AMONG THE MANY CHALLENGES facing CPGs in their efforts to make sense of retail media networks has been a pervasive storytelling bias.
On daily basis, we encounter widespread published commentary and reports celebrating retail media’s headlong growth, along with advice on tech, measurement, and monetization for retailers. Much of it comes from solution providers, consultancies and ad agencies vying to cash in on the burgeoning media sales opportunity. Wall Street analysts have been a megaphone for this side of the story too.
This article is part of a series. Republished here by permission from CPGmatters.
The bandwagon effect has been so powerful, the lure of “new” digital revenue so enticing, that critical thinking is too often abandoned by analysts and bloggers. Spending forecasts are frequently represented with “hockey stick” charts. With each new quarterly release, it seems as if proponents keep expanding the definition of “commerce media” to help drive the forecasts to new heights.
Meanwhile, for brand marketers (the lion’s share of all that juicy ad spending) pragmatic guidance about RMN strategy and practices seems relatively hard to come by.
Balancing the retail media story
As we have been documenting here in recent months, retail media is just now emerging from its nascent state. The digital network side has been dominated by early adopters who pioneered search and sponsored product advertising – Amazon Ads, Google Ads, Walmart Connect, Albertsons Media Collective, Kroger Precision Marketing, Instacart Carrot Ads, and a few others.
These few giants have collectively captured a massive share of early spending and set expectations that are hard for retail fast-followers to match. Yet we see a continuous stream of industry reports, podcasts and analyses urging retailers of all sizes and sectors to develop RMNs and claim a coveted share of the high-margin ad spend.
It remains a challenge for CPGs to engage actively and successfully with more than a handful of RMNs, but there are more than 200 in play. Standards are still being developed. Definitions of success are still being debated. Practices for joint business planning that may blur the line between trade marketing and retail media are still being defined.
“There is a multitude of retail partners launching RMNs,” observed Celso Borges Shimabukuro, VP & Head of e-Commerce for Pepsico’s Europe business in a recent interview with Rethink Retail. “As such, multiple shades of grey for us to digest in terms of technical capabilities, measurement and data transparency, and strategic alignment.”
Four retail media challenges
Tough challenges arise repeatedly as we try to follow, document and understand the evolution of retail media and its implications for CPGs. These are questions still seeking answers that will likely define the retail media landscape going forward:
1. Balance and Fairness: How should/can brands invest proportionately in retail media across their entire retail distribution portfolios? Do the same established business customs and legal requirements apply that brand marketers are accustomed to when making trade marketing investments?
As we have reported, The trade marketing custom has been buttressed for decades by the federal Robinson-Patman Act, which requires that supplier net prices do not advantage large retailers to the detriment of smaller ones.
To be sure there is deep concern about this among regional supermarket chains, independents, and wholesalers who have traditionally enjoyed a fair share of trade marketing investment spending, in line with their capacities to distribute CPG products. Many view a fair share of retail media revenue to be a matter of competitive survival. Brand marketers need the distribution they provide too.
2. Digital Versus In-Store Channels: Is there equivalency between retail media messaging in the physical and digital realms? How do they differ? How can brands best comprehend the differences and make fact-based plans?
We may consider that the “moments” experienced by shoppers at the shelf are qualitatively different from those experienced using the retailer’s digital shopping platform, accessing their loyalty app or interacting with the same retailer via social media. The messages, offers, and expected results for each will differ, and therefore the value equations have distinct definitions.
Accessing shoppers digitally, via loyalty programs or shopping apps, allows for a high degree of personalization, while reaching them using signage at the shelf allows proximity to the moment decision. In-store media have been gaining mind-share in recent months, with much of the focus on digital signage networks.
3. Endemic versus Non-Endemic: Who should be advertising on shopper media? Retail media networks can credibly ask brands to place their advertising close to the point of decision, in-store or online. “Endemic” refers to ads from brands that the retailer sells. When Google Pay advertises on belt dividers used at POS checkouts (true!), that is a low-tech form of non-endemic, in-store advertising, not connected to any particular item of merchandise, but intended to remind shoppers to choose that payment option.
In the realm of “commerce media,” which encompasses RMNs operated by financial institutions (like Chase and PayPal), online travel agents (OTAs) like Expedia and Marriott, and commerce intermediaries like Uber Eats and Instacart, it might be argued that all advertising is non-endemic.
For RMNs, especially regional operators, the prospect of attracting non-endemic revenue from local advertisers like law firms, accounting practices, home improvement companies and non-competing retailers may represent a significant added value. Executing against this opportunity may require affiliation with other advertising networks.
Brand marketers might also consider whether part of their retail media investment should be directed not toward the retailers who already offer their products for sale, but through other commerce networks their desired consumers are known to patronize. At this time, it’s not clear that sound methods exist to accomplish this.
4. Value-Added Intermediaries: What are the aggregation methodologies and who are the business entities and service providers that can bridge the gap between advertisers and retailers in the retail media realm? If we accept that brand marketers cannot reasonably interact one-on-one with hundreds of distinct retail media networks, how will they reach their audiences?
Innovation is underway from several quarters. Retail trade associations are stepping up to educate their members (NGA, NACS, FMI). Wholesalers and distributors are re-defining their traditional roles as distributors of trade promotion funds to also encompass retail media campaigns. As we outlined last month, a variety of commercial platforms have been introduced to assemble in-store and digital networks that aggregate audiences across multiple retailers.
Each of these confounds is pervasive for brands as they seek to develop mature, empirically-rigorous approaches to retail media advertising. It’s not getting simpler. Just the opposite.
A tipping point
“The industry is at a tipping point,” said Brent Oakley, President of In Store Marketplace (ISM), which describes itself as a “unified, programmatic in-store marketplace that integrates seamlessly with broader retail media strategies.”
The terms “programmatic” and “marketplace” are especially meaningful for brands, as they seek manageable ways to define and reach consumer audiences across their retail partner portfolios.
Oakley maintains that three strategies matter for CPG’s efforts to navigate multiple retailers:
- Leverage demand-side platforms (DSPs) like The Trade Desk and Yahoo for easy access to first-party data.
- Optimize creative to deliver premium ad experiences at the moment of purchase decision – regardless of retailer size.
- Use technology partners that provide unified measurement across retailers, ensuring consistent insights and accountability.
Added Oakley, “In-store media is no longer an experimental channel – it’s a must-have for CPGs looking to win at the point of purchase.”
Consider an alternate view
Have too many observers been looking at retail media from the wrong perspective? In their provocative episode this week, Todd Sawicki and Tom Limongello, co-hosts of the Middlemen Podcast, posited that, “Trade is Eating Retail Media.” Here’s a key excerpt from their discussion:
“For the past 5 years Wall Street has pressed retailers to say that retail media was a new thing, an incremental thing, and not in any way the same as trade. Retail media is a set of new tactics that come from better data usage and measurement, but what’s becoming clear is that the merchant team will continue to be in control.”
They added, “That means trade will control and effectively consume all retail media to become a part of what trade is, because trade has something that is more important than mere data, it has relationships.”
Perhaps the Middlemen have put their fingers on the next retail media confound?