News and developments in retail media dominated 2022. “Everything is an ad network“, summarised analyst and investor Eric Seufert.
As online continues to represent an increased proportion of shopper spend in the wake of Covid-19, retailers (and beyond) are increasingly waking up to the advertising opportunities that this presents – while brands are seeking new ways to target, convert and connect with their audiences.
What will we see from this fast-moving space in 2023? We turned to a number of experts for their thoughts, with predictions on the increased role of creative, the need for better measurement, potential fragmentation or consolidation in the space, and whether the increased competition could be bad news for retail media pioneer Amazon.
In this article:
Retail media growth will be a theme of 2023
Vihan Sharma, EVP Global Sales at LiveRamp:
“Established retail media networks continue to expand their influence across the global digital media landscape, picking up an increasingly dominant share of ad spend compared to other channels. Expected to reach $101 billion in global annual revenue by the end of the year, a rise of 15%, we’ll see even more CPG ad dollars being funnelled here in 2023.”
“Driving this growth is the demand from brands for media channel accountability and measurable return-on-investment. Indeed, in an economic climate where every media dollar is scrutinised, the ability to connect the data pathway between consumer ad exposure, purchase, and beyond, is invaluable.”
Amanda Tushingham, Industry Director Retail at Teads:
“With a variety of new brands entering the market aiming to help businesses monetise digital inventory and move products, retail media is likely to be one of digital’s biggest growth areas in 2023. Multiple players (including broadcasters ) are also showing interest in the intersection of retail media and another rapidly growing channel, connected TV (CTV). This strengthens the holistic view between channels where consumers are, which will be hugely impactful for brands that are aiming to monetise their data offsite.
“With such substantial growth, brands should be careful to not jeopardise their brand equity with bad creatives and digital experiences through new retail media opportunities. Rather, businesses should be leaning towards experts who already work with premium publishers and develop unique and useful user experiences that are not bogged down by unhelpful clutter.”
Jaclyn Nix, EVP, Media Sales and Operations, CitrusAd:
“More retailers will lean into retail media as the macroeconomic climate tightens margins and drives retailers to find additional top-line revenue.
“As more retailers enter the space, existing retail media networks will be forced to up their game to compete for dollars. Tech and talent will matter.”
Potential to disrupt the ‘walled gardens’
Philippa Snare, SVP EMEA, The Trade Desk:
“Beyond the retail media space growing and maturing, it’s important to recognise just how seismic the potential of retail media is for bringing about wider industry change. As retail networks grow, one of the most significant changes we’ll see in 2023 is the ability that these networks have to disrupt the power of the walled gardens. This will further ignite the shift to the open internet.
Retail networks offer advertisers the data and end-to-end experience they seek, but with the bonus of objectivity and transparency that is so often lacking within the walled gardens. Combined with pressures from their clients and regulators, retail media will act as a catalyst to strongly encourage the walled gardens to open up in order to remain competitive.”
The evolution of retail media in 2023
Retail media will get serious about creative
Mark Williams, SVP Client Development, CitrusAd:
“Retailers will get more serious and more creative about really solving for lingering challenges with retail media. We will see more retailers making investments by way of funding, talent, and prioritization to fill gaps and dramatically upscale their ability to service advertisers. Carrefour’s bold new joint venture with Publicis Groupe is a compelling example of retailers bypassing one-size-fits-all partnership models to solve for their most ambitious plans.
“The trend toward open platforms will accelerate. The old walled gardens that dominated the first phase of retail media will make way for proprietary retail media sandboxes that connect via API upstream into demand platforms, and downstream into delivery channels. Retailers will still control their first-party data and rules of engagement but will lean more into industry-led standards and protocols that allow brands and agencies to activate more efficiently using the platform of their choice. Retailers will make it easier for brands to compile performance metrics across various retailer and third-party networks into a single BI tool for faster, more accurate and more complete look at their most critical KPIs.”
Donia Baddou, Managing Director, Connections:
“One of the overriding themes in the UK next year will be the role of creative and messaging in retail media. Most of the conversation is focused on data, and the potential of it all, but we haven’t really have had the chance yet to discuss that creative and messaging has an equal importance.”
Retail media will need to become more programmatic
Jaclyn Nix, CitrusAd:
“New players will continue to launch, but brands are going to get fatigued and have their own belt-tightening. The largest retailers will take the biggest chunk. In order for retailers outside of the top three to four to compete, they need to band together through technology, making it easy for media planners/buyers to purchase and execute campaigns.
“More and more dollars will flow from legacy channels (programmatic, social, etc). The pool of available media dollars won’t grow, but the allocation will shift towards retail media. However, retail media will need to become more programmatic and easier to buy across platforms. This is where API partners like a Pacvue and Skai are set to win on sponsored product ads, but in order to ensure a more seamless sell they will need to build in on-site/off-site display.”
Measuring the omnichannel ‘halo effect’
Maren Seitz, Analytic Partners:
“Amazon is showing that there is a huge omnichannel impact in retail media. On average, 45% of the sales volume that Amazon Display drives is on non-Amazon sales. 23% of the sales volume that Sponsored Brands & Sponsored Products drive is on non-Amazon sales, according to Analytic Partners’ ROI Genome data.
If advertising is placed on Amazon, then sales are also happening on other sales channels due to the halo effect.
Retail media is likely being under reported as this halo measurement would not be as readily available without a comprehensive piece of analysis, i.e. CMA (Commercial Mixed Analytics).
Retail media will increasingly also think about how to address the upper parts of the funnel – by focusing on how to be a place for brand advertising rather than just being focused on conversion.”
A need to agree on metrics – and potentially adopt new ones
Donia Baddou, Connections:
Pricing levels vs. measurement – the prices in retail media are significantly higher which is logical, however we are yet to see a precise way of tracking investment vs. results. And having a chance to compare it like for like with the inventory across the multiple closed loops available.
“There is also a need to agree on what is measured, and what metrics are the minimum required – not all retailers provide the same metrics and data, which makes it difficult for brands to establish success in a rational way.”
Amanda Tushingham, Teads:
“Brands would also do well to leverage attention as a metric for success, as it will enable them greater understanding of their sales uplift via the analysis of key customer data signals through the customer journey. In such a challenging economic climate, where ROI is going to be a top priority, organisations that close the retail loop with holistic views of their consumers through multiple channels (i.e. desktop, mobile and CTV) and measure that impact through new measurement tools, such as attention will be the platforms that deliver into the future.”
Good data and identity solutions will offer a foundation for success
Philippa Snare, The Trade Desk:
“The impact of activating a campaign across multiple channels is well understood. There are hundreds of potential touchpoints with consumers each day, and crafting a strategy to reach them in a joined-up and meaningful way is a no-brainer. Retail media is an important part of this omnichannel puzzle, both in providing another touchpoint in consumers’ daily lives but, more importantly, helping connect a purchase to the wider digital marketing journey. As this new piece becomes fully integrated, we’ll continue to see the development of even more sophisticated attribution models as the ability to understand the full consideration and purchase journey.
“But the foundation needed to underpin any future innovation in retail networks is quality data. Bespoke, helpful online experiences must be rooted in accurate data – especially as consumers take a critical look at their outgoings. Identity solutions, such as EUID and Unified ID 2.0, that put customers in control of their data while continuing to deliver meaningful insights to support the joining–up of data across channels and platforms is critical. This will provide the solid foundation that retail networks require to innovate and help marketers succeed.”
Growth in the space will lead to fragmentation in the short term
Donia Baddou, Connections:
“The loudest retail media voices online in the past year have been the supermarkets/ large retail groups and FMCG/ CPG conglomerates, however we predict further fragmentation of the retail media landscape. Hundreds of brands large, medium and small have a vested interest in retail media, as it helps them grow more efficiently and provides a marketing tool at multiple levels of the funnel. Additional large media owners will create their own proposition that will give brands an opportunity to have a modular and combined way of working (ITV, Channel 4 etc.) with retail media.
“Technology companies inside and outside of the programmatic space have already made some headway in building custom solutions for brands wanting to monetise, harness or expand their audience through retail media. The fragmentation will happen in this area too. Expect a proliferation of the tools and fragmentation of the systems giving access to RM inventory as well as giving brands the power to become a media owner themselves.
“Consolidation may come at a later stage – even if the programmatic players have their eye firmly on retail media by currently developing solutions to connect the space and automate it (and it would be great to have a consolidated space where arbitrage and bidding can happen!), we’re far from a large consolidation happening in the UK. It’ll take more than a year to get there especially, specifically in the UK and in Europe. The US market is a different story, they’re currently years ahead of Europe and have different data rules to play with in the closed loop.”
Will increased competition in retail media topple Amazon’s throne?
Amazon’s ROI is still strong – for now
Maren Seitz, Analytic Partners:
“So far, Amazon is still seeing a great Return on Investment – up to 54% higher ROI compared to average Digital Display ROI and 22% compared to average Paid Search.
“Other retailers will be catching up, bringing the usual effects of greater competition with them – a greater pressure to keep costs manageable, and an ability to prove impact beyond others.”
A victim of its own success
Jaclyn Nix, CitrusAd:
“I believe Amazon will be a victim of its own success. Given their scale, the continued growth will be hard. They are already looking at non-endemic brands as a growth channel as they have largely tapped out on endemic brands.”
Amazon will need to invest in more ownable properties
Mark Williamson, CitrusAd:
“With increased competition for attention and media spend – especially among FMCG/CPG, Amazon will need to derive more value from the unique properties they have acquired or built over the last several years.
“This means we should expect them to continue to invest in more ownable properties and platforms in the future. Properties like Thursday Night Football in the US, live English Premier League games, Prime Video, and proprietary hardware are not easily replicated by competing retailers and are strong options for non-endemic advertisers.”
Partnerships with connected TV (CTV) will be incredibly impactful
Philippa Snare, The Trade Desk:
“I would argue that connected TV (CTV) and retail media are the two most impactful opportunities available to brands and advertisers right now. A TV ad remains one of the most popular and effective ways to reach consumers – especially when charged with the power of digital technology, as with CTV. While retail media provides the unique opportunity to finally close the loop: connecting marketing investments through to the point of purchase. The power of bringing the two together can’t be overstated.
“And we’re seeing that play out on our platform – connected TV remains our fastest growing channel but we also saw retail marketing spend increase by nearly 3 times between Q2 and Q3 this year. Advertisers are incredibly excited about the potential power of these opportunities.
“We can look across the Atlantic for signs of what’s to come: shoppable video ads are increasingly mainstream, with companies like Instacart making their debut and Roku establishing groundbreaking partnerships. We’ll likely start to see more of these types of innovative opportunities available as advertisers continue to shift spend to these channels.”
Jaclyn Nix, CitrusAd:
“Closed loop attribution is a good thing, but there will need to be some industry oversight into how it is measured. Depending on how effectively CTV scales, I see this further reducing TV budgets (vs. pulling from retail media dollars).”
