The Meteoric Rise Of Retail Media Networks And The Profitable Future Of Store As Media

Non-CPG advertisers anticipate increasing spend with RMNs

Inflation is running rampant putting increased pressure on retail earnings, as worries about 70’s style stagflation grow. With supply costs rising and customer demand shifting, Target has warned that its inventory glut will drag on earnings as they rely more heavily on discounting and may use clearance sites like Overstock. But there are new profit streams in sight.

The industry is abuzz about retail media networks and for good reason. Retail media spend doubled last year from $20 billion to $40 billion and Coresight predicts it will hit $75.1 billion this year! Retail media is the fastest-growing segment of media behind only connected TV, according to Michael Harrison, managing partner at Winterberry Group as the online advertising industry grapples with a cookie-less future. Across categories, 75-90% of brands are looking to increase their spend on retail media networks (see graph above).

Beyond Amazon - Retailers Rapidly Launch New Retail Media Networks

Every other week we hear of new launches and they are extending to in-store customers and experiences.

Walmart Media Network is now Walmart Connect and includes in-store digital touchpoints. Walmart even recently announced electronic shelf labels creating nearly limitless ad inventory.

Advertisers across RMN providers

Macy’s launched its retail media network in 2020 and is going to offer a self-service portal later this year. CVS Health Hubs are launching with in-store digital throughout. Albertson’s hired Kristi Argyilan who headed Target’s Roundell and is extending their retail media network launch this month. Even Dollar General is getting in the game, enabling targeting of often overlooked rural shoppers.

80% Of Spend Will Be Net New - Increasing Profitability And Further Solidifying The Store As Media

Spend on retail media

Interestingly, the source of ad spending will net new for retailers and not cannibalize existing spend. According to McKinsey, “RMNs provide an incremental source of high-margin revenue, and substitution for shopper or co-op marketing can be managed. On the advertiser side, this surge in budgetary allocation to RMNs delivers performance that justifies the investment.”

At Perch by Raydiant, we are increasingly seeing advertising spend be married to in-store shopper marketing programs that deliver digital impressions and engagement like our lift-and-learn platform and product engagement marketing technologies. What better time time to influence shoppers than when they are in-store, in front of your product and have identified their interest in the category?

“A lot of CPGs have kept their brand advertising separate from their ecom advertising,” Momentum Commerce’s VP Todd Bowman says. “They were very siloed – you had an Amazon team, a Walmart team, a Target team. What they’re finding is, there’s a lot of duplication happening within their teams…. A lot of these CPGs are finding what they need to do is bring those teams together. When they come together, they’re able to build a broader front and build leverage to those retailers to help take a little bit more control of what’s happening.”

The economics of retail media networks are impactful. According to Customer Management Partners, retail media networks can transform the slim margins of grocery and drive meaningful 4.3% increases in revenue and in turn double net profits.

Grocery Base Business Financials vs Retail Media

Source: Customer Management Partners

According to the CMP white paper, “What is certain is that retail media is giving the early adopters—like Kroger, Target and Walmart—another weapon to compete against smaller chains and independents. Beyond the direct revenue and profits generated by these programs, retail media networks are proving to be an increasingly valuable tool for delivering personalized experiences and enhancing customer loyalty, which drives incremental growth in the base business.”

Will 2022 Finally Be The Year Of The Digitization Of The Store?

What’s becoming clear is that retailers have valuable audiences of high-intent shoppers that are getting harder to reach with the demise of the online advertising cookie. Retailers are in unique positions to enable digital touchpoints online and in-store that brands will compete to own and message shoppers at the critical point of consideration. The retail industry has predicted the “digitization” of the store for a decade now. A perfect storm of the commoditization of reliable hardware, better data from computer vision and IoT, the demise of the cookie, and strong financial incentives make 2022 the year that the first meaningful steps towards the digital store are likely to be completed. And in the process, we will see billions of spend flow into retailer’s doors.