What Are Retail Media Networks?
Retail Media Networks are advertising platforms set up by retail companies to provide advertising services to third-party suppliers and brands on the retailer’s digital channels.
Over the last few years, Retail Media Networks (RMNs) have been growing and gaining market share in the U.S. digital advertising world, and are forecasted to reach $61.15 billion in 2024, contributing 19.1% to total digital ad spending.
How it Works
In a Retail Media Network the retailer owns first-party data, that has been gathered from previous purchase data from his own customers.
The retailer offers interested advertisers (e.g. suppliers and brands) an advertising service, where they can utilize this data to create targeted campaigns for their products on the different digital channels owned by the retailer.
This is done in the form of different ad products, such as:
- Sponsored Products
- Sponsored Brands
- Display Ads
- Search Ads
- Email Ads
Ad products may also include third-party channels that partner with the retailer, such as streaming networks, and they could also include in-store display ads at the retailer’s brick & mortar stores.
When the customer sees the ad on the retailer’s property and completes a purchase, data from this order gets fed back into the ad network, and used to optimize future campaigns.
A Tweak on The Business Model
Retail Media Networks represent a great opportunity for retailers to tweak their traditional retail business model, and add more revenue streams, using its own existing properties.
This is one of the numerous ways a retail business can grow its top line and bottom line, as ad businesses typically have higher margins than retailing.
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Since this is a different business model, and a different industry altogether, retailers that want to enter this field need to first understand the dynamics of this industry, and the different capabilities and resources needed to establish a successful digital advertising arm, that can compliment their primary retail business, and not conflict with it.
For example, digital advertising requires a data infrastructure that enables the measurement of campaigns’ effectiveness by connecting purchase data to campaigns.
The business model of advertising also has a different sales model, which is B2B sales, and that’s completely different from the B2C sales model retailers are used to.
Additionally, the B2B sales account managers will be interacting with the same suppliers the buyers are interacting with, so some guidelines need to be established, in order to prevent any conflicts between different stakeholders.
Top Retail Media Networks
The top retail media networks include:
Benefits of Retail Media Networks
There are many benefits for retail media networks, and all these have driven suppliers and brands to adopt them and increase their ad spend on them.
Customers browsing through the retailer’s property could be at different stages in their buying journey, but they all have a high buying intent; i.e they are interested in buying this particular product and now could be comparing between alternatives or checking prices from different vendors or even ready to buy right now.
This gives the advertisers higher conversion rates, when compared to other channels that do not have such a high buying intent.
Compared to other advertising channels, such as social media, retail media networks are considered brand-safe.
There are no controversial topics discussed, or other negative influences that could affect the brand from a specific influencer or personality connected to the ad campaign.
One of the biggest benefits of retail media networks are first-party data.
This has become particularly important for advertisers, due to the recent changes in privacy laws and the different platforms changing their policies to comply with the new laws and the rising concern for data sharing by third parties.
Closed Loop Reporting
Through retail media networks, advertisers can directly connect their ad spend to sales and measure conversion rate more accurately.
When a CPG brand advertises on TV or social media, it’s hard to know which proportion of sales came through which campaign or channel, as those brands sell through third-party retailers and don’t sell directly to consumers.
But when they advertise on a certain retail media network, they can directly see how many sales transactions resulted from each specific campaign, through their partnership with the retailer in this case, and this helps them create better campaigns in the future.
The Opportunity for Retailers
Retail Media Networks are a huge opportunity for retailers, and that’s why it has been growing very fast.
As we have explained here, there are a lot of benefits from these networks to certain advertisers, such as CPG brands. And when you add to that the fact that, among the biggest advertisers in the world are several CPG brands, such as Proctor & Gamble, which has spent $8.1 billion in 2021 and Unilever, which has spent $4.7 billion, you will get to know how big this opportunity is for multi-brand retailers.
The challenge is to be able to adapt quickly, and build the right capabilities and infrastructure to seize such opportunity.
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