Part 1 of Spotlit’s Three Part Series detailing the under reported trends of 2020 to watch for in 2021 and beyond. Other topics include:
Part 1: Advertising – Unlocking Retail Media Scale and Value
As the final death of the third-party cookie approaches, digital advertisers spent 2020 scrambling to identify the best ways to continue targeting effective audience segments. Retail media networks, digital advertising networks owned by Amazon, Alibaba, and big box retailers like Walmart and Target, have emerged as the category to watch. These networks combine seamless ecommerce integration with first party retail purchase data (in some cases down to the SKU level), a down funnel dream for conversion focused marketers. As a result, brands across electronics, personal care, clothing and pharmaceuticals have joined CPG first movers in testing retail media campaigns, fueling a $5B (+38%) YoY increase in category ad spend this year. Not wanting to miss out, Home Depot, CVS, and Walgreens each launched their own networks and on and on we go.
The rise of retail media is undoubtedly a headline many of our advertising readers have seen but for all the hype that this category has received, there are still real issues that will limit adoption. Scale will be the largest obstacle to overcome – with available inventory scattered across single-retailer offerings and many of those retailers struggling to identify the right sales support and technology infrastructure partners necessary to service growing demand. What’s more, retail media sellers have struggled to evolve past display and search ad units – leading marketers to cite “innovation in ad solutions” as the number one feature the want to see sellers invest in going forward.
Diving a layer deeper, however, a quiet but winning trend reveals itself. This year, retail media sellers unlocked real scale and value through partnerships with OTT/CTV platforms and DSPs. Kroger’s tie up with Roku, which enabled marketers to attribute in-store sales to linear ad buys, is a prime example of the former. Walmart Media Group’s bake-off between the Trade Desk and Xandr, which will give WMG buyers access to inventory on websites other than Walmart own destinations, illustrates the latter. These partnerships turn retail media channels into full-funnel marketing solutions capable of the granular sales attribution that Google and Facebook have been promising (but only somewhat delivering) for the past decade.
Key Takeaways:
- For Retailers – There is undeniable opportunity here to grow your business (95% of CPG brands have reported that their digital media spend with retailers is incremental to existing shopping or trade programs), but make no mistake, retail media isn’t a “if you build it, they will come” initiative. Heading into Q1, retailers looking to enter the space should walk before they run – spinning up a center of excellence that can unite the existing silos of your organization and identifying the right external partners to provide a truly scaled ad offering to brands.
- For CPG and Other “Product” Advertisers – Retail Media likely offers better first-party attribution than any other channel in your mix, it’s time to explore which networks provide the purchase data best aligned with your product and begin testing campaigns in early 2020.
- For Ad-Supported Platforms – Looking to differentiate and elevate your inventory as mega CPG brands start to hit the gas again (P&G increased ad spend by $100M in Q3 alone)? A partnership with a retail media seller with down funnel shopping cart visibility will help your buyers understand actual ROI, not just observed sales and brand lifts.