Much is written about the Covid-catalyzed catapulting of Retail Media Networks into the radar screens of high-performance advertisers and marketers. Retailers used to be buyers of goods from brands. Now, brands buy ad inventory from retailers. Around a 100 RMNs exist in the ecosystem today, 20 of them being quite large. We cast away those consumer-is-in-shopping-mode glasses, look beyond the privacy-compliant first-party data and peer through the personalized messaging propaganda to see it like it is, tell it like it is.

Who can become an RMN?

Retail media isn’t for everyone. To construct an MVP of an RMN, retailers need to assemble at least 6M – 11M monthly visitors. Traditional retailers have an uphill climb. They can barely stitch together shopper activity across physical and digital for themselves, let alone leverage it for others’ benefit. Lack of mechanisms for aggregation and for cross-platform interoperability among smaller RMNs are other common reasons why retail media isn’t for every retailer.  

This also makes a strong case for a retail agnostic advertising strategy wherein brands target shoppers on the sites and apps they organically engage with. This allows brands to advertise their products on several platforms and apps to meet consumers where they are most frequently on their mobile devices.

Who uses RMNs?

GroupM estimates that retailers made USD 101B in ad revenue, in 2022. That’s 18% of all global digital advertising and 11% of all advertising. But who feeds the RMN ad spends? Afterall, RMNs are good only for brands carried by a retailer and not every brand is suited to be on retailers’ websites! Gap Inc’s recent closure of retail media operations within a year of kickoff is a leading indicator.

CPG firms – national brands, in particular – are ideal and predominant candidates. But where do thin-margin CPGs get the money to invest in RMNs? That holy, sacrosanct “trade fund” piggybank is what they dip into, per a Wakefield Research survey. In the United states, CPG trade spend exceeds USD 200B powered by up to a quarter of the gross sales of companies. In grocery, promotions funded by CPG trade funds bring in almost 40% of sales. As the retail rebellion crosses this Rubicon to spread trade dollars amongst RMNs, the river of deals, coupons and co-advertising activities will soon peter out into a stream. Amidst budget cuts, the balance too shifts away from building brand equity and growth towards driving short-term sales.  

In its Jan 2023 report titled Retail Media Networks: A Forced Marriage or A Perfect Partnership, Association of National Advertisers (ANA) reveals that 56% of marketers work with five to 10 RMNs.

Since no two RMNs work the same way, this leads to multiple learning and activation curves for brand and agency teams. Gaps in transparency, consistency and standardization of reporting prevent them from fully optimizing their use of RMNs, necessitating the need for a single source of truth to manage budgets across platforms. But why work with so many RMNs in the first place, amidst all these uncertainties?

Why use RMNs?

Eighty-five percent of the companies surveyed by the Association of National Advertisers (ANA) say they’re pressured by retailers to buy advertising on their RMNs. In today’s high-inflationary environment where consumers are very likely to switch to retailer-owned store brands and private labels, these RMN dollars do double duty – of defending brands’ share among retailers and growing them. But the “inability to quantify ROI for leadership” remains a top concern for CPG executives, to justify increased RMN spending.  

Personalization vs targeting

Once prevalent, in-store coupons are now passe because they failed to respect consumers’ preferences and pestered them with personalized offers. Consumers saw it as targeting. Pound on all the first-party data you want to, a Nike buyer isn’t likely to switch to Adidas. Serving an ad to someone who will never buy the product, not even maybe if given away for free, is just not personalization.

Last words

Although RMNs are being credited with driving brand sales, they have yet to prove their worth in generating brand growth. The risk of overuse of consumer data in sending personalized messages is real and must be moderated. Consortia and data interoperability will be key to attaining both focused insights as well as the wide reach that brands seek from this burgeoning media space.

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‍Sathish Rangarajan

Industry Analyst - PipeCandy

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