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Retail Media: The third wave of digital advertising

June 1, 2023

Retail media is the talk of the town and is exploding as we speak! According to Insider Intelligence, US retail media ad spending will hit $45.15 billion in 2023, an increase of almost 20% over 2022. Growth will accelerate each year through 2027 when forecasted spend reaches $106.12 billion. But what is Retail Media all about?

Retail Media is advertising where retailers are using their platforms to sell advertising space to brands who want to promote their products to shoppers. They are using their data on shopper’s purchasing behavior to sell targeted advertising space to brands onsite, in-app, in-store, and offsite.

Big global companies are investing in Retail Media

Leading global retailers such as Carrefour strive towards becoming digital retail companies that place digital and data at the heart of all their operations if we look at the growth forecast in the US advertising in Retail Media is expected to grow rapidly and for the first time since 2014, Google and Meta have less than 50% of the digital ad spend market share in the US.

Tesco, the biggest grocery chain in the UK, also see the potential in retail media and expects to invest significantly in this area and as a meaningful contributor to profit. End of 2021, the company launched a media and insights platform to connect brand and their agencies with the retailer’s extensive first-party behavioral dataset from the Clubcard loyalty scheme. Something that’s now being taken to a new level launching a Retail Media offer in April 2023.

Tesco claims to have the largest closed-loop grocery media platform, including media screens in +500 stores, powering over 6500 campaigns a year with a return on advertising spend (ROAS) of 6,6x compared to 3,8x in other channels.

Suddenly, everyone can be an ad network, and using digital ads on retailer websites is eye-catching and engages shoppers along the path to purchase from awareness to consideration to conversion.

Consumer expectations and technological possibilities are driving the change

The reason we see this happening now and accelerating so rapidly is due to a combination of changed shopping habits, ad cookies going away, and a rapid increase in direct-2-consumer channels, we now have the right tools, great margins, and first-party data of shoppers.

Hundreds of retail media networks are launched in the last 2-3 years with impressive growth rates, but Europe is still behind. The UK has the highest density but still few compared to US and Asia. This will for sure change over the next two years.

Third wave of digital advertising

The first wave of digital advertising was Search followed by Social and it’s easy to believe that money has been moved from one channel to another, but the fact is that 80% of retail media spend is new money, and margins and profits are remarkable. Expected cannibalization is within “Shopper & Trade Marketing) but only -16%.

If we move out into the physical world, we can see that purchasing behavior on a macro level is easy to observe. We know which products should be at the beginning, middle, and end, and we know how customers move and behave once they are in the store. However, to get more personal data about individual customers, another layer is required, like logging in to a website. Customer clubs, discount cards, self-scanning – there are many ways to solve the challenge for those who want to.

Retail Media and Digital Signage

The future of retail media lies at the intersection of these two worlds and realities. Exactly how we can best solve this is not yet known, but a lot is happening, and it is happening fast. The only thing we know for sure is that digital signage is perfectly positioned in the middle of everything. By being the most relevant and currently the largest digital surface in the physical store, it has a unique position to both collect and provide relevant information about, and to, customers. All with the goal to improve the overall experience.

Because that’s exactly what it’s all about in the end – an improved purchasing experience for the customer. To succeed in this requires a very good insight and understanding of the individual customer. Regardless of whether it is about the digital or physical world. A seamless experience between offline and online. Where all the information you encounter is relevant to you. Whether it’s marketing or not.

Retail media means personalized shopping. Everywhere and always. It also means that it is the future of all types of marketing and sales communication. This requires full insight and knowledge about your current, future, and potential customers.

With increasingly integrated solutions between physical and digital, and not least the rapid advancement of AI, it is a whole new world that is about to open.

Talk to our experts if you want to know more about how we can help you with a solution for your business.

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