RETAIL MEDIA’S REMARKABLE RISE – WHAT’S IN STORE FOR 2024?

In December, the Oxford English Dictionary announced “rizz” as the 2023 word of the year. Looking at the shortlist of terms such as “Swiftie” and “beige flag” I almost expected to see “retail media” appear, such has been the noise around it in 2023. As we enter 2024, the retail media juggernaut shows no signs of slowing down so whether you sit on the retailer or supplier side of the table it must form an integral part of your strategy for the coming years

Looking at the size of the retail media market, the mid-year report from GroupM valued the global retail media market at $114.4bn in 2023, comprising 13.8% of global ad spend – nearly double its 2018 share. This is projected to rise to $175.7bn by 2028 when it is expected to surpass TV advertising and account for 15.4% of all ad spend. I would argue that retail media’s true size is in fact even greater than these figures suggest as, for a variety of reasons, much retail media commentary focuses solely on online media and doesn’t take into account media within physical stores, the investment for which often comes from below-the-line and is not as easily captured by – or of as much relevance to – media companies who often provide the commentary. To ignore such an important environment, with numerous media formats, misses a significant part of the retail media picture, however, particularly at a time when the lines between above and below-the-line marketing are increasingly blurred. So, what exactly is retail media then? A quick search will deliver a myriad of definitions, some of which are again restricted to online media. The best definition I have seen, however, defines retail media simply as “advertising owned by a retailer or activated using a retailer’s data”.

To ignore such an important environment, with numerous media formats, misses a significant part of the retail media picture…

Factors Driving the Growth of Retail Media

While much of retail media’s growth has come in the last five years, the seeds were sown in the years preceding this as those lines between above and below-the-line marketing started to blur. Retailers were becoming more sophisticated in the shopper engagement opportunities they offered suppliers, often partnering with third parties who introduced new media formats. Retail marketing started to become – to some extent – detangled from trading discussions with clearly defined rates for media activity. Brand manufacturers were simultaneously establishing shopper marketing teams to focus on these expanding retail marketing opportunities and help ensure alignment between commercial and brand marketing activity.

Fast forward a few years and a combination of events turbo-charged the growth of retail media. Chief amongst these was the explosion in grocery e-commerce, driven in no small part by the Covid-19 pandemic. This was important for two reasons:

  • Firstly, increased website traffic meant a greater audience for brands to advertise to. Secondly, e-commerce brings significant extra costs for grocery retailers, many of whom are quite open in stating that selling media helps offset these costs.
  • Another contributing factor has been the deprecation of third-party cookies which has resulted in advertisers exploring alternative ways to target audiences online. Advertising against an audience built on a retailer’s rich first-party data is a very attractive proposition and a 2023 IAB Europe study found that 91% of advertisers saw retail media as being a key part of their advertising strategy following the deprecation of the third-party cookie. The other key data-related benefit retail media provides for brands is the ability, through a retailer’s sales data, to provide closed-loop attribution and measure the impact of activity. Marrying up sales and loyalty card data provides advertisers with the holy grail of being able to target the right audience and report back on the effectiveness of the activity, not only in terms of sales uplift but also other metrics such as whether buyers were new to the brand.
retail-media

Four Trends For 2024

So, what can we expect to see from retail media in 2024? Here are some trends I expect to feature prominently as retail media matures further.

Moving Up The Funnel:
While most retail media spend to date has been at the point of purchase – either in-store or on-site – we are increasingly seeing more upper funnel media channels such as social media and video on demand being used to reach shoppers earlier on their purchase decision journey, leveraging retailer data through partnerships with technology and media providers. UK retailers such as Tesco, Sainsbury’s and Boots have formed partnerships with the likes of Channel 4 and ITV enabling advertisers to activate against relevant shoppers on their streaming platforms and measure sales uplift among those who’ve been exposed to their ad. Similarly in the US, Walmart have partnered with media companies such as NBC, Roku and TikTok to enable effective targeting, shoppable ads and closed-loop attribution for advertisers on these channels. I anticipate more of these off-site retail media opportunities to be launched as retail media becomes an increasingly important fixture in mainstream above-the-line media. Of paramount importance as these expanded funnel partnerships develop is consumer privacy, and retailers and their partners must ensure there is transparency in how customer data is used and that processes are in place to ensure this data is not compromised or misused.

In-Store Digitalisation:
While every year sees an increased presence of in-store digital signage, 2023 was particularly noteworthy as retailers ramped up their rollouts, with retail media very much being the driver behind this. At home, both Musgrave and Tesco introduced new in-store digital formats, creating fresh engagement opportunities for brands. The UK notably witnessed Sainsbury’s announcing plans to double its digital screen network to over 820 screens while Tesco announced they quadrupled their network to more than 1,800 screens over the course of the year. Something quite telling about these UK rollouts is the number of screens located at prime aisle-end positions as shoppers enter the store. A few years ago, it would have been unthinkable for this space to be used for anything other than stock, but retailers are now seeing both the media revenue that can be generated from these screens and the impact they can have on sales. In 2024, I expect further substantial investment in digital signage while also seeing screens increasingly being utilised to their full potential, leveraging features like dayparting and dynamic content to make messaging as relevant as possible to shoppers at different times or based on external factors such as weather. We can also expect to see the use of features like assisted selling to educate and inspire shoppers in categories where some guidance might be beneficial.

we are increasingly seeing more upper funnel media channels being used to reach shoppers earlier on their purchase decision journey

New Networks:
As retail media has become established as a core function within most major grocery retailers this has sparked a fear of missing out among both other grocery retailers and retailers in other sectors, all of whom are trying to figure out if and how they can capitalise on the opportunity. Internationally, we have seen retailers such as Boots, Currys, the Very Group and Home Depot establish retail media offerings across diverse retail sectors and in the US there is also a growing establishment of retail media networks uniting regional or independent grocery stores. I anticipate more retailers launching retail media offerings in 2024, however any new entrants must ensure they have a compelling proposition as without the store footfall, online traffic and rich customer data of the major grocery retailers, establishing a successful retail media network is more challenging. Smaller retailers can, however, punch above their weight in different ways such as providing access to a niche audience, by providing exciting opportunities to participate in co-marketing initiatives with the retailer or through robust measurement and evaluation. One thing new entrants must not do is view retail media as just an opportunity to hit up suppliers for additional revenue as this will only result in short-term gains, at best. Building and running a successful retail media network requires both taking a different perspective on the traditional retailer-supplier relationship and expertise that retailers often don’t have in-house, so for many retailers the best approach to developing their retail media offering is through partnering with an agency who specialise in the space.

As retail media evolves, we must always remember its most important stakeholder: the shopper! Fundamentally, there is a simple reason why effective retail media works; this is because it provides shoppers with more relevant messaging and better experiences along their purchase decision journey. The most successful retail media networks provide a triple win for retailer, brand and shopper. If we stay focused on this triple win, we are only just beginning to tap into retail media’s full potential and who knows, maybe it will even win word of the year someday!

Eoghan Phelan
Managing Director of V360°