Challenges for Retailers When Building Retail Media Networks

E-commerce exploded during the pandemic, growing by 50 percent in just a couple years. This incredible growth came hand-in-hand with an increase in retail media networks (RMNs), which help retailers grow their online advertising business and allow brands to put their product ads right in front of online shoppers who may be looking for a similar product or related service.

As a result, this year nearly three-quarters of brands are planning to dedicate a budget specifically to advertising on RMNs. These networks present an attractive alternative to utilizing third-party data sources that have grown less practical due to new privacy laws to target potential customers while they're consuming content across the internet. They also present an opportunity for retailers to maintain existing trade spend and capture new advertising dollars as consumers spend more and more online.

Here’s what you need to know about building a RMN and the challenges you may face, especially when it comes to increasing consumer trust as it relates to data collection and usage, keeping client data safe, and respecting new privacy laws such as the California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR).

Data Privacy Challenges

So, what's a retail media network? Some online retailers take advantage of their market presence by providing space for advertisements from brand partners. We've probably all experienced looking for an item on Amazon.com or Walmart and seeing ads for similar sponsored products from particular brands show up above the actual search results. Those personalized results are thanks to retailers partnering with other brands.

Unfortunately, RMNs come at a difficult time for data security and privacy. Last year saw a record number of data breaches in the U.S., nearly 50 percent more than 2020. In addition, the deprecation of third-party cookies meant more reliance on first-party data (i.e., the data that brands and retailers collect directly from their customers).

Retailers already have first-party information about their customers through loyalty programs, surveys and purchase histories. It’s a simple step to leverage that information with a trusted set of brand partners for advertising purposes.

However, legal problems, costly fines, and especially reputation damage can arise when companies fail to properly ask for permission when collecting this data or fail to adequately protect and secure such data from unauthorized access. These lapses have a significant impact on the top line. In fact, 29 percent of customers will abandon a company outright over data privacy concerns in favor of a more privacy-conscious brand.

Privacy Considerations for Retailers

Giants like Amazon and Walmart already crowd the retail media space. If you want to stand out in a growing industry, you can prioritize privacy by allowing consumers to opt in or out of sharing their data, being transparent about how you'll be using the collected data, and ensuring that your brand partners are using this data properly.

Let’s start with the concept of asking customers and potential customers to opt in. The goal of a retail media network is to create a network of direct partnership opportunities for advertising cross-promotion. The company that owns and develops the network can offer space for advertisements from partners. In order to show shoppers suggestions for products that are personalized to their needs and preferences, the retailer can use past purchasing data or preference data.

Roughly 80 percent of consumers want personalized purchasing options, yet nine out of 10 want control over their own data. Therefore, when using purchasing data to provide personalized advertisements, the retailer should get explicit permission from the customer.

For example, you can have an opt-in program that asks whether clients would like to receive personalized recommendations for products related to their search and purchasing history. Or you can include this feature as part of a loyalty program. Either way, the important part is to explicitly ask for permission, as opposed to just collecting personal data in the background.

The second thing you can do is ensure that you and your brand partners are collecting, securing and using consumer data in a way that's compliant with data privacy standards like GDPR and the CCPA through data privacy verification. Data privacy verification can help check whether your method for collecting data allows a proper opt-in or opt-out from customers, as well as identify bots and other false data sources.

Privacy needs to be your first consideration if you hope to stand out in a competitive retail media market and bring more value to your customers. By prioritizing data privacy, you can grow the trust of your customer base and build a retail media network that's future-proof in an increasingly privacy-conscious world.

Timur Yarnall is the founder and CEO of Neutronian, a SaaS company that provides data quality and compliance verification services. Neutronian also developed the NQI Certification, a comprehensive data quality, compliance, and transparency certification, to bring more trust and transparency to the marketing industry.