There’s no doubt about it, retail media networks (RMNs) are on the rise.Â
Over the next five years, the Boston Consulting Group (BCG) has estimated that the retail media market will grow by 25% per year to around $100 bn (£88.5 bn), at which point it will account for more than 25% of total digital media spending.
As part of our blog series on RMNs, the retail media team at Trigg Digital decided to take a deeper look into the key factors driving growth in the market…
- The Demise Of Third-Party Cookies
Recent regulations designed to protect consumers’ privacy have meant that the digital advertising industry has lost out on access to the third-party data they’ve relied on for years. Governments around the world have passed laws and regulations to protect data – in 2018, the European Union introduced General Data Protection Regulation (GDPR), which is one of the toughest in the world. It’s not just governments who are concerned about data security, though. In 2020, Google announced it would be removing third-party cookies from Chrome by the end of 2023, while Apple has already limited the effectiveness of cookies with the Intelligent Tracking Prevention (ITP) feature on its devices, which can hide users’ IP addresses.
To combat this, media owners, including retailers, have doubled down on their first-party data in the name of protecting consumer privacy. First-party data (the data that a company collects directly from its audience) is increasingly important, and more and more advertisers are relying on it. The biggest benefit of first-party customer data is that it’s collected first-hand from the customer which allows companies to build up a better picture of their own audience. Information can be gathered about each customer through anything from email and social media surveys, in-store promotions and loyalty cards, to page views and user journeys on the retailer’s website. Using this data, retailers can then give their customers a far more relevant, timely and personalised experience. By selling advertising space to brands, retailers can help brand marketers to get their products and/or services in front of the right customers and importantly, potential customers, all whilst developing a new revenue stream for their retail business.Â
- The Shift From Physical To Online Retail
Even before the pandemic, retailers were shifting from physical stores to online, but the pandemic has certainly helped to accelerate the process. According to a study by McKinsey, the number of online shoppers increased by nearly 30% during the pandemic. In fact, McKinsey estimated that in 2020, we saw a decade’s worth of e-commerce adoption take place in just three months.Â
The global e-commerce market is expected to grow by almost $11 trillion (£9.5 trillion) between 2021 and 2025. This has been helped by the lack of barriers to entry – after all, it’s far easier to set up an online store on Shopify (30 minutes they tell us!) than it is to set up a brick-and-mortar store on the high street. The same can be said for the advertising industry, which has seen a significant shift from physical to digital marketing. Advertising is more costly than ever before, particularly for digital advertisers. For those advertising on TikTok, the cost of ads has increased by 185% year on year, with an average £8.26 per cost per mile (CPM), while Meta’s average CPM is around £12.05. Marketers have redirected their adverts, particularly when it comes to the consumer packaged goods sector. A recent survey found that 85% of consumer packaged goods (CPG) companies were spending their money on RMNs. Instead of focusing on in-store trade ads, these companies are turning to virtual storefront ads. Netflix and Walmart were some of the first big names to make this move, launching an online storefront dubbed ‘Netflix Hub’ at Walmart.
- The Drop In Foot TrafficÂ
Unsurprisingly, the pandemic and lockdowns resulted in a huge drop in foot traffic at bricks-and-mortar locations like shopping centres and high streets. This development gave retailers the impetus they needed to make up for lost revenues, and make the move to more high-margin operations like retail media. Bricks-and-mortar stores are seeing a resurgence, but they’re not yet back to their pre-pandemic levels. So, many brands are now looking to make up for lost revenue by turning to RMNs – take Smartify, for instance. The digital out-of-home platform is working with small companies like laundrettes, grocery stores and cafes to create their own RMNs, with digital screens in shop windows displaying ads for products and services that can be found in the store. It works, too! The initiative has already seen significant success at increasing footfall in participating stores.
- Eyeballs Darting From Above The Line (ATL) Ads
With return on ad spend (ROAS) increasingly coming under scrutiny by marketing bosses, there is more pressure than ever for marketeers to make the most of their ad budgets – the World Federation of Advertisers suggests that 29% of brands surveyed are planning to decrease their spending next year. Meanwhile, the cost for companies to acquire new customers is ever-increasing and it has become easier than ever for customers to switch brands.Â
With RMNs, brands can advertise to customers in digital formats, and have their products or services targeted directly to their ideal audience, with more targeting options and lower wastage. By combining retail media advertising with traditional above-the-line (ATL) advertising, brands are able to optimise their advertising spend with finely-tuned ads shown in the right place, at the right time, to the right people, subsequently increasing the conversion rates. Alongside offering better targeting, retail media ads also solve the age-old problem with ATL advertising – its effectiveness is almost impossible to measure. Below-the-line (BTL) ads, such as those ran through retail media networks, can provide insight into everything from the number of website visits, to the customer’s exact journey once they reach the site. Take Tesco for example – the UK supermarket giant is currently running a beta trial through which it is offering brands access to the data of their Clubcard customers, which can be targeted according to demographic information, location, budget and exact products purchased.
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With the potential to provide an incremental and highly profitable revenue stream for retailers, all whilst solving a wide variety of issues for advertisers (including the pending loss of third-party cookies and associated audience targeting) it is hardly surprising that RMNs are sharply on the rise.
To find out more about how your retail media game can stay ahead of the game, check out our previous blog on challenges in the RMN market.
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Here at Trigg Digital, we’ve developed a killer retail-media team with all the skills and industry knowledge they need to help set up, scale up or improve your retail media network. We have already helped world-leading retailers, e-commerce and media organisations to launch and/or scale a RMN, and have seen great success in implementing this exciting and reliable new source of revenue.Â
To find out more about the latest developments in the world of retail media networks, you can follow us on LinkedIn or subscribe to our monthly news round-up. If you want to get in touch to find out how we can help you get started with your own retail media network, don’t hesitate to contact us.
+44 203 239 8492
hello@triggdigital.com
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