First things first, let’s take a stab at defining retail media as we understand it today. Retail media networks are advertising platforms created by retailers to monetize their e-commerce sites. They allow advertisers or brands to reach highly-targeted audiences based on the shopper's purchase history and interests, making them highly effective. Retail media networks also offer a more cost-effective advertising option than traditional advertising methods since advertisers can pay per click or per impression.
The retail media market has grown rapidly in recent years and is expected to reach $100 billion in 2023 in what Andrew Lipsman of Insider Intelligence calls Retail Media 2.0. Mainstream retail media networks, such as Walmart Connect and Amazon Advertising, are becoming increasingly important in this market. Retailers can leverage retail media networks to generate revenue and offer additional value to their customers.
According to industry experts, the retail media market will continue to grow in 2023. More retailers are expected to enter the market and offer retail media opportunities to brands. Personalization and targeted advertising will become increasingly important, as consumers become more aware of their data privacy and retailers focus on delivering relevant content to their customers. Retail media will also become more integrated into the overall shopping experience, with retailers offering advertising opportunities on in-store digital displays and other touchpoints.
The retail media market is growing fast, and many big players have entered the space. Amazon is the dominant player, followed by Walmart and Target. Other key players include Kroger, CVS, and Walgreens.
Amazon's advertising business has exploded in recent years and is reported to have generated $37.7 billion at the close of 2022 - an increase of 21% from the previous year. Walmart's advertising business is also growing, and they are working on developing their own retail media network. Target has a highly effective retail media network, and they are working on expanding it to more brands.
Retailers can leverage retail media networks to generate revenue in several ways. They can create their own retail media network and offer advertising space to brands or work with existing retail media networks to monetize their e-commerce sites. Retailers can also use retail media networks to promote their own products, drive sales, and increase customer loyalty.
One of the most significant benefits of retail media networks for retailers is the ability to capture more revenue from their e-commerce sites. They can also gain valuable insights into customer behavior and preferences, which they can use to improve their offerings and marketing strategies.
Retailers have various monetization strategies available to them, including advertising, affiliate marketing, and retail media networks. Advertising is a tried-and-true method for generating revenue, but retailers can also monetize their platforms through affiliate marketing, where they earn a commission for promoting products from other companies. However, the most promising monetization strategy for retailers is retail media networks, which leverage the vast amounts of customer data that retailers collect to target ads and promotions to specific audiences.
One significant advantage retail media offers is the ability to target ads and promotions to specific audiences by leveraging privacy-green first party data. Retailers can leverage their customer data to create highly personalized campaigns, improving the effectiveness of their advertising efforts. Additionally, retailers can generate revenue through partnerships with brands and manufacturers looking to promote their products directly to consumers. By monetizing their platforms through retail media, retailers can unlock a new source of revenue while also improving the customer experience through personalized advertising.
Several retailers have successfully monetized their platforms through retail media. For example, Target launched its retail media network, Roundel, in 2018 and generated over $1 billion in 2021. The network leverages Target's customer data to deliver personalized ads and promotions to customers across a range of channels. Another example is Amazon, which has built one of the largest retail media networks in the world. In 2021, the company generated $31 billion in advertising revenue, driven in large part by its retail advertising offerings. These examples illustrate the potential for retailers to generate significant revenue by leveraging their customer data and partnering with brands and manufacturers.
Retail media networks have become a crucial component of the retail industry, offering a new way for retailers to monetize their e-commerce sites. Retail media refers to the placement of advertisements on a retailer's website or app, enabling brands to reach consumers in a more targeted way. As per WARC, global retail media ad spending is expected to grow 10.1% in 2023 to $122Bn.
Retail media networks offer retailers the ability to capture a share of the $100 billion global retail media market, which includes advertising, in-store media, and promotions. It allows them to monetize their first-party data and customer insights by offering advertising opportunities to brands that want to target their customer base. Retailers can use these networks to offer a range of advertising solutions, such as sponsored product listings, targeted display ads, and programmatic advertising.
Retail media has also become increasingly important as consumers continue to shift their shopping habits online, particularly due to the COVID-19 pandemic. With the growth of e-commerce, retailers are now able to offer brands access to their customer data, allowing them to deliver more targeted advertising that can lead to higher conversion rates.
As per Econsultancy’s report, some key trends that will shape the retail media market in 2023 include an increase in programmatic advertising, the growth of social commerce, and the continued rise of mobile commerce. Retailers need to focus on personalization and contextual advertising, such as using real-time data to deliver ads that are tailored to the consumer's interests and behaviors.
Another trend is the rise of marketplace advertising. Many retailers are now offering marketplace services to third-party sellers, which allows them to generate additional revenue from advertising fees. Amazon Advertising, for example, has become a significant player in the retail media market, with its advertising revenue expected to reach close to 40 billion in 2023.
Retailers are also increasingly investing in data analytics and measurement to provide brands with detailed insights into the effectiveness of their campaigns. This allows retailers to offer brands more transparency and accountability, helping to build stronger relationships and create long-term partnerships.
To optimize their retail advertising efforts, retailers need to focus on providing value to both their customers and their advertising partners. They need to use their first-party data to deliver targeted and personalized advertising, while also providing a seamless customer experience that encourages engagement and loyalty.
Retailers should also look to build partnerships with brands that align with their values and complement their product offerings. By working with brands that resonate with their customers, retailers can create more effective advertising campaigns that drive conversions and build brand loyalty.
Retailers should also invest in data analytics and measurement to ensure that their advertising efforts are delivering measurable results. This allows them to continually optimize their campaigns, improving their effectiveness and providing more value to their advertising partners.
Finally, retailers should prioritize transparency and trust with their advertising partners. By providing clear insights and analytics, retailers can build stronger relationships with brands, leading to more long-term partnerships and increased revenue for both parties.
Despite the potential for lucrative revenue streams, retailers face a number of challenges when it comes to monetizing their retail media networks. One of the main challenges is that retailers may lack the necessary expertise and infrastructure to manage and optimize their retail media networks effectively. Additionally, retailers may struggle to prove the value of their retail media offerings to brands and advertisers, which can make it difficult to secure buy-in and investment.
According to a report by Insider Intelligence, nearly half (48%) of US retailers surveyed reported that measuring the effectiveness of their retail media was a challenge. Meanwhile, 35% of retailers said they struggled to build and maintain relationships with brand advertisers, and 32% cited a lack of expertise in managing their retail media networks.
To overcome the challenges of monetizing their retail media, retailers can take several steps. One is to invest in the necessary technology and talent to manage and optimize their retail media networks. For example, retailers can use data analytics and AI-powered tools to better understand and target their audiences, and to measure the impact of their retail media campaigns.
Another strategy is for retailers to work closely with brands and advertisers to co-create retail media campaigns that deliver real value to consumers. This can involve using customer data to inform personalized, relevant ad targeting, and creating engaging content that resonates with shoppers.
Finally, retailers can look to collaborate with other retailers and marketplaces to create larger retail media networks that offer more scale and reach to brands and advertisers.
For retailers looking to capitalize on the $100 billion retail media market, there are several key considerations to keep in mind. One is to develop a clear value proposition for their retail media offerings that differentiates them from competitors. This could involve focusing on specific audience segments, offering unique data insights or targeting capabilities, or providing exceptional customer service and support.
Another consideration is to prioritize transparency and trust in their relationships with brands and advertisers. This means being transparent about data usage and ad targeting practices, and ensuring that retail media campaigns are fully compliant with privacy regulations.
As the retail industry continues to evolve, retail media networks have become an important tool for retailers to monetize their e-commerce sites and offer personalized advertising to customers. With the market expected to reach $100 billion in 2023, retailers are working on developing their own networks or partnering with existing ones to generate revenue and capture valuable customer data. As the industry continues to grow and evolve, retailers that leverage retail media networks will be well-positioned to capture a share of the global retail media market and drive growth in the years to come. So, if you're a retailer looking to stay ahead of the game, it's time to start exploring the possibilities of retail media.
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