Retail Media Networks: Everything CPG Brands Need to Know

The boost in e-commerce sales that has occurred as a result of the COVID-19 pandemic has dramatically accelerated digital advertising spend within the channel. By the end of 2020, the e-commerce channel accounted for 12.3% of total digital ad spend in the United States, up from 9.4% in 2019. This is a year-over-year increase of 49.8%, and eMarketer expects investments in these ads to continue growing faster than the overall digital ad market.

Even before the pandemic, Amazon was the third largest digital advertising seller in the U.S. market, due in large part to ad placements on its e-commerce properties. After seeing Amazon’s success and witnessing the dramatic growth in e-commerce channel ad spend during the pandemic, many other retailers have started investing in their own media networks to add higher-margin revenue streams to their businesses. In fact, last year saw the highest volume of retail media networks launched or re-launched within the calendar year.

To capitalize on this growth, many CPG brands are considering an increased investment in digital ad spend in the e-commerce channel. An August 2020 survey from Merkle found that 85% of CPG respondents were planning to move more marketing dollars to retail media networks; 52% planned to do so in the next year. In this article, we give CPG marketers a high-level overview of retail media networks, their pros and cons, and a list of the most popular networks today.

What Are Retail Media Networks?

Today, the term “retail media network” generally refers to platforms developed by retailers that allow their partner brands to run digital advertisements on their websites, mobile apps and other digital properties. Retail media is similar to trade marketing in that it enables brands to advertise their products directly at the point of sale. These ads may be text-, image- or video-based and are prominently placed on homepages, category pages, search results pages and even product listing pages. This gives brands the opportunity to reach shoppers at different key points in the online customer journey.

Advantages of Retail Media Networks

As mentioned above, the primary benefit of retail media networks is that they enable brands to advertise to customers directly at the point of sale. Visitors to e-commerce websites are usually there to buy or research products, and with sales just a few clicks away, it’s the perfect opportunity to promote your brand.

The fact that advertising and sales happen on the same platform has several benefits in and of itself. First and foremost, it allows each retail media network to collect reliable first-party customer data that brands can use to target different audience segments with highly personalized ad campaigns. It also allows brands to measure the sales impact and ROI of their ads more accurately so they can optimize their campaigns for maximum performance.

Retailers with customer loyalty programs can typically offer brands even more robust insights and advertising options, as they often capture key demographic and biographic information and keep track of purchasing behavior both online and in stores.

Challenges of Retail Media Networks

Advertising via retail media networks is unfortunately not without its challenges for brands. Currently, the market is dominated by many single-retailer offerings, each with its own advertising capabilities and standards for measurement and attribution. This fragmentation requires brands to learn and use several different advertising platforms, thereby increasing the amount of talent and resources needed to manage campaigns effectively.

Another downside of this “walled garden” approach is that sharing insights across closed ecosystems is almost impossible, leaving brands with an incomplete view of the customer and forcing them to make cross-platform decisions blindly. On top of that, many retail media networks lack the core capabilities CPG brands say they need to maximize ad spend, such as stronger content management tools and more advanced algorithms. Finally, brands who reallocate portions of their trade marketing spend to retail media programs could see increased internal competition and conflict between the two business units.

Top Retail Media Networks

Today, almost every major online retailer has some sort of media network. The following is a list of the most popular.

Amazon

As the second largest retailer and the third largest digital advertising seller in the United States, Amazon should be the top priority for CPG brands when it comes to retail media spend. Last year, the company’s advertising business grew by 52.5% to $15.73 billion, increasing its market share past 10% for the first time. E-commerce channel advertising, which includes search and display ads on its retail properties, accounts for roughly 89% of Amazon’s ad business. The retailer will control 76.2% of the nearly $24 billion e-commerce channel ad market this year, compared to the 6.5% captured by No. 2 Walmart.

Walmart

Walmart is Amazon’s main competitor in the retail media space and should be a close second to Amazon in every CPG brand’s e-commerce advertising strategy. With 150 million customers visiting its stores and website each week, Walmart is the largest retailer in the United States. The company’s digital ad impressions increased 50% year over year from 2019 to 2020, and last year, its number of net new advertisers grew by 40%. At the beginning of this year, Walmart announced an expanded vision and new name for its retail media business, now known as Walmart Connect. Walmart Connect is expected to become one of the top 10 advertising platforms in the United States.

Kroger

Even though Kroger currently only operates in 35 states, it is still the third largest retailer in the country. The grocer boasts 2,800 stores, which is more than Target but fewer than Walmart. For this reason, Kroger is a strong third contender to consider in your CPG brand’s retail media strategy. Launched in 2017, Kroger’s digital advertising business, called Kroger Precision Marketing (KPM), gives brands access to exclusive data on 60 million customers. Last year, KPM saw a 200% increase in spend from the brands using its platform, along with revenue growth of 135%. At its annual Investor Day event this year, Kroger officially announced that it has set its sights on dominating the growing retail media market.

Target

Target’s retail media network originally launched in 2016 and was rebranded in 2019 as Roundel, with aspirations of becoming a more aggressive player in the digital advertising space. As one of the top 10 retailers in the country, Target has amassed the profiles of 147 million loyal customers and counting. The retailer has more than 30 million in-store guests and 40 million unique visits to its online properties each week. Last year, Target’s digital sales grew by nearly $10 billion, which is a clear sign that it deserves at least a portion of your CPG brand’s budget for e-commerce channel advertising.

Instacart

Instacart has been selling managed advertising options for years, but the launch of its self-service platform in May 2020 has made it an especially powerful tool for CPG brands. Instacart’s advertising business pulled in hundreds of millions of dollars last year, and it’s growing so fast that revenue could top $1 billion in 2022. Total sales among brands running ads on the platform have increased more than 200%, and the company’s ads unit is set to be its fastest growing team this year. Every one of the world’s top 25 CPG brands advertises on the Instacart marketplace, which allows advertisers to claim prominent shelf space on the digital aisles of 600+ retailers and nearly 55,000 stores.

Other Notable Retail Media Networks

Future of Retail Media Networks

The importance of retail media networks to CPG brands will continue to grow as changes to third-party cookie policies take effect. In the absence of their own first-party data, CPGs have historically relied on third-party tracking cookies to power their digital advertising programs. But new regulations driven by consumer privacy concerns around data collection may put an end to third-party cookies as we know it. Google, for example, will stop supporting third-party cookies in Chrome browsers by the end of 2023. In the cookie-less world of the future, retail media networks and their rich first-party customer data will be a vital imperative to CPG brands.

OneSpace Can Help

If you need support developing your e-commerce channel advertising strategy, OneSpace is here to help. We possess the right mix of creative expertise, retailer knowledge, consumer search data and in-house technology to boost visibility, conversions and agility. Read details about our full-service Instacart solution or contact our team to learn more.

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