What Is Retail Media Advertising? Strategies + Best Practices
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You’ve probably heard the term “retail media” popping up in digital advertising circles. In fact, we highlighted retail media as an emerging trend to watch in our 2024 Future of Media Execution predictions piece.
But what exactly is retail media? How does it relate to other concepts like retail data and retail media networks? Additionally, why are big names like The Trade Desk, Walmart, Target, and Kroger (to name a few) hyping it up?
Finding the answer to these questions can be intimidating initially, but we’ll help you in this blog, providing the foundation of retail media you have been looking for.
What Is Retail Media?
Retail media advertising refers to two specific media execution tactics:
Executing media campaigns that serve ads to users on a retailer's owned inventory locations, such as their websites, apps, and physical stores.
Executing media campaigns that serve ads to users across the open web, leveraging the first-party data collected by retailers for targeting and measurement purposes.
Before we get too far explaining the minutiae of retail media advertising, let’s quickly revisit the definitions of retail, retailers, and retail data.
What Is Retail?
Retail encompasses the selling of a wide range of products for individual consumer purchase. Retail products can include (but not limited to):
Food, beverage, and groceries
Household and pet goods
Health and beauty products
Clothing
Sports apparel
Seasonal products and goods
Technology and appliances
Key Players in Retail
Retailers sell the types of retail and consumer packaged goods mentioned above.
While some retailers produce the products and goods they sell, it is more common for retailers to carry products and goods produced by individual brands. For the brands that retailers purchase products from and “carry,” we consider them “endemic” to the retailer.
The leading retailers you need to know about when talking about retail media generally include:
Best Buy
Macy’s
Sam’s Club
Meijer
Drizly
CVS
Instacart
Dollar General
Amazon
eBay
Walmart
Target
Kroger
Walgreens
Albertsons
The Home Depot
Almost all these retailers have online web locations where they sell the retail products of the brands they carry; many also own physical stores. These retailers are power players in this space, attracting massive amounts of consumer traffic, both online and in-store.
Retail Data Collection
Retailers collect various data points from their shoppers, known as retail data.
Retailers with physical stores collect data on user purchases, promo code usage, and credit card information. Retailers with online web locations collect the same data as in physical stores, in addition to in-depth data on the products users search, browse, click on, add to cart, and purchase.
We consider all this data to be first-party and owned by the retailer. Since retailers oversee thousands of daily online and in-store visitors and transactions, they can use this data to identify top-selling products and purchase patterns quickly and even uncover new trends.
Retailers also collect deterministic data identifiers from users online and in-store, such as email addresses, phone numbers, physical addresses, first and last names, and reward numbers. This helps identify, remember, and track users and their consumer behaviors with the retailer over time. Retailers can use these identifiers and additional retail data to place users in specific audience segments based on their retail behaviors and preferences.
Types of Retail Media Advertising
From an execution standpoint, there are three types of retail media advertising: on-site, off-site, and in-store.
On-Site
On-site retail media advertising refers to brands executing media campaigns that serve ads for their retail offerings on retailers' online web locations and apps.
Big retailers like Instacart, Amazon, and Best Buy have online web locations and apps where thousands of consumers purchase retail products daily. Because of the high traffic volume these retailers receive, they allow brand advertisers to pay to execute media campaigns and serve ads within these online locations.
To execute on-site retail media campaigns, teams primarily use a retail media network offered and operated by the retailer or via an ad-buying platform that partners with retailers – more on that below.
On-site retail media ads come in various formats. They can take on product display and native-based formats like the retail media ad below on Instacart.
Retail media ads can even appear in the search results of users’ queries within the retailer’s website or app.
Almost always, on-site retail media advertising will leverage the first-party data collected by the retailer to assist in serving ads to the most relevant audience users visiting the on-site web location.
Off-Site
Off-site retail media advertising refers to brands executing media campaigns that serve ads for their retail offerings across the open web rather than on retailers’ owned web properties.
Although off-site retail media ads don’t serve on a retailer’s owned web locations, they utilize the first-party data owned by the retailer the brand advertises through to target relevant users across the third-party ad inventory of other websites and platforms on the open web.
Advertisers and media experts execute off-site retail media campaigns using retail media networks and/or ad-buying platforms. With this model, teams can target users with off-site retail media ads via several ad formats, including display, OTT/CTV, DOOH, native, online video, and audio.
The locations where brand advertisers can reach and serve ads depend on the retailer's specific partnerships and connections with other third-party publishers and marketplaces that provide the ad space and allow the activation of the retailer’s first-party data.
An example to visualize off-site retail media is if a brand advertises through Roundel, Target’s retail media network. Brand advertisers can serve retail media ads on-site on the Target.com website and app. In addition, Target works with multiple publishers and marketplaces, allowing these retail ads to target users off-site on websites not directly affiliated with Target. When doing so, Target uses its first-party retail data to identify and serve ads to relevant users in these off-site locations.
In-Store
In-store retail media is when brand advertisers pay to serve advertisements for their retail products within retailers’ in-store locations. In-store retail media is essentially on-site retail media, however, it focuses on the physical store environment rather than online inventory. Ad formats for in-store retail media include in-aisle signage, in-store audio, branded product displays, and in-store DOOH displays.
What Are Retail Media Networks, and Why Are They Important?
Retail media networks (RMNs) are specific platforms created by retailers for brand advertisers to execute retail media advertising campaigns.
Notable retail media networks include:
Walgreens Advertising Group
Instacart Advertising
Macy’s Media Network
Kroger Precision Marketing
Costco Wholesale Media Network
Klarna Media
Best Buy Ads
Amazon Advertising
Walmart Connect
eBay Ads
CVS Media Exchange
Target Roundel
Albertsons Media Collective
The Home Depot’s Retail Media+
RMNs are important because they have been a new way for big retailers to aggregate and sell their on-site and in-store retail media inventory. Equally important, they allow these big retailers to permit brand advertisers to execute off-site retail media campaigns, activating the retailer's first-party retail data.
For brand advertisers, RMNs function similarly to demand-side platforms (DSPs). Brands–or the agency working on their behalf–gain access to the platform and can immediately begin launching retail media campaigns on-site, off-site, and, in some cases, in-store.
Since retailers own and operate their RMNs, they incorporate their first-party retail data tied to authenticated and identifiable user audiences. This results in robust audience data segments available to the brand advertiser for on-site and off-site targeting.
For instance, brand advertisers could access the Walmart Connect RMN or Walgreens Advertising Group RMN and select audience segments to target, including recent retail product buyers, lapsed brand buyers, and even predictive, lifestyle, and persona audiences such as baking enthusiasts, pet lovers, DIYers, family movie lovers, busy families, wellness gurus, and more.
The Benefits of Retail Media Advertising
First-Party Data All-Around
Retail media advertising leverages first-party data from retailers to create highly targeted ad campaigns. For example, Macy’s continuously collects customer data, including their interests, preferences, and past purchase behaviors. This data is analyzed and segmented into specific audiences.
Suppose a brand wants to execute an on-site or off-site retail media campaign to promote its home goods or clothing product. In that case, they can easily access the Macy’s RMN and launch their campaign. With a high degree of certainty, Macy’s will find the most relevant users from its first-party data that best aligns with the campaign.
Advertisers can also activate their first-party data in conjunction with that of the retail media network, resulting in even more effective targeting. This approach reaches users who have previously engaged with the brand, enhancing the chances of conversion.
Proximity to Point of Sale
One of the most significant benefits of retail media advertising is its proximity to the point of sale – particularly for on-site and in-store retail media tactics.
To illustrate, while executing a campaign via The Home Depot’s RMN, teams can place their ads next to relevant products and within the on-site search feature on homedepot.com. When users visit homedepot.com to search and browse products, they are often further down the purchase funnel and ready to buy. Having your ads appear next to products or in search results can sway users to choose your product at that moment, driving more impulse purchases.
Working with Established Retail Media Players
The entry of major brands into retail media, such as Target, Kroger, Instacart, and Walgreens, adds legitimacy to this vertical. These well-known retailers generally have higher user loyalty, trust, reliability, and reach.
It is very exciting that brands and agencies can use RMNs or affiliated ad-buying platforms in a more self-serve manner to tap into the retail media inventory and audiences these big players offer.
Partnerships
Retailers, retail media networks, publishers, and data providers are currently creating multiple retail data partnerships. This means they are collecting first-party data, sharing it with each other, and creating new retail audience segments. This allows brand advertisers to serve ads across different on-site and off-site retail inventory, targeting these specific retail audiences – audiences that were previously unavailable to target due to less robust data.
Full-Funnel Approach
As digital marketers, we often draw lines, saying one digital media execution approach is for awareness while another is strictly conversion-driven. The interesting case with retail media is that it can actually cater to several parts of the funnel. Off-site retail media ads can be a great way to work the top to the middle of the funnel, while on-site and in-store retail media ads can grab the user’s attention right at the point of purchase.
Challenges in Retail Media
Retail media is a relatively new digital media vertical, bringing multiple challenges and questions for advertisers to consider:
Oversaturation and High Competition
As retail media, especially on-site retail media, becomes more popular, it will likely lead to increased competition, less available ad inventory, and, consequently, higher prices.
This poses a challenge for smaller brands, as brand advertisers who win out tend to have the most media spend available. As a result, consumers browsing products on retailer sites may see retail ads for products that are not the best options but rather those from the highest bidder. This scenario can make it hard for smaller brands to compete and diminish the consumer’s ad-viewing experience.
Losing Control Working with Big Retailers?
While the promise of retail media is exciting, let’s remember that big retailers are creating retail media networks primarily to better monetize their own traffic and inventory. Retailers control the ad networks, build the first-party retail audiences, and serve the retail media ads, making it difficult for advertisers to control ad-serving outcomes fully and have absolute confidence in their results and the ultimate prices they pay.
In addition, we have retailers like Amazon, which remains a dominant player, capturing over 70% of the retail media advertising market. This dominance means many advertisers continue using Amazon due to convenience, price, and product selection. As newer, competing retail media networks pop up; they become uncharted waters as the industry is still working to determine their effectiveness.
Navigating Multiple Options
The plethora of retail media networks available adds complexity. Each platform has its unique interface, minimums and pricing, creative requirements, and workflows. Teams must invest significant time and effort in vetting, exploring, training, learning, and mastering these platforms – often under tight deadlines.
Best Practices for Retail Media Advertising
Balancing Retail Media within Your Marketing Strategy
Brand advertisers shouldn’t view retail media networks as the new and sole destination for all their media spending. To drive successful outcomes, it’s crucial to maintain a comprehensive marketing funnel that creates multiple touchpoints across different channels. This ensures continuous engagement and guides potential customers through the awareness and consideration phases before they are ready to convert at retail locations.
Selecting the Right Networks
Choosing the appropriate retail media networks should align with your brand’s retail product offering and target audience. For example, brands selling tech products or appliances may find that Best Buy’s retail media network aligns well with their customer base. In contrast, food product brands might see more value using Walmart Connect or Instacart’s RMN.
While this might be intuitive, it’s still vital to research and, at times, directly ask your audience about their retail purchase habits and preferred retailers/interfaces they do so through. This approach helps avoid overinvestment in retail media placements that might not have significant engagement from your audience.
Evaluating New Opportunities Cautiously
As the landscape of retail media networks expands and new data partnerships form, it’s tempting to jump on these latest offerings, expecting enhanced results. However, the presence of new technologies or data partnerships doesn’t always translate to better performance. It’s essential to critically assess whether these innovations improve your marketing effectiveness or add unnecessary complexity and cost.
Future Trends in Retail Media Advertising
Retail media advertising has seen remarkable growth in the last few years, primarily driven by the increase in the number of retail media networks (RMNs) available. We expect to see more RMNs surface and additional partnerships between retailers, publishers, and data providers to better help brands get their retail media ads in front of relevant retail consumers. New ad formats and advanced tools for effective measurement will also likely emerge, further shaping the retail media landscape.
At Pathlabs, we plan to continue closely monitoring how independent agencies will fare in executing retail media campaigns for brand clients during this continued expansion of retail media. These agencies often lack the time and resources to thoroughly vet and assess retail media vendors and network options and evaluate the quality of retail data. Additionally, gaining access to these networks can be costly, especially for agencies with only a few clients interested in this vertical.
Pathlabs aims to bridge this gap for independent agencies by serving as their Media Execution Partner (MEP). As an MEP, we equip agencies with the people, workflows, and technology needed to excel in digital media execution, especially in retail media. Our media activation and services teams constantly assess the retail media vertical, engage with vendors, and secure access to the best and most viable retail media network options.
These tools are fully accessible to our agency partners, and more importantly, our team of trained experts is ready to handle any retail media execution tasks for the agency. This allows the agency to focus on more significant priorities, such as interfacing with brand clients and charting a path for growth by winning more business.
Interested in learning more about how an MEP can help your agency drive business outcomes with retail media? Contact us today.