Retail Media Networks: The Next Advertising Frontier

Retail Media Networks… ever heard of it?  Retail Media Networks, or “RMNs”, are all anyone can talk about these days, and for good reason.  

They are being referred to as the “third wave” of digital advertising innovation, following earlier waves of digital innovation: search and social.  In fact it is predicted to reach $55B in revenue by 2024, surpassing both search and social by a landslide. 

This isn’t just a media buzzword—RMNs are already here, and they’re here to stay.

Retail Media Networks 101: What is an RMN?

Retail Media Networks (RMN) refer to a retailer’s creation of their own media ecosystem.   Their purpose is intended to sell available data and ad inventory within their network.  The majority of RMNs feature three main inventory components:

1. Owned digital assets- aka their website and mobile app. These owned digital assets( or “on-site media”) are the most popular form of RMN inventory.  In fact, currently 85% of spending within RMNs is done on-site.  The two main inventory sources advertisers can leverage onsite are search and display.  Advertisers utilize search when trying to promote their product in a sponsored post, as consumers are actively searching specific keywords.  Whereas, display used similarly to programmatic display inventory on various publisher websites.
2. Digital advertising platforms- aka additional digital ad inventory outside of their owned properties. Digital inventory external to a retailer’s owned properties is often referred to as offsite media.  This form of inventory is increasing and will account for 20% of all RMN spending by 2027.  The possibilities for offsite media are endless with RMNs.  Already, advertisers can find inventory within display, audio, digital out of home, CTV and social within an RMNs network.  While the majority of this inventory can currently be purchased by other DSPs, the rich first-party data from retailers provide advertisers with new and valuable audiences.
3. Physical assets-aka in-store aisles, end caps, and other point of purchase locations. This form of inventory is referred to as in-store.  For retailers with a large physical footprint, this can be a major differentiator. While advertising in-store is not a “new” concept, the programmatic buying and selling of digital in-store assets is noteworthy. Today, doing so only accounts for under 1% of total retail media network spending by advertisers.  Nonetheless, we are likely to see this percentage increase with the proliferation of digitization in-store (e.g. cooler screens, digital end caps, and more).  Providing in-store marketing opportunities for advertisers enables a full-funnel RMN strategy using in-store placements to drive brand awareness.

Large and in Charge.

While RMNs have been around for several years, their development greatly accelerated with the pandemic.  Stay-at-home consumers relied heavily on eCommerce, resulting in almost 10 years of projected eCommerce growth observed in the first 6 months of the pandemic and an overall 55% increase in online spending. Despite the neutralizing eCommerce growth rates, the sudden spike gave RMNs the kick start needed to gain retailer investments. 

Retail Media Networks took that momentum and ran with it, reaching an estimated $45 Billion in spend by the end of 2023 and their potential has exponential opportunities. 

With RMNs increase in popularity and the hunger for reliable first-party data given concerns over data privacy, advertisers are integrating RMNs further into their media mix.  Forbes reported that 74% of advertisers will have a separate retail media budget and 80% of RMN ad spend will stem from incremental budgets.  

Who is in the space?

There is RMN representation in nearly every industry, but the current networks dominating the space (by spend) are Amazon, Target, and Walmart. In fact, Amazon is such a major player that their network will account for more than 75% of total retail media ad spending this year. 

73% of advertisers expect to spend more in RMNs next year, and everyone is looking for a piece of the RMN pie.  With the early success of traditional RMN players, brands in other areas of commerce have recognized the opportunity to create a revenue stream from their first-party data.  This type of Commerce Media Network has been explored by travel and hospitality brands including Marriott.  

Looking ahead, the most anticipated RMN inventory for advertisers are in Beauty, Specialty apparel, general retail, and DTC household.  Niche RMNs are in high demand for advertisers to reach specific consumers.  It is up to the retailers to create networks that fit those advertisers’ needs.

Are RMNs really worth the hype? 

Potentially. RMNs provide a variety of intriguing capabilities to advertisers including:

• Reach High-Intent Shoppers at Point-of-Sale: Retail Media Networks allow advertisers to reach consumers when they are already in a shopping mindset.  This results in an easier conversion and a better customer experience.  Search is undeniably a dominant form of spend within RMNs.  It directly reaches these high-intent shoppers already looking for a product. According to McKinsey, RMNs have seen a 3-5x greater return on ad spend from RMN campaigns than other digital campaigns.

• Leverage Valuable 1st Party Data: Retail Media Networks provide advertisers access to the retailer’s first-party data for additional untapped targeting capabilities. This rich data includes purchase-based behavioral targeting, collected through loyalty programs, that advertisers have craved for years.  This data incredibly valuable, especially in the age of cookie deprecation when advertisers have less data to leverage for campaign targeting.

• Closed Loop Measurement: Retail Media Networks have the potential to close the measurement loop by linking an advertiser’s impressions to direct purchases with the retailer.  By advertising directly “on shelf”, 70% of marketers have seen enhanced returns from advertising on RMN’s compared to other media.  However, measurement can still be a challenge for comparing effectiveness between multiple retail media networks and other channels.  This is partly due to not having a concrete solution to understanding incrementality.

• New Inventory Source: The most exciting aspect of RMNs is that they provide advertisers with unique, uncluttered, endemic inventory sources. A consumer’s path to purchase offers previously untapped, premium inventory on a retailer’s digital properties.  Advertisers are eager to take advantage of this mid-funnel inventory location to connect with consumers.

We can help!

This goes for retailers looking to stand up a Retail Media Network, or brands seeking advice on RMN spending.  Leveraging years of hands-on expertise, we have armed fortune 100 brands with actionable strategies regarding Retail Media Networks.  We work with top retailers and advertisers to get the most out of their current digital assets and media campaigns.