The way the world purchases everything, from groceries to electronics, has changed dramatically since the pandemic. The boom in online sales has dawned a new era of customer insights which derive from ecommerce platforms, paving the way for retail media which offers a high-margin business to the retailer, and the lure of highly effective advertising to brands.
Retail media has been around for decades, with brands traditionally advertising to consumers in the aisles and by the checkout in brick-and-mortar stores. By targeting shoppers already in the process of making a purchase, the right advertising message can directly drive sales.
Before digitisation, this was mostly time-consuming and labour intensive, let alone costly as advertising was using paper and cardboard to promote items. However, in the last few years, retail media is offering retailers a highly effective and uniquely digital way of advertising to shoppers just at the point of buying. GroupM predicts retail media will outstrip television adverts by 2028, which demonstrates its exponential growth.
Retailers will need to extract maximum value from their data to capitalise on this growth. Comprehensive data strategies are critical for retailers to understand how to share their shopper insights with brands, without compromising the privacy of their customers. Building a unified view of the consumer requires retailers to strengthen their infrastructure and capabilities around data management.
The appeal of retail media
Retailers of all sizes are facing significant pressure on their margins as a result of ongoing inflation and tough price negotiations with suppliers. Retail media not only offers them the chance to optimise their brand advertising in stores, but also to monetise online platforms and harness first-party data to create brand new revenue streams.
Brands can leverage this in-depth, first-party data to tap into shopper habits just as they’re primed to click ‘buy’, achieving greater ROI at a time when it’s never been more crucial to ensure advertising budgets stretch further.
With consumers shopping online more often than ever before, retailers are building vast online options for advertising space. Their inventories expand far beyond standard banner ads, and now encompass smartphone apps, websites, social channels and more, all enriched with first-party data on customers’ shopping habits.
This data creates the potential to segment audiences, deliver personalised messages, tweak timing and frequency, all of which optimise the chances of advertising achieving short-term results as well as longer-term brand building.
Unlocking the full potential of retail media
While advertising on retail sites such as online supermarkets is considered a safe bet for brands due to long-established and trusted retailer domains, many have a long way to go before they unlock the full potential of retail media. Deploying retail media use cases requires a synergy of technology, data infrastructure and people. It involves building a centralised data platform to break down data silos and create a holistic view of the customer.
Once this data is correctly assembled, managed and governed, it is necessary to implement the right processes to allow partners and third parties to collaborate securely on the data sets. Businesses can take this a step further by using data clean rooms which allow them to derive insights on sensitive or regulated data without exposing the underlying data. This means they have full control over the exact data they wish to share with third parties during the data sharing process.
While retail media is still in its infancy, we are already seeing different models appear that are characterised by how retailers decide to leverage shopper data. Some retailers are guarding their data closely, using it only internally to help advertisers develop targeted campaigns. While others are already exploring the potential in sharing data directly with advertisers as a value-add service.
To do this effectively, often retailers need to rethink the nature of their business, and move away from being a retailer that just sells products, to a technology company that can harness their data. To make this work in the longer term, retailers need to overhaul their talent pipelines to ensure they are attracting the best talent in the world of advertising and data science.
They will also need to carefully consider how these two different disciplines can be managed effectively, with senior leadership recognising the importance of data and the significant impact it can have on revenue streams.
The future of retail media
Retail media is already growing at a dizzying pace and reshaping the world of advertising as we know it. This trend is only set to grow. For retailers, it offers a new, high-margin source of income, and for brands it’s a way to achieve advertising objectives in secure and brand-safe spaces, without breaking the budget.
To build on this growth, retailers need to ensure their first-party data is not siloed and is ready to be activated for collaboration with external partners. Extending the ability to use shopper data to off-site advertising networks will unlock the full potential of retail media and open up the full potential of the data at their fingertips.
Theo Hourmouzis is regional vice president for Australia & New Zealand at Snowflake.