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You’ve likely been hearing about retail media networks across your LinkedIn feeds or in various newsletters over the last few months. While they’ve been around for a few years, they’re gaining a lot of traction in the industry. We’re here to give you the low-down: the benefits, challenges and process to set yourself up to use retail media networks.
Retail media networks are advertising platforms that exist within the context of online retail websites and marketplaces. These networks allow advertisers to place their ads directly on retail websites, which can be more effective in driving purchases and increasing brand awareness than traditional advertising methods. When you search for “computer” on a retailer’s website, you might get ads for similar tech products from another retailer.
Retail media networks can take different forms, but they generally operate by allowing brands to bid for ad space on a retailer’s website, and then serving up targeted ads to shoppers based on their search history, purchase history and other behavioral data. Advertisers can choose to display ads in various formats, including banners, product listings, sponsored search results and more. It’s often most beneficial to have your ad on a search result because of its targeted nature.
Retail media networks are popular because they offer several benefits to both retailers and advertisers. For retailers, they can help increase revenue by monetizing their website traffic and providing a new revenue stream. For advertisers, they offer the ability to reach a highly targeted audience of shoppers who are actively browsing or searching for products, increasing the likelihood of a purchase.
Despite a looming recession, ecommerce and retail spending is on an upward trend, so it’s a good time for retailers to take advantage of the opportunity to increase their visibility. According to eMarketer, US retail ecommerce sales total $1.1 trillion and will be up to $1.6 trillion by 2026, making up 20% of total retail sales in the US.
Additionally, US digital retail media ad spending is projected to increase by 2024. According to eMarketer, it was at $37 billion total spend in 2022, projected to be at $55 billion in 2024 (covering almost 18% of total digital ad spending in the US).
With these data points in mind, let’s take a look at some of the main pros and cons of retail media networks.
Benefits of Retail Media Networks
- Targeted Advertising: Retail media networks allow brands to display their ads directly to consumers who are actively shopping for products. This means that advertisers can reach a highly targeted audience, increasing the likelihood of a purchase.
- High ROI: Retail media networks are known for their high return on investment (ROI). By targeting shoppers who are more likely to convert, advertisers can achieve higher sales and revenue with lower costs.
- Enhanced Brand Awareness: By placing ads directly on popular retail websites, brands can increase their visibility and reach a wider audience. This can help to improve brand recognition and customer loyalty over time.
- Detailed Analytics: Retail media networks provide advertisers with detailed analytics, allowing them to track the effectiveness of their campaigns in real-time. This means that advertisers can quickly adjust their campaigns to optimize their results.
- Multiple Advertising Formats: Retail media networks offer a variety of advertising formats, including product listings, sponsored search results, display ads, and more. This allows advertisers to choose the format that best suits their goals and target audience.
Challenges of Retail Media Networks
- Competition: Retail media networks can be highly competitive, with many brands vying for the same advertising space. This can lead to increased costs and reduced ad effectiveness if not managed properly.
- Complexity: Retail media networks can be complex to navigate, with many different advertising formats, bidding options, and targeting settings to manage. This can require a high level of expertise and resources to optimize campaigns effectively.
- Limited Data Access: Retail media networks are owned by the retailers themselves, which means that advertisers may have limited access to first-party data. This can make it challenging to optimize campaigns and track performance effectively, especially knowing how beneficial first-party data can be.
- Limited Attribution: Retail media networks can make it difficult to accurately attribute sales to specific advertising campaigns. This is because many shoppers may be exposed to multiple ads before making a purchase, making it challenging to determine which ad was most effective in driving the sale.
So now that you’re thinking about the pros and cons of retail media networks, how can your brand get involved if you aren’t already?
Here are some steps retailers can take to put retail media networks into practice:
- Establish the RMN: The first step is to establish the RMN. Retailers need to create a dedicated team to manage and sell ad space on their website and app. The team should be responsible for setting up the infrastructure, including the ad server, tracking system, and reporting dashboard.
- Define the audience: Retailers need to define their target audience based on their shopping behaviors, demographics, and purchase history. This information will help retailers attract advertisers who are interested in targeting specific groups of consumers.
- Create ad packages: Retailers need to create ad packages that offer different types of ad space, such as banner ads, sponsored product listings, or in-store promotions. Ad packages should be priced based on the size, location, and duration of the ad.
- Attract advertisers: Retailers need to attract advertisers by promoting their RMN to media agencies and brands. They can use their existing network of partners or attend industry events to showcase their RMN.
- Measure performance: Retailers need to measure the performance of their RMN by tracking key metrics such as impressions, click-through rates, and conversion rates. This data will help them optimize their RMN and provide better insights to advertisers.
- Continuously optimize: Retailers need to continuously optimize their RMN by experimenting with different ad formats, placements, and targeting criteria. They should also stay up-to-date with industry trends and best practices to stay competitive in the market.
In conclusion, retail media networks offer many benefits to advertisers, allowing retailers to increase their targeted advertising, enhance brand awareness and reach new audiences. While there are some challenges, it seems the space is growing along with over retail ecommerce sales. It’s a new way to collaborate with others in your industry to benefit your brand and your partners’.
To stay on top of retail industry trends, make sure to register for the CommerceNext Ecommerce Growth Show this June in NYC.