advanced technologies such as artificial intelligence (AI) and marketing automation optimizes the personalization and effectiveness of Retail Media advertising campaigns.

The technology enables better targeting and a smoother, less intrusive advertising experience, improving consumer satisfaction and campaign effectiveness.

Demand for retail media has emerged in response to significant changes in consumer behavior and the digital environment, such as cord-cutting and the rise of online shopping. Factors such as investment in digitization by retailers, innovation in business models, the growth of e-commerce, the elimination of third-party cookies and technological advances have further stimulated its growth. Retail Media not only offers a new source of revenue for retailers, but also provides brands with an effective and accurate way to reach consumers at critical moments in their shopping journey.

Retail Media strategies to maximize the effectiveness of advertising campaigns

In retail media, retailers and advertisers can use a variety of strategies to maximize the effectiveness of their advertising campaigns. These strategies include brand advertising and sponsored ads, each with specific objectives and methods.

1. Brand Advertising

• Objective: Increase visibility and brand recognition.
• Format: Generally includes display and video ads that are shown on different parts of the retailer's website or app, as well as on other digital platforms.
• Placement: Can appear on home pages, category pages, product pages, banners and in dedicated promotional spaces.
• Benefits: Helps build a strong brand presence, capture consumers' attention at different stages of the buying process and increase brand awareness.

2. Sponsored Ads

• Objective: Drive sales of specific products.
• Format: Includes sponsored product ads that appear in search results and on product pages. These ads are highly targeted and are displayed in response to relevant consumer search queries.
• Placement: Appear in search results, at the top or next to related product pages and in shopping carts.
• Benefits: Increases visibility of specific products, improves the likelihood of conversion by displaying to consumers already in the buying process, and provides a measurable return on investment (ROI).
  
  

Inventory formats in digital retail media strategies

Advertisers have access to a variety of inventory formats for their retail media campaigns. These formats allow advertisers to choose how and where they want their ads to appear to maximize impact.

1. Display Ads

• Banner Ads: Graphic ads that can appear on the top, side or bottom of the retailer's pages.
• Rich Media Ads: Interactive ads that may include videos, animations or interactive elements to capture the user's attention.

2. Video Ads

• In-Stream Ads: Video ads that play before, during or after video content on the retailer's platforms.
• Out-Stream Ads: Video ads that play in the body of editorial content, such as in an article or blog.

3. Native Ads

• Ads that integrate naturally into the content of the retailer's website or app, appearing to be part of the editorial content to provide a less intrusive experience.

4. Sponsored Search Ads

• Ads that appear in search results within the retailer's website, usually at the top of the results list or next to relevant products.

5. Social Media Ads

• Ads that are displayed on the retailer's social media platforms, such as its Facebook, Instagram, Twitter, etc. profiles.

6. Retargeting Ads

• Ads that are shown to users who have previously visited the retailer's website or have shown interest in specific products, pursuing them on other websites or apps to remind them of their interest and motivate purchase.

7. Programmatic Ads

• Ads that are automatically purchased and displayed through programmatic buying platforms, allowing for precise targeting and real-time optimization.

Retail media strategies, such as brand advertising and sponsored ads, offer retailers and advertisers a variety of ways to achieve their advertising objectives. The inventory formats available for digital strategies allow for great flexibility and creativity in the implementation of campaigns, ensuring that ads are effective and relevant to consumers. By combining different strategies and formats, retailers can maximize their advertising revenue and enhance the shopping experience for their customers.

Benefits of Retail Media for all stakeholders

For retailers

• Monetization of space: Retailers can generate additional revenue by selling advertising space on both their digital channels and in physical stores.
• Investment in digitization: Advertising revenue can be reinvested in improving digital infrastructure and customer experience.
• Improved customer experience: Relevant, well-targeted advertising can enrich the shopping experience by presenting products that consumers may be looking for.
• Analytics and data: Retailers can gain valuable data from ads, which can be used to improve marketing strategies and further personalize the shopping experience.

For brands

• High return on investment (ROI): Targeted ads at the point of purchase have a high probability of conversion, resulting in a higher ROI.
• Visibility and recognition: Brands can increase their visibility and recognition by being displayed in strategic locations within the retailer's shopping environment.
• Effective targeting: Retail media advertising enables precise targeting based on consumer behavior and preferences, increasing the relevance and effectiveness of ads.
• Access to real-time data: Brands can access real-time data on the performance of their ads and adjust their strategies in an agile and efficient way.

For consumers

• Ad Relevance: Consumers see ads more relevant to their interests and needs, which enhances their shopping experience.
• Ease of product discovery: Well-targeted ads can help consumers discover products that might otherwise have gone unnoticed.
• Offers and promotions: Ads can inform consumers about special offers and promotions, helping them save money and make informed purchasing decisions.

Key benefits of Retail Media

• High ROI: Retailers' ability to reach consumers at the critical moment of purchase maximizes conversion opportunities, resulting in high ROI for brands.
• Critical time to purchase: Ads are shown when consumers are in a buying mindset, whether exploring products online or in a physical store, increasing the chances of immediate conversion and sales.

Retail Media challenges and opportunities

One of the main challenges faced by Retail Media is the lack of standardization. The absence of common standards makes it difficult to compare and evaluate campaigns across different platforms and retailers, complicating the planning and analysis of advertising effectiveness. In addition, variability in ad formats and metrics used to measure success across retailers and platforms creates inconsistencies, presenting a challenge for advertisers seeking a cohesive approach.

Another significant challenge is the accurate measurement of ad campaigns. Accurately attributing a campaign's impact on sales can be complex, especially in an omnichannel environment. The fragmentation of data collected by different retailers further complicates getting a holistic view of consumer behavior and campaign performance. In addition, the use of first-party data must comply with privacy regulations, which can limit the amount of data available for analysis and targeting, presenting an additional challenge for advertisers.

Future trends in Retail Media

Increased digitization of stores is a key trend in the future of retail media. The integration of digital technologies into the physical shopping experience, such as digital signage and interactive kiosks, is on the rise, creating new opportunities for in-store advertising. In addition, retailers are increasingly focusing on delivering a seamless and cohesive shopping experience between online and offline channels. This includes the use of integrated data to personalize the customer experience across all touch points, improving the effectiveness of advertising strategies.

The increased use of artificial intelligence (AI) is also set to transform Retail Media. AI and machine learning can analyze large volumes of data to optimize ad campaigns in real time, improving ad targeting and personalization. In addition, AI-based technologies can provide personalized product recommendations for consumers, increasing the relevance of ads and improving the shopping experience. Marketing automation using AI can reduce costs and improve efficiency, managing everything from content creation to campaign management more effectively.

While Retail Media faces significant challenges in terms of standardization and measurement, future trends such as the digitization of stores and the increasing use of artificial intelligence present promising solutions. These trends are set to address current challenges and improve the effectiveness and efficiency of Retail Media in the future.