Article

Michael Nutley
Michael Nutley 1 July 2022

How Retail Media Has Become a Key Strategic Channel

Retail media is booming. Four out of five US marketers say advertising on ecommerce sites and using retailers’ data for offsite targeting are strategically important for their organization. And brands are increasing their spend in the channel by more than any other after social media.

These are some of the key findings in a new report from Digital Doughnut’s sister company London Research in partnership with GroupM agencies Catalyst and Xaxis – The Retail Paradigm: How Brands are Investing in the Future of Shopping.

This report follows on from The Retail Paradigm: The Evolution of Consumer Shopping, published earlier this year, which looked at the behaviours and attitudes of consumers as the world starts to emerge from the pandemic.

This one looks at how brands are responding, the barriers they face, and the further actions they need to take. Other findings include: Marketers are responding to consumers’ ‘fluid and flexible’ approach to shopping by increasingly moving to outcome-based budgeting and focusing on what works. 

The strategic importance of retail media, combined with the complexity of the retail media ecosystem, increases the reliance of brands on their agency partners for guidance and investment in the space.

Three-quarters of brands recognize retail media is shortening the customer journey and changing the role of search. However, they have yet to fully capitalize on the implications of these changes, especially in the way retail media can directly link advertising to purchase.

Three Key Drivers 

Three main forces are driving the rapid growth of retail media: the rise of ecommerce itself, driven by the pandemic; the impending demise of the third-party cookie; and the cost-of-living crisis. In addition, the previous report found that consumers have become more accepting of retail media in the past year. In particular, the proportion of over-55s saying they’re receptive has increased by 22% to 72%.

GroupM research suggests the ecommerce boom, which started during the pandemic, will continue, although not at the same rate. It predicts global ecommerce sales will grow by 19% in 2022, to $6.2 trillion,  before slowing down slightly to 16% in 2023, and 15% in 2024. Two-thirds of the marketers interviewed for this new report expect their online sales to increase this year.

More ecommerce obviously means a bigger audience for on-site advertising, but brands need a new way to target consumers on other sites as well. Interviewed for the report, Benjamin Sylvan, GM Retail Data Partnership at The Trade Desk, explained the importance of retail media in a post-cookie world.

“The open internet opens up who marketers can reach, allowing them to find all of a retailer’s buyers wherever they consume media vs. only those who buy on the retailer’s ecommerce platform,” he said. “There’s going to be a lack of rich audiences as the third-party cookie goes away, so advertisers will turn to retail media to help them find high-value audiences across the web.”

Meanwhile, the first report also showed that consumers are tightening their belts, with ‘saving money’ the single biggest factor in their shopping decisions. A better understanding of customer behavior driven by retailer data means brands should be able to create better discounting strategies to reward loyalty and encourage particular behaviors.

The Omnichannel Imperative

The other crucial point made by the two reports together is that, while retail media addresses a number of problems for advertisers, it can’t be allowed to operate in isolation.

The first Retail Paradigm report concluded that: “For consumers, ‘omnichannel’ means adopting whatever mix of in-store and online, or collection and delivery, best suits their needs in the moment, and changing whenever things no longer work for them.”

“As a result, the pressure is on marketers to deliver a coherent, consistent experience at every touchpoint, and to be able to respond to every customer interaction, no matter how fleeting.”

For brands, this means integrating retail media into their overall advertising strategy, something that the research found is already under way. Four out of five respondents (80%) agree they measure the impact of digital retail media on in-store sales performance, while three-quarters are combining on- and offline data in their loyalty schemes.

“The consumer shift towards convenience and flexibility is being met with speed and investment from across the ecosystem,” said Kerry Curran, Executive Director, Performance Strategy & Growth, U.S., GroupM.

“Everything is or will be shoppable and traditional categories will continue to expand outside of traditional channels and products to reach consumers wherever they are. That is why an omnichannel approach is so essential to success today.”

Both Retail Paradigm reports are now available to download

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