How Nordstrom’s Retail Media Expansion Foretells the Future of Retail Data
Just one year after launching its Nordstrom Media Network retail media pilot, Nordstrom has announced that it’s expanding the offering. The news reflects an ongoing trend in retail: an increased focus on not only acquiring first-party data, but also using it in smart and innovative ways that demonstrate value to customers.
As a cookie-less future looms, ownership of customer data is driving both brands and retailers to change the way they advertise and sell. On one end of the spectrum are the retailers that used to serve as shopping destinations for a range of brands; on the other end are the brands that traditionally relied on retailers to sell their products. Direct-to-consumer (D-to-C) brands have long innovated in the middle ground, selling their brands’ products via their own websites as well as through larger retailers and marketplaces.
Now retailers and brands (including D-to-C) are all diversifying their marketing efforts by taking cues from each other’s business models. Many brands now have D-to-C stores that bypass retailer gatekeeping, accrue more first-party data, control the shopping experience, and create brand loyalty. Retailers like Nordstrom have already created private-label brands to compete with those they carry in-store; now it's taking a page from Amazon.com and created a high-margin advertising opportunity that keeps both brands and customers in Nordstrom's commerce ecosystems.
More than 12 new retail media networks have launched in the last two years, with advertising spending estimated to grow from $30 billion to $100 billion in the next two years. The $40 million that Nordstrom made on its 2021 retail media pilot exceeded expectations and led to this year’s expansion to drive seamless, personalized engagement throughout the customer journey through combined digital and in-store experiences. This new venture will help Nordstrom maintain market share against competitors; the brands that advertise on the network, however, must step up their data game if they hope to reap significant benefits.
Each retailer’s unique advertising platform differs in terms of functionality, measurement and opportunity, which fragments data across many sources and makes it challenging for brands to gain the insights they need to meaningfully improve. Brands are also beholden to retailers to maintain the inventory and online/offline consistency that create excellent customer experiences.
These challenges may explain why some brands, like Nike, are moving away from external retailers. Nike has begun downshifting its presence at Foot Locker and Amazon to ramp up its omnichannel D-to-C strategy, which gives the athletic brand more control over its brand presentation and the customer journey. An important part of that journey is a mobile app that facilitates an interconnected online and in-person shopping experience that customers love — and collects the first-party data that Nike needs to continually improve. While this D-to-C strategy excels at strengthening long-term, direct relationships between the customer and the brand, the downside is that it reduces convenience by limiting when and where customers can engage.
As brands and retailers continue to blur the lines between them to capture more data, it’s clear that they’re all driving toward the same end result: the intentional, sophisticated use of data to improve the customer experience for their brand. Keeping that customer experience at the forefront of all data-related decision making will be key for all players in the commerce spectrum to succeed.
Megan Harbold is the vice president of product marketing at Skai, the only full go-to-market digital ad engine that enables smarter decisions and better outcomes with actionable intelligence in making customer connections.
