Brian Mandelbaum, CEO of Reaches.
It’s no secret that retail media is revolutionizing the advertising space: the retail media industry is now a $50 billion market, up from $13 billion in 2019.
Large retailers such as Amazon, Kroger, Walmart and Target have become their own data companies, where their own retail media networks (RMNs) use consumers’ first-party data from transactions and receipts to target, deliver and measure ad campaigns for brand partners who buy in.
As the CEO of an all-in-one consumer data platform, I’m constantly thinking about the explosive growth in the retail media space and how better data can improve media and measurement outcomes for both brands and retailers.
RMNs help the advertising landscape.
RMNs provide brands with the first-party data they need to not only reach consumers effectively through advertising, but also measure that effectiveness while remaining compliant. As advertising technology evolves, it is much more valuable for marketers to understand what drives a sale than to receive a proxy for the performance of their media spend.
In the light of abolition of third-party cookies and the changing ad technology landscape, RMNs were immediately seen as a savior for brands. Initially, RMNs seemed to circumvent many of the existing requirements for existing ad technology platforms to even qualify for a media plan. While RMNs undoubtedly provide benefits to brands, they are still nascent platforms and require significant budget and manpower to run.
And while retail media networks aren’t going away, they can’t stay as they are. Here are three truths about the current state of RMNs and what needs to change to make the ecosystem fairer for brands.
Truth 1: The retail media network landscape is fragmented.
For all its benefits, the current retail media network system is flawed, in part because brands buying into an RMN can only see a portion of the total spend. This leads to fragmented strategies across retailers, rather than one comprehensive strategy.
If a brand works with the RMN of one major retailer, it can only receive data and performance from that one retailer. But most consumers don’t shop at just one store. The current RMN system is like trying to put together a jigsaw puzzle with just the red and blue pieces (or rather, the Target and the Walmart pieces). I believe brands need to aggregate multiple datasets from RMNs to get a more accurate picture of their customer.
Marketers also get bogged down with inefficiencies when it comes to developing creative assets and buying media. Each network of retailers requires different asset specifications and standards. To use the same creative across multiple platforms, media buyers often have to do double duty to meet the specific and nuanced requirements of retailers.
In the long run, I think this is an unsustainable situation for brands that can’t possibly buy every RMN and whose already-tight media teams can’t handle the workload multiplied across networks. Even with the performance gains that brands are getting from working directly with retailers to target consumers, it seems that brands need access to a broader spectrum of retailer data to make their investments worthwhile.
Truth 2: Retail media lacks transparency and falls short of industry standards.
As part of their buy-in, brands make deals to advertise within an RMN’s media network, through digital advertising and marketing network opportunities. But many in the industry are not impressed with how retailers report campaign results.
RMNs currently provide home baked performance metrics and typically do not measure the incrementality that accounts for all ecosystem-wide media buys. As a result, brands don’t really know how their campaigns compare to their other non-RMN strategies.
Industry groups, including the ANA and the IAB, have been called upon to help create measurement standards and transparency around RMNs. Since these industry groups have not yet reached the retail media sector, I think there are plenty of opportunities to lay the groundwork for basic needs for brands, but it will take time to see meaningful changes.
In the short term, I predict brands will find it challenging to compare RMN performance against their other media strategies without measurement standardization.
Truth 3: For all their limitations, brands still pay a premium.
While the price for RMN partnerships varies, some industry experts do quoted they charge three times more than the industry standard for access to their network. These pros have likened the cost of RMNs to “tithing to the church” to activate retail media and reach consumers more effectively.
At a higher price, advertisers can expect premium performance. But I find that RMNs today can’t deliver transparently even based on industry standards. Can brands justify the cost of long-term partnerships with RMNs when retailers still hold all the cards?
The future lies in standardization and breaking silos.
These truths clearly show that change must occur in the retail media ecosystem if brands are to derive lasting, holistic benefits from their partnerships. Retailers have always had a stranglehold on manufacturers when it comes to data access, but now brands can pick and choose the networks they budget on. The retailer that can develop ad products and technology that is comparable to the best platforms in ad technology while adhering to the same measurement and performance standards will ultimately come out on top.
It’s time for brands to demand a more level playing field. The hope that industry groups will implement measurement standard RMNs is a start – and this should be a relatively easy fix as measurement standards are enforced elsewhere in the advertising industry.
But brands also need to think ahead to a future where retail media isn’t just another walled garden to navigate. For starters, brand leaders can step forward to help industry groups develop RMN measurement standards and demand accountability from retailers in closing RMN deals. As the industry waits for measurement standards, consider supplementing RMN insights with other consumer data alternatives that provide snapshots of more than one retailer’s ecosystem.
The future of retail media should be media agnostic And retailer agnostic, not only for the benefit of brands, but for better advertising results that prioritize consumer preferences and privacy.