A variety of new entrants are pouring into the retail media space, from C-stores to pharmacies, quick-service restaurants, auto retailers and B2B companies. According to Mark Williamson at retail media platform CitrusAd, “They smell blood in the water; their boards, their CEOs are saying, ‘Hey, everyone’s doing retail media … What are we doing, what’s our plan?’
“There’s so much energy and excitement for it, because there’s a fear of missing out…”
Indeed, retail media will be the fastest-growing advertising channel globally in 2023, with Warc forecasting 10.1% growth in spend (to $122 billion), following nearly ten consecutive years of double-digit growth since 2014.
Retail media has found favour both with retailers, who can put their stores of first-party data to effective use while generating an additional stream of revenue, and with advertisers as a means of reaching shoppers at the point of purchase.
But with competition rising as more and more players take advantage of this growing space, some retailers may be unsure about how to get started – as well as how to compete against the clout of mega-players like Amazon, Walmart, and Target (or outside the US, supermarket giants like Tesco and Carrefour). Is it even worth it for smaller retailers to launch a retail media proposition? What’s happening in sectors such as grocery, where ecommerce penetration is traditionally lower? Could the solution lie in building a walled garden with ‘small walls’?
I sat down with Williamson, who is SVP Client Strategy & Development at CitrusAd, to hear about the trends he has observed in retail media, particularly in the United States; and how smaller retailers may gain a foothold in a competitive environment.
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Retail media is now a core function within retail power players
At present, the opportunity presented by retail media is so huge that, in Williamson’s opinion, “You’ve got to be pretty blind, or stubborn, as a retailer to not understand that you should be in retail media” – at least in the United States, where the retail media landscape is most mature, and increasingly in other parts of the world as well.
Amazon is widely recognised as the pioneer of retail media, launching Amazon Advertising in 2012; its major US rival, Walmart, was not far behind with the launch of Walmart Exchange, or WMX (later rebranded to Walmart Media Group and then to Walmart Connect) in 2014. Other major US retailers joined the fray in the mid-2010s: Kroger purchased the US assets of Tesco-owned data science and analytics business dunnhumby in 2015, turning them into a standalone subsidiary called 84.51°, while Target launched Roundel, its retail media business, in 2016.
Williamson reflects on the way that retail media has developed at these organisations in recent years. “What I’ve seen over the last three to four years is those programmes really maturing, and each of them developing a competent function of retail. Retail media, within those organisations, is now a core function”, alongside merchandising, operations, marketing, and so on – “and the way that I define that is: it’s a department unto itself. It’s not buried underneath an ecommerce marketing team, or a category marketing team; it is a clearly-defined department with a leader that has a seat at the big table.
“There’s something about that team that has enough legitimacy inside the organisation that when disruption needs to happen, when change needs to be pursued, they can move faster through that.”
“That’s a huge difference … That’s really, I think, what’s moved the needle for retail media in general: the big, big retail power players saying, ‘Retail media’s now a core thing that we do. It’s a thing we’re going to talk about in every meeting, it’s a competency that we’re developing, and we expect you to match it.’ And brands react to that; they create retail media programmes.”
New entrants and a fear of missing out
Other trends that Williamson has noted as retail media awareness has accelerated include new entrants from a lot of different verticals, especially grocery, where ecommerce penetration has finally reached a level that makes retail media viable. “There’s only so much you can do in retail media if your ecommerce penetration is one or two percent,” says Williamson. “But it was kind of trending up, and Covid accelerated that, so now grocery – at least in the US – is 10, 12, 15% ecommerce penetration; now you’ve got critical mass, you’ve got a lot more digital integration and digital adoption among customers.
“So now you’ve got these retail companies in the grocery space that are legitimate retail media players … They’re a couple of years behind in developing those teams, getting the seat at the big table, getting their technology stack in order, [and] you can see that happening in real-time.”
“… everyone’s just jumping in to figure out what their piece of it is.”
How smaller players can compete in a fragmented retail media landscape
For “powerhouse” retailers like Target, Kroger, and Walmart, “it’s really hard for them to fail” at retail media, says Williamson. “They have so many customers, they have so much data, they have so much site traffic, so much in-store traffic … They just need to be in the business.”
However, there are only a handful of powerhouse retailers and many more smaller retailers, such as regional grocers or newer entrants from verticals that don’t have a rich history of retail media, that might want to compete in the space. How can these smaller players build a compelling proposition?
One key point that Williamson makes is about consolidating channels: there is typically a lot of channel fragmentation within retail media programmes, with different touchpoints managed by different vendors, creating a complex situation for brand buyers to navigate. “It doesn’t mean you have to have one partner that does all the stuff,” he qualifies. “But different parts of your stack have to talk to each other. There has to be integration.
“It’s hard work to do, but until [retailers] do that – I think there’s more than enough money with brands. There’s no shortage of money; but there is shortage of time, bandwidth, strategic planning… If you’re Walmart, or you’re Target, or maybe a Tesco or a Sainsbury’s, you can get the attention of brands and say, ‘Here’s how we want to engage’.
“But if I’m a dollar store, and my brand rep is someone who covers all the dollar stores or all the regional grocers in my region, or they cover the whole country in a smaller class of trade – there is no way they can ever get down to the nitty-gritty of every single thing that they can buy. … And so that fragmentation on the channel, the delivery, and the measurement side has got to be consolidated.”
Lowering the garden walls
Williamson also cautions against smaller retailers who might be thinking about creating their own ‘walled garden’ platform in the vein of Target’s Roundel or Sainsbury’s Nectar360 in which brands engage exclusively with a single retailer.
“This is where retailers just have to be honest with themselves: very few have the power to be treated one-to-one,” he says.
“Most retailers have to be willing to join a network – to connect their inventory into some kind of buying pool where their inventory is made available – and that’s not fun, it’s not sexy; they don’t get credit for getting direct dollars – but it’s either that, or get ignored.”
Which is not to say that these retailers aren’t important – they are the only ones who can reach the particular customer base that they have, such as in the United States, where regional grocers may be the only way to reach consumers in a particular local area. However, Williamson argues that retailers still need to make it easy for brands to do this.
“[Brands] want to be live there, but they just can’t go to that one retailer and say, ‘Okay, how do I buy sponsored search from you?’ So, I think you’re going to continue to see the evolution of this network effect of multiple retailers together – but retailers have to be honest with themselves and say, ‘My best chance of success is being a part of this grocery network instead of doing it on my own.’”
To that end, CitrusAd launched its own platform in July 2022 that connects more than a dozen regional grocers in the United States in one media network. A similar venture is afoot to link up retailers across Europe and Latin America, involving CitrusAd’s parent company, Publicis Groupe in collaboration with French supermarket Carrefour, which will begin operation in the first half of 2023.
Williamson distinguishes this model from open programmatic, emphasising that retailers would still have control of their inventory and the ability to decide what types of ad units and placements they want to run.
“We guide them from a yield management perspective, to make sure they’re actually winning bids and getting the flow of dollars down to their channel – but they’re still in control; they still control their data, they’re still within privacy regulations,” he says. “How do you build a walled garden with small walls, with entry points that have been deliberately created where retailers are still in control, but they’re able to take advantage of demand outside of their walls?
“That requires technology; it requires strategy; it requires a lot of setup, but I think for most retailers, that’s where they’re going to have to get comfortable – playing in this hybrid between open programmatic and full walled garden.”