Retail Media Network Gaps Hold Peril for Brands

JUST WHEN YOU THOUGHT the retail media conversation couldn’t get any hotter, we hear high-profile executives from the largest Retail Media Networks (RMNs) and their technology suppliers on podiums and podcasts talking up a glorious future for brand advertisers.

RMNs were a recurring theme at last September’s Groceryshop event in Las Vegas and this month’s NRF ’24 Big Show in New York promises no fewer than 24 sessions on “Retail Media” topics. No wonder – the take from retail media sales this year is projected to reach $52 billion in the U.S. market alone, according to Coresight Research.

RMNs are retailer-owned digital and in-store channels which convey messages and offers to shoppers from CPGs and other third-party businesses. They have exploded in popularity over the past few years, due to the added revenue they can attract for retailers and the personalized audiences they can deliver to advertisers.

Right now, big RMNs wield heavy clout when it comes to scooping up those alternative revenues. The most prominent – Kroger Precision Media, Walmart Connect, Albertsons Media Collective, Target Roundel, Dollar General, Instacart – can deliver audiences in the tens of millions or more. These certainly boast wide geographic coverage that is important for brands.

It’s easy to be dazzled by the scale of those audiences and the purported advertising efficiencies and targeting capabilities of their networks. Savvy advertisers must also recognize that sheer, provable reach is only the first piece of the puzzle.

As brand marketers gear up to take further advantage of the retail media opportunity, they would be wise to keep in mind my Marketing Metrics Fallacy: Just because a quantity is highly measurable doesn’t mean it is highly meaningful. Nor is it highly comprehensive, which is the chief concern of this essay.

Big Retail Media Numbers Mean Big Brand Commitments

Of necessity, brands must devote significant brain power and expert resources to understand, plan and track their investments across those leading retail media networks. There is a lot at stake, and the learning curve has been steep. But can brands fully cover their national markets with only those networks?

The next tier of grocery retailers – “power regionals” like Publix, Wegman’s, H-E-B, Giant Eagle, Meijer, Raley’s, Hy-Vee, Southeastern Grocers, Lowe’s Foods, and quite a few others – represent very significant parts of many brands’ ACV (all commodity volume) that should not be ignored in the retail media equation.

These retailers have excellent market reach, but are not configured to deliver national retail media audiences. It is a heavy lift at present for ad buyers to stitch several together in a media plan to cover most of a desired geography or audience profile. That goal puts quite an onus on brand media planners to work with each of them, master each of their specific media buying processes, and understand their metrics. As matters now stand, the magnitude of those efforts would quickly outstrip available brand resources, brands tell us.

In just published research conducted for NielsenIQ by Coresight Research, the authors found that advertisers used an average of just six RMNs on average over the past 12 months. Almost every brand advertiser (96%) used at least three RMNs.

Said the survey authors, “We expect brand advertisers to limit the number of RMNs they use once they have identified their optimal advertising media mix—resulting in a more competitive environment for retailers that offer RMNs.”

Beneath this finding is an important reality for brand markers: Most have a lot yet to learn about how to use retail media effectively in support of their larger objectives. Return on ad spend (ROAS) is just one element of the strategic picture.

If brands steer all their retail media spending and collaboration effort to a half-dozen top RMNs and simply don’t have bandwidth for the next 100 grocery retailers, they are effectively adopting a two-tier strategy that ignores a major chunk of ACV.

Watchouts For Brands as they Evaluate RMNs

With all this in mind, I’d like to share a few matters of concern … better, call them opportunities for brand marketers, as they work to master the retail media equation.

Do you have a clear picture of the share of households an RMN can deliver in your target geographies?

Another way to look at it – how well does the RMN match up against your distribution map in each of your important markets?

You have tracked your MDIs (market development indices) diligently for decades to understand brand penetration, maintain distribution and allocate promotional resources. Now is not the moment to cast aside this discipline because of a new shiny object.

Does it make sense to concentrate your retail media advertising only with a few giants and ignore the opportunities with smaller retailers who can’t match them on scale network sophistication? Some of the best retailers have a unique identity that connects them with hard-to-reach shopper segments.

Cultivation in walled-gardens – Do you understand share of pantry?

No retailer media network can deliver a complete profile of household consumption based on their captive data. It is well understood that most consumers assemble their total pantry solutions from visits to several food stores. This has always been a limitation of even the best loyalty programs too, but the challenge is amplified with incremental investment in retail media.

Syndicated market data could be even more essential to the retail media advertising equation than it already is with respect to trade promotion planning. Data sharing and collaboration are essential elements of this.

Right now, the burden is on the brand’s experts to assemble a more comprehensive picture. In the NIQ/Coresight research, 52% of brands cited lack of reporting standards across retailers as a top challenge. This can make it very difficult to decide where to best spend retail media dollars.

Why are they here? – Trip mission matters

Examination of shopping baskets across digital stock up, digital spearfishing, store stock up, fill-in and convenience trips reveals a wide variety of intent, depending upon the trip mission in the moment. To be efficient and relevant in their media buys, brands need to learn more about these behaviors and what messages need to be delivered in each moment along the journeys.

How will brand marketers put together the multiple data streams needed to help complete this picture? Where are the tools that can help brands make well-reasoned retail media decisions?

Are you prepared to have a comprehensive conversation about the sources of funding?

Trade marketing dollars are flowing toward retail media. This was once unthinkable, but retailers have grudgingly accepted that they must consider rebalancing brand spending to achieve a net total gain in revenues. If incentives are not aligned within the retail organization, this conversation could become very difficult.

Retail Media Impact – Parting Thoughts

Use of retail media is consistent with brand marketers’ objective of providing an omnichannel brand experience to consumers. Spreading campaigns across multiple RMNs may help a brand reach more of its desired audience, but it also adds considerable intricacy. Brands are willing to invest the effort, but their bandwidth is limited. Many are frustrated by gaps in most present retail media offerings.

Yet to be comprehensively addressed by trading partners are questions like: “What will the impact of your retail media investments be on the category management process? On on-shelf availability? On base and promoted prices?”

Brands have no choice but to confront internal pressures to re-allocate trade marketing funds into retail media. Retailers will instinctively resist this, as they want retail media spending to be entirely incremental. But even if some funds are re-allocated, retailers may be willing to consider collaborations that result in net total growth of brand investment across all retail promotional channels, including trade promotions, personalized loyalty programs and retail media.

Brands would be well-advised to bring data-supported reasoning to support this conversation.

Editor’s Note: This article originally appeared in CPGmatters and is republished here by permission.