Debunking Retail Media's Myths as It Enters Its 2.0 Era

In March, Gap closed its retail media network (RMN), GPS Media, after just one year. For some, the closure of such a short-lived project signaled that the bubble had burst on the frothy growth of retail media networks, a channel forecast to be worth more than $106 billion by 2027 in the U.S., according to Insider Intelligence. Naturally, there is more nuance. Gap as an RMN was always limited because it sells mostly Gap products. A key selling point of an RMN—using retailer data to target shoppers with ads very close to the point of sale—wouldn’t apply to other apparel, beauty or consumer packaged goods brands that could happily spend at RMNs like Amazon, Target, Walmart and Kroger. Still, the excitement around RMNs has been a runaway train. Now representing more than 14% of total advertising spend at the global level, according to GroupM, the channel is gearing up for its 2.0 era. Marketers are asking retailers harder questions, pushing back on relationships long categorized by a power imbalance, while retailers try and catch up with Amazon, which has eaten more than 75% of the market, per Insider Intelligence. Here is where the hype hasn’t matched reality. Myth: robust on-site display metrics Estimates from Mimbi suggest there are between 70 and 80 RMNs in the U.S. But not all of them have the reporting and measurement capabilities—identifying fraud, viewability and frequency capping—that are table stakes in media buying. “Viewability can be in the single digits,” said Briana Finelli, U.S. head of commerce at WPP agency Wavemaker. “On-site display can be overhyped unless [RMNs] have the measurement tools of a regular media buy. That can then outweigh the benefits of being on a retailer’s app.” Retailers are not—nor should they be expected to be—programmatic experts. Inconsistencies in frequency capping or viewability are partly thanks to a messy ecosystem of hungry third-party ad-tech companies partnering with retailers. Those overlapping partnerships, often in retailers' walled gardens, make it harder to know whether the right person has been reached, but it offers some sense of visibility as the rest of the open web faces impeding signal loss. These reporting growing pains are not limited to retail media, still in its infancy. Two very credible players—Albertsons and Sam’s Club—are less than 2 years old, analysts point out. Myth: unbelievably good ROI Sources agree that the early RMN boom times, spurred by Covid-19 pandemic shopping habits, led to some wildly inflated ROI numbers, with retailers taking credit for purchases that might have happened anyway. “No CPG brand believes $1 will get a $4 [return on ad spend],” said Andrew Lipsman, principal analyst at Insider Intelligence. “A true 25% ROAS is really good for a CPG.” The relationship between retailers and brands, historically adversarial due to the power imbalance of decadeslong upfront trade agreements, has become more tense as brands want more evidence of their investments. Colin Lewis, from Retail Media Works, points to Amazon Marketing Cloud and Walmart Luminate as two examples in which the largest RMNs have created platforms where retailers can share content, sales numbers and information with brands. “It’s really crossing the chasm,” in terms of becoming a more collaborative relationship, said Lewis. Still, as more brands take a look under the hood, there will be uncomfortable conversations about attribution and performance along the way. Myth: a performance-only play Most recognize that the easy money of following Amazon’s playbook and selling sponsored ad impressions on-site is now evolving, moving beyond a strict performance play and up the funnel. That makes attribution more complicated. “The large misconception is that [retail media] is a digital or ecommerce play,” said David Peterson, gm, global head of retail media at Publicis agency Epsilon, which powers Walgreens Advertising Group (WAG). “It is an omnichannel play." He points to an Epsilon stat that 20% of shoppers typically visit a retailer’s website, while the rest of the audience can be found elsewhere, on social, connected TV, display or elsewhere. For WAG, launched in December 2020, "it is our mix of media solutions primarily found off-site, versus primary on-site media solutions, which is our differentiation," said Jonathan Lustig, senior director, media sales at WAG, adding that the approach has a more "open-web methodology." But a truly holistic view of trying to reach the customer is more complex, given operational silos and which team is responsible for the relationships. This makes it tricky to increase investment or track true performance. Take digital in-store placements, a channel whose creative potential is limited by a lack of robust trading infrastructure. In-store digital screens are most akin to digital out of home, which is a small slice of digital budgets and lacks national measurement standards. And while brands' organizational setup has improved, with some appointing dedicated retail media teams, there's still a long way to go, said Lipsman. Further, retailers are already seeing decent revenue from their RMNs. Walmart’s global ad business, led by Connect, generated $2.7 billion last year, just 1.6% of its total revenue but at a 40% growth rate, and it's a much higher margin than selling products. Those eyeing revenue growth, stuck in a slim margin core business, need to be more accommodating in having those ads bought off their platforms, where necessary, without layering on additional fees. “In the long run, the healthiest and most constructive [approach] is for retailers to stop acting like retailers and start acting like media companies,” said Lipsman. This story is part of Adweek’s Beyond the Transaction special feature, which spotlights the people and strategies driving business growth and brand awareness.

Retail Media Advertising

Debunking Retail Media's Myths as It Enters Its 2.0 Era

The realities of the rapidly growing channel are coming into focus

Lucinda Southern

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Lucinda Southern