As retailers sell more ads, marketers’ frustrations and fears grow

    Despite recessionary warnings sounding ahead of the holidays and brands tightening their belts, one area of advertising can’t seem to stop growing. Retail media is now estimated to represent 11% of total advertising spend at the global level, a meteoric ascendance for a category that wasn’t widely recognized until a few years ago but is now under the higher level of scrutiny the spotlight provides. 

    As the market matures and gets more saturated, cracks are forming that resurface old tensions in a brand-retailer ecosystem where the merchant side of the equation has frequently wielded the chips. Retail media’s stunning upward trajectory at the pure dollar level masks simmering frustrations from marketers that feel obligated to make buys or lose out, even if the strategy proves unprofitable or feels like a cost of doing business versus a nice-to-have perk.

    With a lack of industry standardization, third-party solutions providers also see an opportunity to patch over the gaps that retailers are unlikely to mend of their own volition. And hovering in the background is the chance of consolidation that would lead to just a few heavyweights wielding influence. GroupM forecasts ad revenue for retail-based companies will grow nearly 15% this year to $101 billion and reach $160 billion by 2027.  

    “The relationship has always been fraught,” said Nikhil Lai, a senior analyst that specializes in performance marketing at Forrester Research, of brands and retailers. “That relationship is now being put through the crucible of retail media, and it’s being changed in many ways.”

    Growing pains

    Given the amount of money pouring into retail media channels, pretty much any company that owns a brick-and-mortar store, e-commerce website or app is racing to stand up an ad network that can grab a piece of the pie. Trade shows have been abuzz with the topic, with a raft of presentations from companies like Walmart, Target, Albertsons and Kroger touting the latest in their tech and media innovations (the latter two are also trying to merge, which would create an even more formidable player in the grocery vertical). 

    “We’ve seen a tremendous growth in retail media network investments from our clients,” said Jeremy Woodlee, a managing director at Accenture Song, during an Advertising Week New York panel in October. “Virtually every client we have, in retail and beyond, [is] looking at this.” 

    Interest in retail media is driven by the promise that merchants can apply their troves of first-party shopper data to better target and measure ad campaigns, all while placing messages closer to the point of sale. The value of the “closed-loop” measurement proposition has only increased as third-party cookies face deprecation and performance marketing is decimated on social media platforms like Facebook and Instagram due to privacy changes implemented by Apple.

    Meanwhile, marketers are under pressure to prove their efforts can be tied to results in the short term as the economy takes a nosedive. Ad spending has steadily slipped in recent months as brands try to make smarter choices with their dollars. 

    “Most of the growing pains come from the fact that retail media is at its infancy compared to more traditional forms of media.”

    Rachel Tipograph

    Founder and CEO, MikMak

    There are other perks to retail media that stand out during an especially tumultuous digital period. Ads for pet food running on an e-commerce site people visit to browse and shop for similar products won’t appear next to conspiracy theories or hate speech, for instance. 

    “What brands appreciate about retail media is that there is stronger attribution data (from media impression to [omnichannel] sales) and they consider it ‘more brand-safe’ compared to other forms of traditional media,” said Rachel Tipograph, founder and CEO of MikMak, an e-commerce services provider, over email. 

    However, traditional retailers’ grasp of digital technology has historically been patchy, to say the least. The fast influx of brand dollars to retail media has led many to rush to scale up their offerings and partner with outside vendors, but most networks remain fairly rudimentary. Advertising supply can be limited, according to Tipograph, which can drive up rates. Additionally, there’s a shortage of the types of real-time reporting and self-service functions that marketers are accustomed to on digitally native platforms. 

    “Most of the growing pains come from the fact that retail media is at its infancy compared to more traditional forms of media,” said Tipograph.


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