The question I’m asked most often is “Is retail media overhyped, or is it the next big thing?” This question comes, in part, from media coverage and forecasts, including Forrester’s, that project a significant share of ad spend — nearly $100 billion, according to Boston Consulting Group — being absorbed by retail media networks (RMNs) in the next few years. As retail media booms, commentators suggest that it creates a win-win scenario for all parties involved. Retailers win by generating high-margin operating income from RMNs; brands win by investing in media that has a verifiable revenue impact and high yield; and consumers win by getting more personalized advertising without sacrificing more personally identifiable information.
Predictions of retail media’s potential may be accurate, but for now, there are serious problems constraining retail media’s upside. Our latest report — The Marketer’s Guide To Retail Media — explicates these problems and offers solutions. Here are a few of the problems that our report addresses:
- Marketers’ fear of missing out (FOMO) overextends resources. Marketers’ eagerness to activate retailers’ audiences leads to budgets being stretched across too many RMNs, strained workflows, and disjointed performance reporting. In some cases, marketers’ FOMO induces them to spread budgets across tens of different RMNs, each of which gets tens of thousands of dollars — too little for brands to feel retail media’s impact on their bottom line.
- Marketers’ fear of retaliation becomes frustrating when retail media is unprofitable. Marketers (particularly at endemic brands) fear that if they spend less than they could on retail media, retailers will retaliate against them by demoting their products on shelves or by ranking their products lower on retailers’ search engine results pages. And until a couple years ago, marketers hadn’t accumulated enough data from retailers such as Amazon and Walmart to factor retail media into their media mix models (MMMs). These MMMs now account for brands’ total cost to serve retailers, including slotting fees, trade promotion, and fines that they must incur before being able to participate in retailers’ media networks. When MMMs reveal that retail media can be costly for brands, marketers’ fear turns into frustration. When it’s unprofitable, retail media feels like a tax.
Our report unpacks the causes and consequences of these problems and offers solutions. Solutions range from strategic initiatives that marketers can implement to strengthen their foundation for retail media and to strengthen their relationships with retailers as well as tactics that marketers can implement when planning, buying, and optimizing retail media.
If you’re interested in connecting on retail media strategies for your company, click here to set up a guidance session with me.