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6 steps to retail media heaven

Guest post: Steve Gray – Last week Amazon announced $31bn in income from retail media – roughly 5% of their retail sales, mostly driven by sponsored… View Article

RETAIL SOLUTIONS

6 steps to retail media heaven

Guest post: Steve Gray – Last week Amazon announced $31bn in income from retail media – roughly 5% of their retail sales, mostly driven by sponsored and display ads that are paid for by brand advertisers who are seeing better returns than the equivalent spend on Facebook and Google.

Such is the outperformance that a wall of advertising dollars is ready to descend on those retailers who are able to offer brands similar exposure to consumers who are ready to shop but haven’t yet made their mind up about which product to buy.

We hear reports of one major CPG who offered to increase its spend 400% with a major supermarket chain only to be told that there wasn’t sufficient ad inventory available.

Management teams at major retailers are only coming to terms now with the opportunity in front of them but its clear from the differing approaches being taken and the variable results being achieved that retailers are not finding this straightforward.

We have identified six success factors

1. Strategy

Retailers need to embed retail media into their overall strategies. Just like a newspaper, TV station or other publisher they have to ensure a careful balance between the user experience – finding what to buy quickly and easily – and the opportunity to generate ad income in a way that helps not hinders customers. To determine the scope – instore, out of store, onsite and offsite. For brand suppliers only or third party advertisers ? Integrate with the retailer’s own brand and communication strategy or keep separate ?

2. Leadership

Retail Media needs an owner and its not obvious who that should be. It has to be a commercial role but marketing’s focus is typically the retail brand and commercial’s focus is typically buying products not selling media. And its not just about e-com as retail media covers personalised marketing to instore shoppers as well as digital signage in and around the store and traditional ambient media like magazines and trolley advertising. Whoever takes the lead needs a direct report to the CEO.

3. Data & technology

Data and technology are core success factors and Amazon’s ability to understand what customers are looking for, to serve ads relevantly to specific audiences and enable advertiser’s to see what works and what doesn’t is critical to their success. For multi channel retailers modern loyalty software, a CDP, audience selection/personalisation tools and ad serving software connected to advertiser’s buy side computers is key.

4. Operating Model

Many differing roles are required to succeed. Web design, ad tech, ad sales, data, marketing, commercial, retail operations, finance and IT all have a part to play. Which bits to do in house and which to outsource ? build an in house Media Centre ? work with specialist commerce media sales teams ? separate commerce media from traditional retail media or bundle them together ? These are all key considerations.

5. Selling to Media Agencies

Perhaps the biggest challenge is how to access the big bucks. An easy trap to fall into is to assume that its the brand’s commercial teams that hold the commerce media purse strings. This might be true for traditional retail media but unlikely to be so for the new money that retailers need to attract and whose expenditure is typically managed by global media agencies. These agencies are dispassionate about retailer a vs retailer b. They care about scale, audiences, data, formats, ease and speed of doing business, fast and accurate measurement . It is highly unlikely that a newly created retail media agency or in house team will have this connectivity. We know of several major retailers that are losing £ millions in ad income because they got this wrong. And good luck to the Commercial Director of one major UK supermarket who is convinced he can pull this off because he personally knows the sales directors of all his major suppliers.

6. Billing and Measurement

As in all things you can’t manage what you don’t measure. Many retailers are unable to measure what income they generate from their traditional retail media as its tangled up in trading discussions, rebates and off invoice pricing. We suggest that media sales should be itemised and invoiced separately with transparent pricing and rate cards. This is a key step to ensure incrementality. Its likely that investors will push for this and “other income” or similar will play an increasingly important role for investors. Particularly so as commerce media tips online groceries into profitability.

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