Retail media is changing the way brands reach customers. In general, retail media is advertising within retail websites and apps at or near the point of sale. It’s the digital equivalent of an aisle display. In brick-and-mortar stores, product displays are meant to stand out from other products and attract the attention of shoppers. Retail media applies this concept to ecommerce.
In the past few years, retail media has become an essential component of a well-rounded marketing strategy. According to Statista, retail media will account for 17.2% of all digital advertising spending in the U.S. in 2022, up from 10% three years ago.
Retail media is growing due to several reasons. First, retail websites provide a powerful opportunity for brands to reach customers with strong purchase intent. Amazon – the current king of retail media – has over 200 million Prime subscribers and receives upwards of 2 billion website visits during some months. Unlike people reading news articles or checking their social media accounts, Amazon visitors are interested in purchasing a product.
Retail media is also gaining traction due to first-party consumer data. Retail companies know a lot about shoppers. They collect valuable information like demographics, purchase history, website activity, email engagement, sales interactions, support calls, customer feedback programs, interests, and other shopping behaviors. This insight enables advertisers to target customers at a granular level.
Despite its rise in popularity, retail media is in its early stages. Many sellers (and retailers) are still learning how to leverage this form of marketing to its fullest potential. One thing is certain: retail media is leading brands into the future of ecommerce. The following are five powerful stats that underscore how retail media is changing the landscape of digital marketing.
#1 – Retail media advertising could reach $52.21 billion by 2023
According to eMarketer, one out of every eight digital ad dollars went to advertising on ecommerce properties in 2021. In total, advertisers spent $31.4 billion in retail media last year, a 135% increase since 2019. Some of this growth is due to the launching of dozens of new retail media networks. Nearly every major retailer now has a retail media network, including Walmart, eBay, Home Depot, Kroger, Wayfair, Costco, and Instacart. Some of these are already generating hundreds of millions of dollars in high-margin revenue. In 2022, eMarketer forecasts retail media advertising in the U.S. to top $52 billion. [Source: eMarketer]
#2 – 80% of advertisers currently use at least one retail media network in addition to Amazon
Amazon is the biggest name in retail media. Last year, Amazon generated $31 billion in ad revenue (making it the third-largest digital advertising company in the U.S.). However, a recent report by consulting firm McKinsey & Company found that 80% of advertisers currently use at least one retail media network in addition to Amazon. “As they scale and build out their value propositions,” the report states, “advertisers are recognizing the benefits of diversifying into other retail media networks that provide access to unique, highly targeted audiences, a range of reasonable costs per thousand impressions (CPMs), and other advantages that make them attractive advertising options.” [Source: McKinsey & Company]
#3 – 70% of brands depend on help from an agency to manage their retail media advertising
Research shows that most brands need help with understanding how to leverage the power of retail media networks. In the 2022 State of Retail Media by Skai and BWG, only
half of the respondents reported that their teams are above average when it comes to retail media maturity. The study found that 29.6% manage their retail media in-house, 64.8% of advertisers use a combination of in-house and agency help, and 5.7% only use an agency. As retail media becomes more competitive and expansive, Channel Key predicts a growing need for agencies to help brands manage their retail media. [Source: 2022 State of Retail Media]
#4 – Most advertisers see better performance with retail media than with other channels
The biggest benefit of retail media for brands is first-party customer data. The quality of this data varies depending on the retailer, but it is more reliable than data collected through third-party cookies (think Facebook and Google). With detailed targeting and reporting, brands can analyze the performance of their ads at a granular level. In a survey by McKinsey & Company, 69% of advertisers say their performance in retail media is significantly or somewhat better than in other channels. It also found that 82% will increase their retail media spending over the next 12 months. [Source: McKinsey & Company]
#5 – Retail media margins far exceed other retail margins
One of the strongest indicators of the future of retail media is not how it impacts advertisers, but how it benefits retailers. A report by Boston Consulting Group found that retail media has the potential to generate enormous profits. “By our estimate, the $110 billion commerce media market will yield almost $75 billion in profits in 2026. Our research suggests that spending by advertisers on retailers’ owned channels will grow at a rate of 22% per year over the next five years, with robust margins of 70% to 90%.” By contrast, the report found that retail margins in the areas like beauty, home improvement, sporting goods, electronics, and grocery fall below 30% on average. From a financial perspective, profitability will no doubt serve as a strong force in the development and growth of retail media networks. [Source: Boston Consulting Group]
Channel Key Takeaway
Retail media is closing the transaction loop between advertisers and customers. In traditional digital advertising, brands purchase ad space on media sites and apps that redirect customers to the retailer. In the new model, brands buy ad space directly on the retailer’s website at or near the point of purchase – and it works. After all, the goal of advertising is to reach the right customer with the right message at the right time. Retail media enables brands to reach a highly targeted audience that is already in the consideration stage of the marketing funnel. Over time, advertisers can expect retail media to deliver even more benefits as the industry grows more competitive and retailers search for innovative ways to outperform each other.