Can retailers recoup more CPG ad dollars without repeating the mistakes of digital media?

Retailers building their own platforms to sell and place adverts for marketers is a business firmly in the midst of a boom, with the impending deprecation of third-party cookies and the demand for alternatives to the old guard of digital fueling a resurgence. of interest. With a proliferation of big-name retail media networks like Walmart, Target, Home Depot, and Macy’s — and some offerings reaching new levels of maturity — consumer packaged goods marketers are expected to shift more budgets to online platforms. forms able to tie advertising messages tightly to the point of sale and tap into a first-party data source.

Despite this promise, retailers are already threatening to repeat some of digital’s past mistakes, especially when it comes to ad volume. At the same time, companies with historical specialties in bricks and mortar face pressures to build complex technical infrastructure in a compressed timeframe. The result will be a period defined by excessive activity as retailers try to avoid leaving money on the table, and accompanying this gold rush, lots of trial and error.

“If you’re looking at going online on an e-commerce platform now, the amount of inventory that’s being sponsored, that’s being sold, i.e. advertising has increased dramatically,” said Emily Turner , Head of Customer Engagement and Media, Americas, at Dunnhumby. , a data science company specializing in retail. “There have been, in my view, trade-offs on the customer experience.”

Any significant upheaval isn’t really in the cards in the short term if for no other reason than the fact that the market is so hot. Consulting firm Winterberry Group estimates retail media marketing spending in the United States has doubled from $20 billion in 2020 to $40 billion last year. The race to find a suitable substitute for cookies, which are set to be phased out in 2023, will have brands looking for other outlets to reach shoppers, with retail media poised to benefit.

“There have been, in my view, trade-offs on the customer experience.”

Emily Turner

SVP of Customer and Media Engagement, Americas, Dunnhumby

In response, the list of retailers offering some form of advertising network that combines physical shopper and e-commerce data has grown: Walmart, Target, Kroger, CVS, Best Buy, Home Depot, Lowe’s, Macy’s and Dollar Tree are among the many are vying for a piece of the pie. That leaves out Amazon — still the model many follow — which is itself realigning its advertising priorities to chase big brands as ad sales continue to be a top-performing segment, as Insider reported. Services are also rapidly scaling to incorporate cutting-edge features such as data clean rooms or cloud-based management.

“Within one to two years, that’s such a big opportunity. Right now, they’re in the investing part,” said Brian Gioia, director of product strategy at e-commerce agency Scrum50. . “They don’t worry about being profitable.”

But the question remains: will retailers put the windfall to good use? There are plenty of gaps that need to be filled as mastering digital marketing remains a daunting task for internet natives, not to mention businesses with little tech backbone and the need to demonstrate true omnichannel finesse and “measurement”. in the vaunted closed loop”. The pandemic forcing retailers to embrace e-commerce has clearly demonstrated the pitfalls of not succeeding on the customer experience side.

“They struggled growing from traditional customer marketing to trade marketing. What worked for them doesn’t work for them the same way anymore,” Turner said. “How do you evolve the way you operate from a traditional consumer commerce and marketing business to a media [business]? It’s learning a whole new set of skills that they often don’t have.”

Transition phase

As retailers make a difficult transition, solution providers see an opportunity. Dunnhumby just introduced a solution called Dunnhumby Sphere that attempts to streamline retail media functions like audience targeting, media booking, forecasting and measurement. The idea is that retail media is too fragmented and leads to too much disconnection between platforms and their partners – a familiar story to emerging pockets of digital marketing.

Deeper integrations with technology vendors could be considered for brands that continue the structure of established advertising heavyweights.

“At the rate things are moving, a retailer doesn’t really have the ability to wait to build slowly,” Turner said. “In this race to go fast, they often need to team up.”

“Right now they’re in the investment part. They’re not worried about being profitable.”

Brian Gioia

Director of Product Strategy, Scrum50

Walmart made waves last year when it partnered with The Trade Desk, a leading independent ad tech company, to develop its own demand-side platform. Walmart DSP, which went live this holiday season for select partners, provides access to The Trade Desk inventory across display, streaming, mobile, audio and connected TV and builds on shopper data from Walmart’s website, mobile app, and 4,700 physical outlets. Locations. It serves as a meaningful test of whether a retailer can scale an ad tech stack to rival the trio of Amazon, Facebook and Google — and can serve as a model for rivals to follow to launch a larger ad network.

“The Trade Desk is building that self-service tool for them, which is what many vendors are looking for,” said Ryan Gibson, vice president of strategy at performance marketing agency Adlucent. “When you talk about being able to elevate customizations to the vendor, they want that visibility, that transparency, and that ability to control where possible. That’s where The Trade Desk partnership is going to be especially appealing.”

A similar theme driving the category will be the expansion of retail media networks outside of a given brand’s properties. Kroger, the largest grocery chain in the United States, launched a private programmatic marketplace last fall through its 84.51° data and analytics unit. With broader reach, retailers are mandated to incorporate ad formats that cover more parts of the sales funnel. Richer media placements can help combat feelings of ad fatigue that are beginning to degrade the user experience.

“You can look at how Amazon has evolved its offerings,” Gioia said. “You start with sponsored product listings in search results that are very conversion-focused. You demonstrate some success and then scale from there in terms of brand building.”

The pandemic has shown that many old chestnuts are finding new relevance on this front. Everything from QR codes to print catalogs have re-entered the retail media marketing rotation and could bring new utility in an era where convincing customers to share their personal information is the primary mandate.

Despite the re-emergence of some traditional media, retailers as a whole will need help to complement their leadership with a greater digital focus. Hiring could come from outside the category, from places like tech companies, while marketing service providers could be tapped to help with onboarding. Likewise, CPG clients using retail media networks might need to hone new muscles to effectively deploy campaigns.

“There’s a lot of transformational work to be done,” said Gioia, who previously worked in management consulting. “I can totally see the Accentures of the world helping to build these new organizations.”

Power grouping

Marketers have long pondered the constraints of working within the walled gardens of the triopoly, but a limited number of platforms removes some of the paradox of choice from the equation. Conversely, advertising through Walmart Connect can look very different from that of Kroger, Macy’s, or Instacart.

“The world of digital media is going to seem a lot more diverse than it is today.”

Brian Gioia

Director of Product Strategy, Scrum50

That said, a variety of options might be welcome, as different retailers cater to different audiences when it comes to factors like demographics or pricing.

“The world of digital media is going to seem a lot more diverse than it is today,” Gioia said. “If you’re a CPG company with different brands, some of your brands will probably over-index at Dollar Tree, others will over-index at Target. Your media plan will take that into account.”

GICs have previously expressed concern that retailers might support new walled gardens even as they portray themselves as opposed to old ones. Although an increasingly crowded field, retail media could end up being dominated by a select few who have both the physical footprint and the digital know-how to match the scale. required by top marketers.

“Usually in the world of digital technology, whenever something new happens, tons of new companies appear. That’s not going to happen here because there are huge barriers to entry,” said Gioia said.

“Unless you’ve spent the last 100 years building lots of Lowe’s stores, you can’t have a Lowe’s retail media network,” he added. “What will dictate success isn’t necessarily who has the best technology or who has the best media offering. It’s who has the biggest size.”

Although reservations persist, it will be difficult for CPGs to ignore the allure of retail media. Cookies and other changes to identifiers will weigh more heavily on performance and metrics during a time when improving these skills is paramount. And retail media, when based on quality data, ultimately promises something that the more obscure areas of the digital world often struggle to prove: someone on the other end is actually looking something to buy.

“There isn’t necessarily a lot of trust in global digital marketing,” Gioia said. “At the very least, I hope people visit Kroger’s website and visit Amazon’s and Walmart’s website. I know real people see my ads.

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