How Retailers Can Capture the Full Potential of Retail Media Networks in 2023
Most retailers are now highly focused on building their own retail media networks (RMNs), offering onsite and offsite inventory. And why not? Retail media networks, when done well, offer a stream of high-profit cash that can be up to 1.5 percent of a retailer’s gross revenues, at margins north of 50 percent. The cookie-less future means that retailers’ first-party data is increasingly valuable. Furthermore, retailers are reinvesting these profits into reducing the technology debt that has built up over the last few years — further improving their competitiveness in-store as well as online.
However, we see too many retailers struggling to achieve the gains they hoped for as they roll out retail media networks. To address this, we’ve created a list of five reasons retailers fail to capture the potential of retail media networks and what they should do to capture it in its fullest:
- Not expanding inventory fast enough: This may seem like economics 101, but many retailers — and particularly grocers — still haven’t enhanced their websites to include sufficient slots for sponsored products and recommended products. Or they wait to get their onsite and offsite partners onboarded, delaying revenue by months. Often this delay is due to lack of capacity on their teams, and concern about how to maintain or even improve the customer experience while growing advertising slots. Yet expanding these slots can fund the projects that will improve that experience.
- Avoiding expansion of their team: A second mistake we see is retailers trying to continue to sell without expanding their retail media sales and operations teams. For example, if retailers want to capture $150 million in retail media network revenue, they’re going to need a team in the mid double-digits to do campaign planning and sell the additional inventory, and to provide return on advertising spend (ROAS) and measure incrementality once it's sold.
- Trying to sell unique or non-marketable inventories: Don’t try to invent new types of media. Agencies and internal media teams aren’t looking for new inventory formats or raw data feeds. They want predictable ROAS with low variability. Retailers don’t need to create novel data feeds, unique inventory designs, or unusual terms and conditions. Stick to the market standards for the best results.
- Not investing in the customer experience: We also see retailers failing to invest in modernizing the customer experience for their e-commerce sites while they’re doing a major retail media network project. This is the perfect opportunity for them to make a generational shift in their customer-facing website since they’re going to be introducing new sponsored search and browse results. The experience should be considered for retail media buyers as well. Investing in a customer-facing planning portal or a responsive media operations team can help retailers compete with the leaders in the market.
- Not pursuing the non-endemics: Retailers are often overlooking the value of non-endemic product sales. These are products that the retailer themselves don’t sell directly. For example, a grocer might run ads for car rental agencies, or a quick-serve restaurant might promote credit card sales or a bank. These types of non-endemics are nearly limitless, greatly expanding the potential set of advertisers and subsequent revenues.
We expect retailers to become increasingly focused on retail media networks in 2023 and beyond. When done properly, retail media networks are a game-changer for not just grocers, but also big-box, specialty and apparel, home improvement, and many other sectors. They fuel a virtuous cycle of driving more traffic to the site, which generates more revenue and makes your audience data more valuable to advertisers. In the future, we see opportunities for non-endemic advertising to take a growing share of advertising dollars. But it's a multiyear journey, and more inventory is coming online every day. Time is of the essence to capture your fair share.
Hilding Anderson is the head of retail strategy, North America at Publicis Sapient, a digital transformation partner helping established organizations get to their future, digitally-enabled state.
Hilding Anderson, Publicis Sapient’s Head of Retail Strategy, works with Fortune 500 companies and top global retailers to advise them on digital business transformation and how to drive higher performance in the changing digital landscape. Particular strengths are in digital business transformation, retail strategy for the data-driven retailer (CDP, algorithmic retail), engineering modernization, and growth strategy.
Hilding’s 20-year career started as an entrepreneur, founding a technology consulting services firm in Cambridge, Massachusetts focused on the retail and healthcare spaces. After a brief stint at a dot-com, he pursued an MBA at the University of Texas in Austin graduating in 2005 with a 3.8 GPA and specializing in Management and the entrepreneurial growth.
Following graduate school, he joined Publicis Sapient’s management consulting practice, working with boards and CEOs in the retail and financial services industries to transform their business. Partnering closely with clients, he developed digital and omnichannel business strategies, working closely with technologists to define and execute business strategy.
In addition, over the past decade, he has researched and published 5 books that document the changing digital landscape and consumer behaviors for retail. He also conducted annual in-depth evaluations of 70+ retailers omnichannel strategies in North America. Building on that expertise, he now leads the business strategy for Retail North America, guiding 40+ accounts on the right business strategy and path forward. His recent indicative work includes shaping a business transformation road map for a large department store, engaging with the chief digital officer of a top luxury apparel retailer in NY on GTM digital strategy and business justification, as well as partnering with a large home improvement retailer on the East Coast in experience strategy and innovation.