Interest and investment in retail media grew massively in 2022. It’s not surprising, given the data that retailers hold, with a 2021 report by The Trade Desk stating that 81% of consumers had registered a digital account with a retailer and 53% said they notice sponsored products or ads on retail websites.
This kind of activity has fuelled predictions of further growth. GroupM’s September 2022 forecast predicted that retail media will grow 60% to reach $160bn in spend by 2027.
Though the drivers of this growth include the ‘closed-loop’ nature of retail media and the targeting capability of retailers (amidst the demise of third-party cookies), that doesn’t mean there aren’t complexities when measuring the performance of retail media.
I spoke to several retail media experts about measurement and asked them about the challenges for advertisers, and whether they could affect growth in the long term.
- What is key to measuring success in retail media?
- What are the biggest challenges in retail media measurement?
- Could measurement challenges stunt retail media growth?
Kevin O’Farrell, Associate Vice President, Analytic Partners:
“Measuring success in retail media can often be tricky, as retailers need to provide brands with plenty of transparency. Brands will need granular data to ensure they have the ability to know if sales are incremental to other activity and how they fit into all the brand’s commercial activities.
“Modelling is the most effective way to holistically measure the impact of retail media and understand the interplay between channels, for instance, whether brands are investing too little, or too much. They need to look for the point of diminishing returns and take into account that it is constantly evolving.
“A number of questions should be considered to measure sales on a retailer’s website or app.
- a. What is driving sales on the retailer’s site (e.g. TV advertising, sponsorship, weather) and how can it be driven in a more efficient way?
- b. With on-site advertising: How effective and efficient is retail media in driving sales both on the website or app, as well as off it?
- c. How should it be best implemented as part of the wider media mix?”
Prateek Gupta, Managing Director of Transact, OMG UK:
“Effective measurement of success in retail media is about achieving a well-rounded measurement framework with clear, attributable methodology and well-defined full-funnel KPIs. It’s crucial that these KPIs not only quantify the effectiveness of ads within the retailer environment, but also assess the impact of broader digital activation fuelled by retailer data or 1st party shopper data. Where the former is still heavily influenced by core performance KPIs such as Return on Ad Spend (RoAS) and Advertising Cost of Sales (ACoS), the latter expands the KPI set to include broader performance and brand goals such as Incremental audience reach, paid impressions, etc.
Over the last year, we have seen KPIs evolve beyond pure sales performance.
“Over the last year, we have seen KPIs evolve beyond pure sales performance. KPIs such as Share of voice, Share of category sales, New-to-brand acquisitions, are now a part of most post-campaign analysis. One key difference from other digital media measurement is that retail media is fuelled by audiences built on retailers’ first-party data. This offers brands the opportunity for closed-loop measurement and provides clearer understanding of how both online and offline shoppers are responding to the activations, in a cookie-independent way.
“Fundamentally, measuring the success of any marketing should be focused on its impact on the business. We have evolved our measurement to look at core business KPIs (such as revenue, growth, profit, margin), vs purely ‘input’ metrics such as share, impressions, clicks, which are just enablers of much more important business outcomes.”
Prateek Gupta, OMG UK:
“There are three big challenges with retail media measurement: a) proving incrementality, b) lack of standardisation of performance KPIs across networks, and c) limited attribution.
“It has been tough for retail media networks to show the true “incremental” impact of retail media formats. For on-site products such as sponsored search, it is often argued that the projected performance of paid visibility double counts organic brand search-led traffic landing on the SKU.
“Similarly, for off-site retail media activations, where shopper first-party data helps reach relevant audiences efficiently, it has been tough to prove that the audience is not overlapping or cannot be reached with other digital ad formats / walled gardens.
[E]ach retailer runs their own attribution windows and models, making it tough to compare and report true performance.
“What further adds to these issues is the lack of standardisation of performance reporting across different retail media networks. This not only makes it hard for a brand to compare the performance between different retailers and ad formats, but also to compare retail media performance with other digital ad channels.
“Lastly, achieving true attributions of retail media activations is difficult as each retailer runs their own attribution windows and models, making it tough to compare and report true performance. Also, due to a lack of proper data connections, it is natively hard to attribute offline sales that may be driven by online retail media ads.
“Both retailers and retail media networks recognise these issues as core challenges to unlock incremental budgets. As such, we’ve seen new services being introduced, such as offering open APIs that share campaign performances for effective post campaign analysis and possible comparison with other performance marketing channels.”
Kevin O’Farrell, Analytic Partners:
“One of the biggest challenges will come from the type and amount of data that retailers supply to brands. Retail media networks are a powerful tool to generate information around shopper’s purchasing history and behaviour, yet when brands don’t have full visibility, it can feel like a wasted investment; or its impact and ROI can be completely overrated.
“As budgets are being heavily scrutinised with the continuing cost-of-living crisis, marketing teams are under significant pressure to make sure every pound can be measured as a return on their overall investment. To make the most impactful decisions, brands will need full transparency around their retail media activity. Therefore, collaboration with the data providers will be key. Outlining exactly which aspects will be measured and setting clear expectations with all involved stakeholders early on will be important to create a happy, successful partnership.”
Nicole Kivel, Managing Director Northern Europe, Criteo:
“[Alongside lack of industry standards], there’s also a lack of understanding in measurement. Agencies think of retailers as media owners, they’re not – it’s vital to appreciate the challenges of retail. Even though the relationship between commerce and media will evolve and ease over time, we can’t forget the retailer amongst all the monetisation.”
Kevin O’Farrell, Analytic Partners
“Yes. Some sources are forecasting retail media to be a $45 billion market this year and growing by about another $10 billion in 2024. So, the available options of RMNs and their offerings will evolve. But compared to the other waves of advertising, we’re still in the early days. Some retailers are hesitant or not ready yet to openly share their data because they are worried about contradicting results that come with last click attribution and overestimation or underestimation of their ads.
“Brands and retailers both should invest in a more transparent future of retail media data that is open to holistic measurement approaches. In a recent omnichannel retailer case study, we’ve seen just how much a channel’s impact can be overrated. When using ROAS or click-based data, affiliates and paid search performance of that customer were inflated by 3x, while other tactics like paid social and video’s performance were notably undervalued. Given the current size and the expected growth of retail media, this could potentially be a terribly inefficient investment for brands.”
Nicole Kivel, Criteo
“In many instances, retailers are thinking about this new media in the same way as they thought about trade marketing. Successfully articulating a retail media proposition to media agencies and driving incremental revenue means adhering to set standards when it comes to the formats, data practices, and KPIs that enable buyers from different verticals to use automation technology and unify measurement and attribution.
[For some retailers] this is a huge departure from their area of expertise.
“For some retailers this may be an easy lift, but for others this is a huge departure from their area of expertise. It’s not simply lifting and expanding their digital trade marketing but entering into a media world in which activation budget is fought for not guaranteed and comes with specific success metrics.
“Moving forwards with this plan requires retail media networks to be willing to engage in a more sophisticated way. For example, any retail media network is going to provide some kind of closed loop reporting, but often this over-emphasises ROAS at the expense of other KPIs focused on consideration, new-to-brand and market share shifts. It is vital to understand and determine the most important KPI for each retail media execution and what it ultimately needs to achieve for the brand.”
Prateek Gupta, OMG UK:
“Retail media has grown exponentially over the last two years, and if we don’t grasp the opportunity to measure this market evolution more effectively (e.g. incrementality and profit), there is a danger that the growth trajectory will be significantly impacted. Equally, if we get it right, it will be an enabler of even greater growth.
“There have been some promising new products and services launched recently to achieve better measurement and attribution. One such product is retail media data clean rooms (DCRs). Data clean rooms are being actively used to share aggregated rather than customer-level data with advertisers from walled gardens like Google, Facebook, and Amazon, while still exerting strict controls. Extending the capability of an incumbent data clean room by bringing retail media data and ad format performance into the core data layer can offer an effective and transparent method to measure the impact of retail media campaigns on broader business goals, and help compare with performance on other walled gardens.
“As DCRs are owned and operated in a secure brand environment, the brand’s own first-party data sets and sales (POS, EPOS) data can be brought into the same environment, offering cleaner attribution between retail media activations and actual uplift across website visits, store visits, and overall omnichannel sales. I am sure there’s more to come in this space over the next 12-24 months that will improve retail media’s acceptance, adoption, and utilisation in the near future, ultimately ensuring continued growth.”