The Responsible Retailer’s Guide to Building a Walled Garden

Navigating the business, societal and technological upheavals of the past two years has been no easy task for retailers. But here’s the good news: The concurrent disruption across the digital marketing landscape in recent years has opened new opportunities for retailers — sustainable ones built on the strength of their customer relationships.

The biggest opportunity stems from the growing influence of first-party data within the global advertising ecosystem. This is an area where retailers are particularly well equipped to compete. These days, many retailers are sitting on a mountain of customer data that they leverage for loyalty purposes, but its value extends even further. Retailers looking for additional monetization avenues are wisely considering various ways to put this data to work for themselves and their brand partners.

Some retailers have taken to selling their first-party data as they would any other asset. And this is, undoubtedly, a way to generate some short-term revenue. However, in the long run, leveraging first-party data as a saleable asset presents two challenges: 1.) With cookie deprecation, this is getting harder to do given the limited ability to connect retailer data across the full digital ecosystem and, 2.) Once data is released into the broader ecosystem, it tends to leak into other platforms and its value diminishes.

The more sustainable first-party data strategy, as many are discovering, is to leverage customer insights to build a retail media platform that gives brands a new venue for advertising to high-intent customers in an informed, brand-safe way. The size of this opportunity in the U.S. has quickly taken shape in recent years, surging 53.4 percent to $31.49 billion in 2021. By 2023, U.S. retail media spend will top $52 billion, representing nearly 20 percent of all digital ad spend.

Amazon.com, of course, is regularly held up as the pinnacle of what’s possible in the retail media space, having quickly grown its retail media business from nothing into a $31 billion revenue stream in just a small span of years. But let’s be candid: Other retailers can’t do what Amazon has done. Amazon built its ad business seemingly overnight, but it did so via robust investment in acquiring, building and connecting the assets needed to operate its own fully rounded ad tech platform — from demand to supply to creative. In doing so, the company positioned itself as a first-class destination for ad dollars, and it did so in a way that it maintained complete control of its most valuable asset: its customer data.

Few retailers have access to such resources. So what can other retailers do in looking to build out their own retail media platforms in a sustainable way? Here’s where they need to focus:

1. Assemble the right platform pieces.

Building a retail media platform while maintaining control of customer data means retailers need to be able to connect the dots seamlessly between supply and demand, while also delivering the creative capabilities required by brands to maximize impact. That means bringing together demand-side platform (DSP), supply-side platform (SSP) and dynamic creative optimization (DCO) capabilities in an integrated fashion so advertisers can execute programmatic buys. Importantly, retailers should look to bring in DCO capabilities that let brands connect to their inventory systems to ensure they’re never spending dollars promoting goods that aren’t there.

2. Prevent leakage.

The above components can be assembled piecemeal, but with each gap between components a seam that could leak sensitive shopper data also opens up. Thus, retailers need to be assessing the potential for gaps up front and getting as close to a fully integrated suite of tools as possible — one that keeps shopper data appropriately quarantined.

3. Measure accurately and consistently.

That’s not to say all the intelligence stays within a retailer’s own walls. To build an attractive, sustainable retail media platform, retailers must be able to deliver accurate, consistent measurement capabilities that will be trusted by their clients. This is where other mega platforms have gone wrong in the past — enacting their own black-box measurement scenarios that ask advertisers to place an unreasonable level of trust in their reporting. By adopting solutions with MRC and IAB accreditation, retailers can avoid asking advertisers to take a leap of faith in their platforms, while simultaneously delivering media measurement in a recognizable, cross-campaign-compatible way.

4. Have identifier flexibility.

Also, let’s not neglect to acknowledge that as third-party cookies go away, the media landscape is and will continue to become increasingly focused on first-party identifiers. The playing field is already becoming cluttered in this regard. That’s not an issue for retailers to solve, but it is one that they must acknowledge by ensuring their media platforms are flexible enough to work with the identifiers of a given advertiser’s choice.

5. Ensure platform flexibility and integration.

This brings us to the final and perhaps most widely applicable requirement of setting up a successful retail media platform: the need to be able to meet advertisers where they are and accommodate their unique demands. For example, a lot of dollars going into retail media are co-op dollars, which brings an extra layer of complexity to budget management as well as creative executions. Is a retail media platform flexible enough to account for such complexity and integrated in a way that no opportunities are lost along the media buying and execution journey?

The retail media opportunity is tremendous, but it’s not a path that retailers can traverse in a hesitant way. Success requires a fully baked and fully backed execution plan. The more deeply integrated the systems involved, the faster retailers can move — and the better the results they can deliver.

Julian Baring is senior vice president, business development at Adform, the only global, independent and fully integrated advertising platform built for modern marketing.