Retail media ad slots are flying off the shelves. Bolstered by digitised loyalty schemes, most major supermarkets are unveiling retail media platforms, while ecommerce retailers capitalise on activating their rich stores of first-party shopper data. For brands, retail media offers an effective complement to or even replacement for search advertising, as many queries now begin directly on ecommerce sites and apps rather than search engines.
Retail giants such as Amazon, Sainsburys, and Tescos have the scale and data maturity to command attention in the media space and offer a familiar buying experience to advertisers. But where does that leave smaller, independent retailers? They also have rich customer data and inventory space that could be valuable to brands, but few have the resources or audience scale to activate these dormant assets.
Rather than being left out of the retail media revenue opportunity, smaller retailers could join forces like their counterparts in the digital publishing world. Publisher advertising networks — such as The Ozone Project — aggregate audience data, inventory availability, and sales resources across domains of niche publishers so that they can, collectively, offer comparable scale to their larger counterparts. Now, similar efforts are emerging amongst retailers, as seen with the Independent Grocers Alliance in the US.
What would independent retailers gain by joining forces?
Retailers may be in an even better position to aggregate audiences than publishers. Even when united by a single network, news publishers are still in direct competition with one another, leading to tensions around audience value, ownership, and attribution. For retailers, other than potentially interrupting the customer journey, there’s less to lose by advertising products sold on another retailer’s site. Depending on the makeup of the network, opening up audiences to partners increases the variety of brands that can target them, without the retailer giving up sales to a competitor.
For example, a retailer that only sells shoes might not usually attract spend from skincare brands. But, if its audience overlapped with a health and beauty retailer in the same network, suddenly the shoe retailer’s audience becomes valuable to skincare brands, which can directly advertise products sold on the health and beauty retailer’s site. The shoe retailer gains a portion of ad revenue, while the health and beauty retailer also gains ad revenue, plus a potential sale.
This could be especially valuable for the small but growing direct-to-consumer (D2C) market. D2C brands benefit from having full ownership of their audience data, but typically have little to do with it other than personalised marketing. But if they joined a network of retailers, they could activate their audience data for advertising on their own site and beyond, and gain opportunities to promote their products elsewhere on the network. D2C brands, however, must tread more carefully with who they partner with and retain some degree of product exclusivity to avoid their entire sales pipeline being swallowed by bigger fish.
The cross-selling enabled by such a network means smaller, specialised retailers can enjoy both an additional revenue stream from advertising and a potential incremental sales uplift. It provides brands with all the usual benefits of retail media — namely, being able to direct high-intent consumers straight to a purchase page — while extending its reach beyond supermarkets and giant ecommerce platforms.
Success in this space could be a lifeline for retailers feeling squeezed by the troubled economy. Retail margins are notoriously tight and vulnerable to market fluctuations, supply chain hiccups, and changing consumer trends. Advertising is highly unlikely to be lucrative enough for it to be the primary revenue stream for retailers — especially smaller ones — but it can provide welcome breathing space to absorb any bumps in the road.
What are the barriers to establishing an ad network for retailers?
Retailers have well-stocked databases of customer information, but turning this data into targetable audiences requires a shift in strategy, as audience data that has been packaged purely for conversion and market research won’t necessarily be appealing to advertisers. Retailers need to consider what brands are looking for from audiences and sort the data appropriately, focusing on attributes that align with the marketing funnel.
For example, a campaign focused on the awareness phase will usually be informed by audience data derived from market research, including a mix of demographic information and broad behavioural data. As campaigns move down towards conversion, the audience make up needs to become more detailed to accurately gauge intent and suppress irrelevant segments.
Then there are the logistics of taking an audience off-site. Establishing whether the same people are visiting multiple retailers requires technology that can recognise and match audiences across domains. This can currently be achieved with third-party cookies on the browsers that still utilise them, but cookie deprecation — which otherwise has not hit retailers particularly hard — means this is not a viable strategy in the long term.
A further complication is that, to be compliant with privacy regulations, retailers must ensure that users consent to their data being used for such a purpose, and track this consent when data is moved off-site. Not all users will consent, of course. But retailers with a smaller pool of first-party data can expand the consenting sample using methods such as modelling and data enrichment. With all the above sorted, retailers can load their audiences into a demand-side platform (DSPs); software solutions that automate the bidding and buying of digital ad inventory.
These hurdles mean that retail media won’t be viable for every retailer, but networks can help bring more participants on board by offering support for those that lack the skills and technology internally, as is often the case in publisher networks. The payoff would be worthwhile, as retailers of all sizes could secure a slice of the lucrative retail media pie. Brands, meanwhile, could diversify their advertising across an array of channels, rather than being locked into a handful of the biggest players.
Fred Marthoz, VP at Lotame
