Retail Media Networks: A Complete Guide with Definition and Examples
Retail Media
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9 min read
A Retail Media Network (RMN) is essentially a digital Advertising Technology (AdTech) platform operated or owned by a retailer. The RMNs activate the retailer's first-party data, and that enables brands to showcase personalized ads to their target audience.
Retail Media has grown as a transformative force in the world of digital advertising, marking the "third big wave" after search and social media advertising.
The sector is experiencing explosive growth, with projections from consulting agency Bain & Company foreseeing a surge in ad spending to $25 billion by 2023. However, eMarketer paints an even more dynamic picture, predicting U.S Retail Media ad spend to reach a staggering $45.15 billion in 2023, escalating at nearly 20% from the previous year and expected to hit $106.12 billion by 2027.
Particularly, in Latin America, Retail Media represents a significant marketing and advertising opportunity. The region has embraced the fastest growing channel of digital advertising, propelled by the innovation of Retail Media Network (RMNs) and changing consumer behaviors. The region's $1 billion Retail Media market not only showcases substantial growth but also boasts some of the world's highest returns on ad spending.
Against the backdrop of challenging economic conditions, marketers in Latin America are strategically turning to retailers for Retail Media platforms and ad types that deliver results at scale. Leading the charge in this digital advertising renaissance are three major players – Mercado Libre, Falabella, and Walmart Mexico – positioning as fast-growing contributors to the evolving world of advertising in Latin America.
What is a Retail Media Network?
A Retail Media Network (RMN) is essentially a digital Advertising Technology (AdTech) platform operated or owned by a retailer. Brands of all sizes can leverage this platform to enhance their digital marketing strategies by purchasing ad spaces and creating ad campaigns through these platforms. By doing so, they can access and target more relevant audiences, while collecting shopping insights to optimize their retail marketing efforts further.
The RMNs activate the retailer's first-party data, and that enables brands to showcase personalized ads to their target audience. It is like a personal digital shelf, enhancing brands' visibility, awareness and sales. Certainly, various ad formats, such as Sponsored Product, Sponsored Display, Video Ads, onsite advertising, offsite promotions and in-store ads, contribute to this enhanced visibility.
For a deeper dive into the Sponsored Product and Display Ads, you can explore our previous articles.
With an omnichannel strategy, RMNs extend beyond websites and apps, encompassing mobile apps, streaming services, email channels, physical stores, and even partner assets like social networks and digital billboards. And, ownership of Retail Media Networks span a diverse array of entities, including digital retail pioneers like Amazon, online marketplaces such as eBay, specialized category retailers like The Home Depot, grocery giants like The Kroger Co., and even delivery services that provide support to retailers like Instacart.
These platforms mentioned, with large user bases, are tapping into the lucrative world of digital advertising by establishing their own Retail Media Network. Here are some more detailed info on their RMNs:
Amazon Advertising: Dominating the US Retail Media landscape with a 75% share, Amazon's advertising revenues experienced a 20% growth from 2021 to 2022, reaching an impressive $37.7 billion in 2022. In the second quarter of 2023 alone, Amazon's ad business generated sales of $10.68 billion. Amazon empowers brands and marketers to extend their reach across various channels, including display, audio, and over-the-top video, with contextually relevant ads. Among small and midsize sellers, Sponsored Products stands out as the most popular Amazon PPC ad option, while large brands and enterprises heavily invest in Sponsored Brands. Read more about Sponsored Brand Ads in our previous blogs.
Walmart Connect: Walmart's Retail Media network, the second-largest after Amazon, saw a 136% increase in ad revenue, reaching $2.1 billion in 2021. In the fiscal year 2022, Walmart's global advertising business generated an impressive $2.7 billion in revenue. Currently, Walmart is strategically expanding its efforts in in-store advertising, leveraging its extensive reach to pursue growth in higher-margin businesses.
Instacart Advertising: Instacart has emerged as a formidable force in the advertising landscape. The grocery-delivery company's ad revenue reached approximately $740 million in the past year, marking a substantial 30% increase from 2021. This growth is particularly noteworthy considering the overall stagnation in the digital ad market during the same period.
eBay: In its latest earnings report, eBay revealed a significant growth in ad revenues, reaching $367 million in Q2 2023—a remarkable 35% year-over-year increase. This notable uptick can be attributed to the company's innovations in ad types, enhanced measurement capabilities, and the expansion of third-party ads.
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Retail Media Ad Types
There are three main categories of Retail Media offerings to consider:
On-site Advertising: On-site ads are placed within a retailer's digital ecosystem, including its website, app, and emails.
Off-site Advertising: Off-site ads are positioned in third-party channels such as social media networks, other websites, or connected TV platforms, leveraging a retailer's customer data and insights.
In-store Advertising: In-store ads are integrated into a retailer's physical environment aka brick-and-mortar stores, encompassing placements such as in-store digital screens and audio ads. To give an example, Cooler Screens, a company at the forefront of digital in-store advertising technology, uses video screens on refrigerator doors in physical stores like Walgreens.
And now, they're expanding beyond just doors—these screens are soon expected to be at the end-caps, checkout coolers, pharmacy screens, and more. A major player, Kroger, has opted to introduce these digital doors to 500 of its stores, transforming traditional refrigerated cabinets into dynamic in-store advertising spaces.
What is the difference between Retail Media and Retail Media Network?
Despite its growing significance, many retailers and advertisers remain unfamiliar with the nuances of the “Retail Media” and “Retail Media Network.”
Now, when we talk about Retail Media, we're referring to the actual advertising near the point of sale you see on a retailer's media network. So, if you're a brand wanting to reach specific audiences, you'd team up with a retailer to create “Retail Media” ads for their digital spaces.
A Retail Media Network is like a technology platform owned and operated by a retailer for advertising. Think of it as the retailer's unique digital advertising playground. Amazon describes Retail Media Network as platforms where retailers can sell ad spaces on their digital channels to third-party brands. So, if a big store has an available ad inventory and wants to share it with other brands so that they can advertise their products and services, that's the Retail Media network.
For Retailers
For retailers, Retail Media opens up entirely new revenue streams beyond traditional retail sales. So, the key advantage lies in the creation of a strong income channel. Retail Media empowers retailers to turn their first-party data and audience insights into a valuable profit source.
By strategically placing ads on their own e-commerce platforms, retailers not only seize a new revenue opportunity but also access a highly profitable avenue with rapid growth potential.
Retail Media enables retailers to precisely target their customer base, attracting increased site traffic and establishing a supplementary business model with impressive profit margins, reaching up to 80% in certain cases. A notable trend is that every Top 10 retailer in the U.S. has now ventured into Retail Media Network. This shift is not without reason, as evidenced by the staggering ad revenues reported by new entrants, particularly influenced by the success of pioneers like Amazon, Walmart, and Target.
For Grocers
For quick commerce players like grocers, venturing into the Retail Media landscape is now more of a necessity than an option, ensuring relevance with shoppers, competitiveness among retailers, and strong connections with brand partners. In the post-pandemic landscape, grocers are eager to enhance the in-store experience, and Retail Media emerges as a vital player in achieving this goal. With the integration of smart carts, interactive kiosks, digital screens, and even aisle-roaming robots, grocery stores are embracing innovative tools as part of their regular offerings.
On the other side, grappling with challenges like declining consumer spending, supply chain issues, labor costs, and competition from e-commerce giants, grocers must find innovative ways to boost both their online and offline platforms' profitability and provide enhanced value to customers and brand partners. Retail Media Network (RMNs) step in as a solution, enabling grocers to increase revenues by selling ad space, creating engaging shopping experiences, and competing effectively with industry giants like Amazon and Walmart.
Through RMNs, grocers can foster stronger relationships with brand partners, offering increased visibility and influence over their products.
For Digital Marketplaces
Using data-driven methods helps marketplaces deliver highly targeted ads, making the user experience better and boosting conversion chances. The network's insights into consumer behavior enable marketplaces to improve product recommendations. This approach not only draws brands interested in specific consumer groups but also positions the marketplace as an innovative and competitive player in digital advertising.
Insider Intelligence reports that Walmart's open marketplace, along with improvements in ad targeting and measurement, led to a twofold increase in the number of third-party sellers using its advertising services in the past year. Meanwhile, other major marketplaces, such as eBay, are relying on Retail Media for growth, with increased ad revenue and expanding seller participation driven by new products and enhancements.
For Brand Partners
Retail Media Networks offer brands a powerful avenue to connect with shoppers throughout their buying journey. The effectiveness of this advertising stems from its timely and relevant nature, enabling marketers to plan strategically and make well-informed media buying decisions. One significant advantage is the enhanced connection with relevant shoppers, as digital store visitors are already inclined to make purchases, keeping a brand top of mind.
What further distinguishes Retail Media Networks for brands is first-party data. Brands can leverage both the retailer's and their own customer data for personalized ad targeting. Research indicates that having first-party information is a primary factor influencing CPG brands' preference for Retail Media Network. Additionally, non-CPG advertisers are increasingly recognizing the importance of these networks, with 75% planning to boost their investment, according to McKinsey.
For Shoppers
Retail Media Networks also enhance customer experience by presenting targeted and relevant ads as shoppers explore specific products on a retailer's website. Unlike generic ads, these sponsored placements align with shoppers' behaviors and interests, introducing them to new brands or inspiring them to try different products.
The key lies in the precision and relevance of Retail Media advertising, contributing to a more enjoyable and less intrusive shopping experience. When executed effectively, these ads assist shoppers in making informed purchase decisions and serve as helpful reminders of related products they might be interested in.
Retail Media Networks are still delivering success. In a recent report on the state of Retail Media, brand/ seller marketers underscored its continued success of Retail Media initiatives. An overwhelming 96% of respondents affirmed that their Retail Media programs successfully achieved the desired brand impact in the previous year.
Looking ahead, 87% of marketers expressed their intent to either maintain or increase spending on Retail Media in the upcoming year, with an even more substantial 93% foreseeing it as a sustained priority for the next two years. Despite being a relatively young channel, the exponential growth of Retail Media is reshaping the landscape of ecommerce, eagerly anticipating the participation of more retailers and marketplaces in its transformative process.
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Sources:
Adams, P. (n.d.). Walmart’s US ad biz has nearly doubled in 2 years amid Retail Media boom. Marketing Dive. Retrieved November 30, 2023, from https://www.marketingdive.com/news/walmart-connect-retail-media-networks-Q2-earnings/691265/
ChannelSight. (2022, July 13). Why Retail Media Is Essential For Brands. ChannelSight. https://www.channelsight.com/blog/retail-media
Patel, N. (2021, January 6). What is a Retail Media Network? Neil Patel. https://neilpatel.com/blog/retail-media-network/
Silberstein, N. (2023, November 10). Retail Media: Everything You Need to Know. Retail TouchPoints. https://www.retailtouchpoints.com/topics/digital-marketing/retail-media-explained#:~:text=Retail%20media%20is%20the%20broader
Stambor, Z. (n.d.). Instacart’s ad business reportedly soared 30% last year. Insider Intelligence. Retrieved November 30, 2023, from https://www.insiderintelligence.com/content/instacart-s-ad-business-reportedly-soared-30-last-year
Sweeney, N. F., Michael. (2023, March 23). What Is Retail Media & Retail Media Network (RMNs)? Clearcode | Custom AdTech and MarTech Development. https://clearcode.cc/blog/retail-media-networks-rmns/
What are Retail Media Network and why are they important? (n.d.). Amazon Ads. https://advertising.amazon.com/blog/retail-media-networks#:~:text=Retail%20media%20networks%20are%20a
Aysu Altuntaş
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