Are retailers and brands ready for the retail media gold rush?
Everyone wants to cash in on the boom in retail media, but as we find out, as part of The Drum’s Retail Focus, it’s not quite as easy as asking your media buyer to add another channel.
Brands jumping on the retail media bandwagon / Pexels
The narrative around retail media is a positive one. It suggests the market is buoyant, with retailers scrambling to set up media networks and brands eager to spend ad dollars. However, major structural and relationship challenges need to be overcome before retail media can be considered a mature channel.
According to eMarketer, in 2024, more than $1 of every $6 spent on digital ads in the US will go toward retail media. In the UK, GroupM reports that the retail media sector will be worth £6.5bn by 2027, making up 16% of total digital ad revenue.
The appetite from advertisers is there, but are businesses ready for it?
A major obstacle for both brands and retailers is that retail media involves different teams and stakeholders that normally have no connection to advertising. It’s basically asking entire departments who don’t speak the same language or share the same data to unite.
For consumer tech company Lenovo, the expansion into retail media has brought marketers, product management teams, trade and sales together. Lenovo’s head of retail media, Mark Nilski spoke recently at an event hosted by Epsilon at The Drum Labs.
“With the sales team, there is much more of an expectation there is going to be a direct result; some people get it and see it as a complex piece that is difficult to measure,” he reveals. However, some are always expecting to get the end result straight after the activation.
For lower funnel retail media activations, Nilski’s team has weekly check-ins with its agency partners where sales often informally join the call to ask questions or to gain insight. Here, agencies can play a role in demonstrating the value of retail media.
Nilski explains that agencies are often set return on ad spend (ROAS) targets but those are less helpful in Lenovo’s retail media ambitions. Right now, Nilski is more concerned with incremental revenue and sales on products that aren’t as easy to convert. His weekly agency check-ins are to “reassure” the agency that Lenovo is “comfortable with a declining ROAS to deliver a business objective.”
“We are a feature-driven category and it’s quite fast-moving and the agency doesn’t necessarily have that in-depth market and product knowledge,” Nilski explains. But the agency has a better understanding of the platforms, he adds: “Between us that creates a better outcome and fosters trust.
“We’ve had to have trust on both sides of taking risks. Sometimes you are right and sometimes you are wrong, but accepting that being wrong is OK as long as you’ve tested your rationale,” he adds about his agency relationship.
Alex Prouhet is global director of Deliveroo Advertising, the takeaway app’s fledgling ad network. Initially launched in 2021 for restaurants, Deliveroo opened the app to CPG and entertainment brands in 2022, with the likes of ITV, Wickes and The Coca-Cola Company being significant advertisers.
“If I wind the clock back two years, a lot of the agency partners we were working with didn’t have the capabilities in-house or had it fragmented across a large structure,” Prouhet says. But in those two years, he has observed retail media and commerce teams pop up at agencies. “Retail media is now becoming part of a wider media buy,” he says. This is where agencies can play a big role in making that a seamless buy for brands.
Conversely, while Prouhet advocates for agencies’ role in Deliveroo’s ad expansion plans, he adds: “We needed to talk to advertisers directly as much as we needed to talk to agencies.”
There are now over 200 global retail media networks. In the past year alone, we’ve seen the likes of Asos, Curry’s, and Morrisons open up shop to advertisers. But setting up a retail media network is not easy for a retailer, nor is it a cheap endeavor.
Diana Abebrese, who is global retail media lead at software company EMAP Systems, says there is still a “big gap” between what brands want and what retailers can provide.
“The big thing that people don’t realize about the fact that retailers have all this data doesn’t mean that they’re equipped either from a people perspective or from a tool perspective to be able to crunch that and share it in the way that advertisers would want,” she says.
Agencies have a big role to play in educating retailers on how to think more like publishers, Abebrese says. “If they want to make incremental revenue out of retail media, they need to provide services and opportunities to buy in the way the market wants to.”
Agencies also need to upskill themselves, she adds, so they can understand the inner workings of retailers. “How to make decisions and effect change within the retailers, who are the different stakeholders and what are the different dynamics,” that is what agencies need to learn, she says. “More work to be done on that relationship.”
From the agency perspective, Amo Aujla-Tse, retail media strategy lead at Publicis Groupe, supports Abebrese when she says more work needs to be done to get companies “set up in the right way” to appeal to advertisers. She shares Abebrese’s struggles with getting the right data from retailers.
“It is getting beyond that point with retailers; there is an expectation with some retailers that there has to be a brief. Quite often, we aren’t at the point of briefing; we need to influence the brief, we need to provide data-driven insights to shape the way people are thinking about commerce strategies for their brands,” she says.