The mood in retail has been better before. If it wasn't for retail media, which sounds like Eldorado and seems to be a win-win for everyone. for retailers, for brands, and for consumers.
While the physical retail business is struggling to fight its way back in 2022 with a slight increase in sales compared to 2020 and 2021, online retail continues to grow much stronger. According to current forecasts (Group M), eCommerce will account for around 25% of global retail sales in 2027. But here, too, growth is currently slowing down and even industry leader Amazon recently had to come up with disappointing news.
However, retailers are not alone in facing many challenges. Consumer packaged goods companies (CPGs) have had similarly disruptive years. Even before the pandemic, they had increasing difficulties in achieving further growth.
Challenging conditions for retailers. Changing needs of consumer goods companies.
In contrast to the sales trend in online retail, Amazon's advertising services are doing well and show up much more resilient to economic weaknesses. Sascha Jansen, Chief Digital Officer of Omnicom Media Group, attests to robust growth for the entire digital advertising market in 2022 despite adverse circumstances. Retail media, which means marketing to consumers at or near their point of purchase including in-store and online advertising, sampling, loyalty cards and coupons or vouchers, has gained enormous relevance.
In 2021, retail media revenues accounted for 18% of global digital advertising revenues and 11% of total global advertising revenues.
A recent survey by IAB Europe (Interactive Advertising Bureau Europe A.I.S.B.L.) shows that European retail media revenues will grow from €9.7bn in 2022 to over €25bn in 2026, surpassing TV spending. In the US, retail media spending is expected to grow to over $61bn, accounting for nearly 20% of digital ad spend (eMarketer Nov/22).
Retail media is the number one growth area in the advertising business.
The topic has so far been the domain of the big online platforms. However, retail media is not really a new phenomenon and is not limited to eCommerce. Retailers have always given their suppliers access to their media. What has changed in recent years is a combination of the focus on external marketing and technological development. More and more (physical) retailers are discovering high-margin business opportunities here. Especially in Europe and in German food retail the industry has awoken.
The industry has recognised the marketing potential of its customers and their loyalty data. REWE Group was one of the first to understand this and continues to invest further in corresponding technology and inventory.
The Schwarz Group aims to create the largest European retail media platform. Their acquisition of the Berlin-based data specialists SO1, who specialise in personalised customer targeting, and two experienced former Amazon managers illustrates the strategic relevance. The important data treasure lies in Lidl Plus and Kaufland Card.
There are opportunities for all market participants.
Amazon currently has a significantly high market share in retail media sales, but competition is catching up. With its subsidiary Walmart Connect, the world's largest retail group has created a comprehensive ecosystem for retail media and, compared to Amazon, can shine with data material on the stationary business. Target, Kroger, Instacart and a whole host of other retailers now also have their own retail media networks (RMN). The same applies to the UK and companies like Tesco, Ocado, Sainsbury or Boots. And what about the APAC region? The trends are similar, although according to eMarketer, spending here is already disproportionately higher (US 14.5%) with 40.7% on digital advertising in China in 2022 on retail media networks such as Alibaba and JD.com.
At the Horizont Digital Marketing Days in October, IAB Europe chief economist Daniel Knapp pointed to the many strong retail companies in Europe that are just getting started. Carrefour and Publicis Groupe have joined forces. Otto, MediaMarktSaturn, Obi, Douglas, MyToys or Zalando, all deal intensively with retail media and take their activities to a new level.
And in Germany, the new Retail Media Initiative (RMC) was formed in September in the Bundesverband Digitale Wirtschaft (BVDW). Their approach is Europe-wide, because many members are not only active in Germany. There the focus is now on networking, the development of uniform definitions and key figures of retail media. Patricia Grundmann, who chairs the initiative, says: "Retail Media is much more than digital banner space. We want to think in a more integrated way and with a view to the entire customer journey.”
There is a mood of optimism. Retail Media also emerged as the clear winner in the latest survey of German media agencies (Foma Trendmonitor). Projected revenue growth for 2023: 27 per cent! A significant entry of the FMCG sector is expected.
The advertising landscape is changing.
One reason for the boom is certainly the wealth of valuable first-party data that the networks can collect and offer to advertisers.
First-party data enables more efficient targeting and can be used for more accurate measurement of advertising ROI, allowing brands to optimise their campaigns and improve performance. In addition, first-party data can track return on advertising spend (ROAS), allowing brands to identify and meet the needs of customers at each stage of the buying process. Depending on the type and amount of information collected, valuable insights into meaningful demographic and biographic data, as well as information on buying behaviour, both online and in-store, emerge.
With its ability to drive sales, generate advertising revenue for retailers, and enable industrial and service advertisers to target customers with a high propensity to buy, retail media offers a clear commercial opportunity.
For brands, this winning combination is driving some dramatic shifts in CPG budgets. Just like retail sales are shifting from High Street shops to online marketplaces, interest is increasing in building digital opportunities for shopper marketing. The boundaries are blurring between shopper and brand marketing. In some cases, new budgets are being created.
The importance of linking touchpoints and contextual targeting.
Retail media networks enable brands to advertise in an ideal place, at an ideal time - at the point of sale. They find consumers in shopping mode, usually just two clicks away from conversion.
Brands can formulate highly specific, targeted campaigns around real customers and address them across a variety of touchpoints, from the sofa to the shop. It's all about motivation to buy, an intensifying of brand relationship and ideally a closer bond with the respective retailer.
Sabine Jünger, head of Otto Retail Media, emphasises the relevance of the entire customer journey and the associated opportunities for branding campaigns. She recently stated in an interview with Horizont Media: "Retail Media can go full-funnel." And Caroline Schmitt, CMO at Douglas, makes it sound like this: "Digital first is our strategy, but that doesn't mean that we do without classic media channels.” TV and print are indispensable, and the Douglas magazine is a project close to her heart.
Marc Fischli is a proven expert in retail media as well as digital and e-commerce advertising. Most recently Chief Client Officer at the British customer data science company Dunnhumby, he joins Criteo as Executive Managing Director EMEA. So far, he has always emphasised that he sees even some advantages for the predominantly physical retailers in Europe compared to the purely digital competition. Through a broader approach, retailers offer more options for advertisers from other industries whose customers do not shop in the respective shop.
Thomas Schwetje, Head of Marketing & Digital Services at Coop (Switzerland), calls for a critical look at retail media and to be aware of the differences between retail and the marketplace. From his point of view, it is not worth focusing only on online, because in many cases there is simply not enough traffic. At Coop, POS is clearly ahead of print and digital. And the Coop app plays an important role.
Newcomers in Retail Media should be aware of the costs, resource input and complexity. They should examine partnerships with third parties, marketplaces, media agencies and technology partners.
It is important to realise that this is currently an immature media market whose dynamics will continue to develop. Data and evidence are limited about which strategies are most effective when investing in this market. A clear strategy is required. It is important to define the right goals and measures while monitoring the right KPIs.
All information related to brand and product must be optimised and coordinated. Done right, this can significantly improve the customer experience through more value, convenience and inspiration.
About Andreas Schambeck
Andreas is experienced in the world of branding, marketing communications and in particular the entire packaging graphics supply chain. As part of the business development team, he brings over 30 years of experience from various industries and target markets. He primarily supports brand owners and retail clients in organising their marketing ecosystem in the best possible way to be even more agile, efficient and consistent.