Image credit: Clearchannel
According to some researchers, retail media networks (RMNs) are going be the fastest-growing marketing channel in 2023. This is happening even though other areas of spending, like digital and social media, are struggling. Marketers are looking for new ways to advertise and retail media appears to pack some real punch. Effectively this is the digitisation of the physical store and while it has been growing significantly overseas, it is just starting to get significant traction on our shores and in Oz.
Back in the early 2000’s I recall putting in one of the first retail media network trials into Progressive NZ. At the time we had just launched onecard and were bringing together the brands Woolworths and Foodtown and figuring out the future model with the ever growing and successful Countdown. As the largest retail network that was truly centralised for decision-making and having millions come through our doors weekly, the math seemed obvious. Imagine if ultimately you could connect the knowledge you had of a customer with the power to engage with them in-store? A no-brainer. Or so I thought. The practical application proved a low priority for my colleagues in Operations, Property and even Merchandise, and the fear of “moving spend” from coop into media was enough to hamstring the rollout. That was over 20 years ago and even today physical store retail media represents the next big business potential for retailers to capitalise on as in-store audiences are substantially larger than digital audiences on average.
If we look to the US as a reference, a study by Insider Intelligence found that for 13 leading brick-and-mortar retailers, including Walmart and Target, their in-store audience is 70% greater than their digital audiences. The study also found that many digital surfaces inside of stores are expected to get frequent exposure. These include brand displays on shelves and video advertisements on TVs. The physical store is having a moment, following the significant (and necessary) investment to support digital and ecommerce the past few years to leverage the customer behaviour changes from the pandemic. And there is a LOT of potential here.
Before jumping into the specifics of retail media advertising, let’s first define what retail media is…… Retail media refers to the advertising opportunities available within a retailer’s eco-system – for example the retailers website, app and the physical store environment. Retailers have a wealth of data on their customers, including their purchase history, their behaviour (recency, frequency and value as well as search) and their location. This can be utilised to deliver targeted and sometimes personalised content and ads to customers.
Last month Liquorland NZ announced they had completed the installation of their network across 114 Liquorland stores with access to over 1 million liquor-specific shoppers every month. Logically this is an exciting opportunity for liquor brands to target shoppers with ads, promos and content aimed at certain audiences. If you extend the opportunities for engagement, Liquorland is also part of Fly Buys and if you are anything like me, your local owner knows who you are and what you like.
So, while this is targeted and assumedly should be more effective for conversation, we don’t have the end-to-end measures to support the behaviour, purchase history and location tie-up….yet. Generally, it is cost effective, and it allows brands to reach customers at point of sale, when they are actively searching and likely to make a purchase decision it seemingly ticks all the boxes.
There are some exciting things happening in the US for us to ultimately benefit from. Early this year, Microsoft introduced PromoteIQ In-Store, a proof of concept that helps retailers as they experiment with content and hardware partners to create in-store retail media activations and digital signages. Separately, Amazon which generates roughly $30 billion a year through its advertising business launched digital signage ads in Amazon Fresh stores in October last year. In my world that is pretty powerful.
This is a major moment. If you are an FMCG brand this is suddenly a significant media channel to rival traditional or even digital advertising. Think about the foot traffic, the intent, the consideration, and awareness opportunities. Multi-category retailers from Mitre10 to Farmers, The Warehouse to Briscoes all have different eyeballs with shoppers on different shopping journeys.
About 80% of all shopping still happens instore so this is a huge opportunity to make an impression if you are a retailer who is big or small. This is a serious space that needs to be well-considered. In-store checkout and display screens, in aisle and aisle ends and what about that endless aisle that sits in your hand?
Major retailers have always had a powerful and sometimes dominant relationship with supplier brands. Some concerned FMCG players are worried that the rise of RMNs will continue to grow the power imbalance.
If we look across the ditch, according to its latest results, Woolworths Australia saw the sales from its digital division WooliesX (which includes e-commerce) drop more than 4 percent, but revenue from its digital and media division, which includes retail media arm Cartology, recorded revenue growth of 8 percent. If you are incredibly curious on the state of the wider owned-media market in Australia, Sonder, an independent owned media valuation business recently released a report valuing the key players and size of the market. It is an interesting read with some unexpected results.
All in all, this is serious business with a substantial set of trade-offs, decisions and considerations before you run to the opportunity. Everyone must win:
Think about yourself as a shopper. You don’t want to be bombarded with crap, noise, stuff. Content must be relevant, engaging and considered. Just because I am here in your store, don’t abuse that relationship. It must benefit us both.
Think of yourself as a brand advertiser. I want to know what I am advertising is to the right customers and converts their hearts, minds and wallets about my brand. I want access to information and data. I want choice and options. I want it to be easy and cost effective and I want to know it works OR how I can make it work better. I don’t want to be “forced” to do it or get delisted.
Think of yourself as the brand custodian. How does this serve my brand’s growth and does it make me a more compelling and interesting place to shop. Does it serve my purpose, our objectives and can it also allow me to bring core and key messages to my customers. Does it add real measurable and sustainable value.
Then there are the considerations if you utilise a media network partner, DIY or use a hybrid. It needs to be commercial and everyone needs to benefit financially.
Before you head-off to your exec team to tell them “we need to set up a retail media network asap” consider the following as well:
It will require a significant investment in digital signage hardware. And placement is critical - just ask the 20 year-ago me who struggled to get anyone to place a screen when customers would actually see it rather than in the top left hand corner near the deli where there was a power outlet!
The software is also important as it needs to power a solution that enhances the customer experience, provides sales conversion of the advertiser and is robust enough to allow localisation and flexibility of content.
The impact of additional “noise” in the customer experience needs to be evaluated. No one wants screaming and annoying additional noise in high traffic locations.
Measurement and attribution. Like any significant initiative in any business, and especially retail, closing the loop and being able to demonstrate the effectiveness of the ad content, sales and customer experience is going to be critical. Real-time reporting and the ability to provide self-service data for advertisers will be key.
Alignment. There has to be an alignment between the KPIs and objectives of the retailer and the retail media side. Ultimately customer experience is going to be a key factor in success and failure and if this isn’t completely understood, failure (and incredibly frustration) will occur.
If you are considering this as part of your strategy, don’t race. This is a marathon and as with anything in bricks and mortar, hard-wired. That has long term implications and costs. This could be a powerful opportunity but tread carefully to ensure you build something that is “brand-safe” not only for yourself, but potential advertisers.
Comments