Opportunities in Retail Media

Narrowly speaking, retail media is a category of marketing that allows to place advertisements near the point of sale (POS). More generally, however, retail media is a way for brands to use retailers' digital and physical spaces to promote themselves and impact consumers' purchase decisions. This may include advertisements on market platforms like Amazon and Otto, advertisements in physical stores, vouchers, and more. In the US, retail media is already a very popular marketing medium in the retail space. Players like Amazon and Walmart started their investments a long time ago. However, the topic has only been gaining more traction in Europe since the pandemic. Retailers like Otto, MediaMarktSaturn, and Carrefour are building expertise to do more in this area.

Retail media involves different parties; we see each of them face different advantages, challenges, and opportunities. Retailers and marketplaces can use retail media as an additional source of revenue and intensify the collaboration with manufacturers and brands. This also means, though, that these types of companies have to build expertise and capacities in an area that is mostly unfamiliar to them.

Brands and manufacturers can leverage retail media to increase their visibility and closeness to the POS. It is not only a new marketing channel but it also enables more precise targeting. Retailers actually have valuable customer data that brands and manufacturers lack. Additionally, Europe's strict handling of third-party cookies and the privacy concerns of website visitors have led to a decline in the usefulness of third-party cookies. Browsers like Mozilla Firefox and Safari have completely blocked the use of third-party cookies. Consequently, marketers seek new ways to track consumers' online activities and deliver personalized advertising. The first-party data owned by retailers represents a real alternative for brands, enabling them to continue running relevant online campaigns.

On the consumer side, retail media ensures that advertisements are personalized and address each consumer depending on their preferences and past behavior as part of their omnichannel experience with a retailer and a brand. At the same time, it means that consumers need to be ready to provide more information about themselves to ensure the relevance of ad campaigns.

Although retail media holds a lot of potential in the marketing and advertising world, we at PAC still see some challenges that need to be tackled for the topic to take off. For one, there is the role of data management. Retail media works mainly thanks to the customer data available to retailers. This means they have to set up a data management strategy to securely handle all information and ensure compliance. We also think there is a risk that retail media might lead to advertisement overload. For instance, when searching for a product on Amazon, many advertisements are already included in the results list. It seems that the online marketplace now wants to leverage its customer data to insert personalized ads in videos on Amazon Prime Video. It remains to be seen whether this is a good idea, especially considering that consumers are usually not fans of advertisements, and many streamers use the service to watch something without being interrupted by commercials or similar things. The third challenge we see is related to the retail media ecosystem. As well as retailers, brands, and consumers, this form of advertising also concerns media agencies and platform vendors. The former have to be aware of this trend to help clients with their communication strategies. The latter have to provide the necessary technology to enable said strategy for brands and allow retailers to offer this type of service.

The retail media ecosystem is quite complex, involving many different parties with different stakes. At the same time, retail media adds to the conglomerate of marketing channels that already exist. Of course, we also see much potential related to (generative) AI in data analytics, content creation, and process automation. We believe that investments in retail media will gradually increase in the coming months.