Why retail media networks are important

Despite being established for decades, retail media networks (RMNs) are a relatively new concept. It all started with manufacturers buying space in weekly fliers distributed by shops and placing advertisements on store end caps. However, digital marketing elevated it to an entirely new level, just like everything else in the field.

Retail media networks: what are they?

In a nutshell, these networks provide a platform for brands to purchase advertising on a retailer’s applications, website, and other digital properties, such as in-store content. Above all, it permits them to place advertisements on the public internet. By collaborating with media businesses, retailers may leverage comprehensive shopper data to provide brands with enhanced targeting and a wider audience.

What was formerly a somber addition to advertising campaigns is now a top priority for merchants and businesses.

“Our goal is to establish more significant connections between our associates and clients,” states Charlene Charles, who oversees DG Media Network Operations at Dollar General. “A company wants to interact with its customers by providing them with the best cereal or personal care product. We aim to serve rural America’s hard-to-reach consumers, ensuring that we provide them with the brands and goods they need, want, and want. Serving our communities and consumers is fundamental to our mission, but we’re now pursuing it via a different avenue.

Why do retailers find them valuable?

One excellent illustration of what makes a retail media network worthwhile is Dollar General. It has a close relationship with customers that are hard to contact via other avenues. 75% of the more than 18,000 locations in the business cater to markets with 20,000 or fewer residents. As a result, it can give marketers access to difficult-to-get first-hand customer information. Brands desire a unique reach like that.

According to Charles, “major mass-market urban areas end up being the concentration of impression volume and delivery.” But you’re not getting everyone, are you? Additionally, we are expanding reach that is unmatched in rural areas because we have discovered and can reach 90% of our clients through paid media.

As a result, DG is able to offer clients deals and promotions that they might not otherwise notice, thus enhancing their connection. It obtains a great deal of money in addition to that.

Even though DG doesn’t disclose its media network earnings, it must be substantial. Twelve percent of Walmart’s income come from its network, Walmart Connect. It is estimated by Forrester that 25% of retailers make over $100 million from their media networks. For many shops, this has changed the game, and these networks could be a lifesaver in an increasingly dire economic situation. Retail profit margins are often very low, ranging from 3% to 4%. Ad sales margins typically range from 70% to 90%, according to  to BCG. And sales are very good.

Furthermore, according to BCG, the retail media industry will increase by 25% annually to reach $100 billion over the next five years, and by 2026, it will represent more than 25% of all digital media spending. Not to mention, this is fresh money for shops. 60% to 70% of the $100 billion in retail media revenue expected in 2026, according to BCG, will come from net new spending that exceeds historical trade dollars.

Why are they important to brands?

Retail media networks are much more valuable to businesses than just first-party data. They also facilitate linking advertising expenditure to revenue. Due to the near proximity of an online advertisement and the point of sale, it is much simpler to link a purchase to a particular advertisement and action. For strategic choices like resource allocation, this offers crucial data. Not to mention, it offers vital information in the never-ending pursuit of ROI.

Having said that, not everybody will be fortunate. These networks need a technology foundation and knowledge that few retailers possess.

“Retailers who wish to join this space should be aware that it is already highly competitive,” says Matt Feczko, vice president of product management at marketing technology company Epsilon. It’s highly competitive, so you have to consider if you have the necessary data. Do I even have the technology or the people I need?

There are various obstacles facing brands. Integrating a new media network is one of them. How do they handle ad sales? Is it compatible with your current tech easily? Making sure the retailer’s data is what you require is another. Does it have a distinct audience? Does it possess the granularity and depth necessary to be useful?

Retailers are become advertising moguls thanks to retail media networks. Nobody is yet aware of every consequence of that significant shift. As marketers scramble to take advantage of them, they are also generating a great deal of creativity. Although a large portion of it occurs online, in-store transactions also occur.

Before, everything in stores was printed, such as end caps that were just large standing items, according to Feczko. It’s now entering this fascinating digital realm, resembling cooler screens.

In particular, Walgreens offers a cooler display screen that, when viewed through clear glass, displays an accurate digital representation of what is within the cooler. Still, it also plays an advertisement or promotion for a certain brand while the consumer is choosing what to purchase.

If there is a drawback to retail media networks’ growing popularity, it is the possibility that their quantity may increase to the point where inventory exceeds demand. At the moment, though, they are helping both retailers and marketers.

Obstacles

Even with all of these advantages, marketers should still proceed cautiously when dealing with RMNs. One reason is that there are many technical difficulties because the channel is still very new.

Michael Greene, senior vice president of vertical strategy at Criteo, stated that this is the largest trend in advertising at the moment. However, the market is still very young in this particular region. Almost every shop who offers third-party brands is involved, in fact. However, you cover the whole spectrum, from Amazon, who has been in this market for years and has made it a cornerstone of their business plan, to the startups who are just getting started. Additionally, the brands lack maturity. They have largely made investments based on the locations of the early entrants, although that may not always correspond with the locations of their customers.

The main issue is that systems and measurements are not standardized. According to a 2023 IAB research of 200 advertisers and agencies that spend $5 million or more yearly in RMNs, nearly 70% of RMN purchasers saw “complexity in the buying process” as the largest barrier to the expansion of RMNs. Sixty-two percent of customers cited the absence of measurement standards as the next major barrier.

A few years ago, brands and agencies would buy from a small number of RMNs; today, they purchase from dozens or even hundreds of different vendors worldwide. In contrast to other digital ad publishers, RMNs lack consistency in almost every area. Everybody has different technological requirements, ranging from ad size and layout to working with programmatic sellers.

According to Greene, one of the particular technological difficulties with the retail media industry when compared to traditional publishing is that, while conventional publishers may have additional revenue streams like subscriptions, their main source of income is advertising. Thus, while considering how to create the viewer or end-user experience, advertisements are taken into consideration.

However, retailers are attempting to balance a far more difficult set of competing objectives. Because selling items is their main source of income, notwithstanding how essential retail media is to them. Every retailer must therefore perform a very delicate balancing act between how to design an advertising experience that complements their core business of selling products and is also easy enough to purchase and compliant with standards so that advertisers don’t have to start from scratch each time they want to run a campaign on their website.

Resolutions

Luckily, revenue is a strong motivator for everyone involved to do things right.

The IAB and the Media Rating Council (MRC) collaborated to produce a draft of the IAB/MRC Retail Media Measurement Guidelines for public comment and feedback in September of this year. Mid-October is when the comment period finishes.

Data accuracy: According to the guidelines, RMN measurement equipment and procedures must be routinely calibrated and validated. Additionally, RMNs must to keep up uniform data collection procedures for audit and internal use. In order to screen out invalid traffic, RMNs are also sent to the Spiders and Bots List maintained by IAB Tech Lab. To find and fix any biases or inaccuracies, RMNs are also urged to compare data to established benchmarks.

Measurement in-store: Digital place-based (DPB) settings within stores are also covered by the rules. For example, in order to link foot traffic and sensor data to certain displays where advertisements are displayed, in-store zones need to be set up at the actual place. RMNs are recommended to the MRC Digital Place-Based Audience Measurement Standards for additional information about exposure and ad impressions in physical places, even though the new rules delineate how merchants can apply taxonomy and measurement to both visual and audio ads.