What Is Retail Media Advertising and How Does it Benefit the Ad Tech Industry?

With the surge of online shopping and ecommerce sales, e-retail sites are becoming a more popular avenue for brand advertising. 

In fact, with the implementation of new privacy laws, retail media may be a necessity for publishers and advertisers. Now that third-party cookies are slowly fading away, it will be a challenge for the ad tech industry to analyze the actions of consumers after they interact with an ad. 

On the other hand, many assert that retail media could be a solution to this challenge.

The advantage of retail media advertising is that the medium provides marketing that links ad spending directly to digital sales. Establishing networks to offer retail media on a large scale is the next step and predictions suggest that US Retail Media Networks will exceed $52 billion in ad sales by 2023.

“Retail media is becoming a very critical part of the digital media ecosystem,” says Brian Spencer, Marketing Director at Kroger Precision Marketing. “You know, I would say we are routinely added to brand plans now.” 

What is Retail Media Advertising?

According to a Xenoss study, retail media advertising is “a form of promotion on the media inventory of the retailer, with advertisers paying a platform or marketplace to showcase their products at or near the point of sale.” 

The study highlights two forms of retail media advertising which include sponsored products and onsite and offsite displays. Sponsored products are generally the main form used for retail media advertising. They can be placed on a variety of pages on retailer sites such as search results pages, homepages, and product detail pages. 

In addition, Spencer asserts that offsite displays offer their own set of benefits. He noticed that larger retail media networks are including offsite media into their ad packages. For example, Kroger has cultivated relationships with Pinterest, Pandora, Meta, and Roku in an effort to engage other avenues where their consumers spend time. 

The advantage of retail media advertising is that the medium provides marketing that links ad spending directly to digital sales.

“We also have our own programmatic private marketplace,” says Spencer. “It allows brands to use our first-party sales data to identify most relevant households and reach those households across the open web, using their own DSP of choice.” 

Spencer adds that the programmatic marketplace provides daily reports on which placements are driving sales at Kroger. It allows opportunities for advertisers and publishers to reduce wasteful impressions and connect right with the consumer. 

Retail Media Networks

The next step is establishing a retail media network. This network is an ecosystem where retailers advertise their digital properties such as their website, app, and email distribution. The study describes it as the “digital version of in-store advertising” that allows the advertiser to connect with consumers at any point in their shopping experience. 

“Retail media networks, such as Kroger Precision Marketing, are built on well-established and trusted consumer loyalty programs,” says Spencer. “That’s really the fuel behind retail media networks.”  

Spencer alludes to the Kroger loyalty program which 96% of sales are tethered. While the program offers customer discounts, there is a huge benefit for the retail media network. The advertisers are able to gauge first-party opted data that is directly linked to the customer experience. Furthermore, publishers are able to access this information from the advertisers. 

“In contrast to the legacy digital marketing ecosystem, which was incentivized to sell impressions for the last 20 years, retail media networks hold data that is baked in consumer satisfaction,” says Spencer. 

The study highlights that there has been a significant increase in large corporations launching retail media networks. There are retail media networks established in major retailers, niche retail media networks that cater to advertisers of specific product categories, and connected retail media networks.  Within connected networks, ad tech platforms integrate inventory from multiple retailers and supply advertisers with a dashboard for targeting. 

Benefits for the Ad Tech Industry

At first glance, some might assume that the rise of retail media might take revenue away from publishers. The evidence suggests otherwise.

Long ago, retailers were prone to distance themselves from the digital advertising space because of its reputation for ruining the user experience. Although Amazon’s flourishing ad tech business changed a lot of retailers’ minds. Of the $41 million ad spend figure calculated in 2022 about 78% of that revenue went to Amazon. Large retailers such as Walmart, Target, and Kroger followed suit. 

Corporations began to understand that retailers and publishers could establish a relationship of mutual benefit. Now that retailers are investing in off-property ads, they are searching for “high-quality inventory.” 

“retail media data can become the new life-blood of advertising” 

To ensure that they are acquiring ads that reflect the quality of their brands, retailers are partnering with premium publishers for guaranteed direct deals. Major publishers are already benefiting from these new partnerships, but this sudden trend will in time begin to benefit niche publishers as well. 

The Xenoss study states that with the challenges arising from data availability and the diminishing of third-party cookies, “retail media data can become the new life-blood of advertising.” 

Firstly, it affords future-proof advertising. Within this medium, each retailer is its own unique entity and the data profile developed for each consumer is unique to that retailer. The first-party data connected to these profiles are not restricted by the new privacy legislation. 

In addition, the study asserts that retail media can track the ROI on media. It will essentially “bridge the gap” between sales and marketing data. The process will use clean data rooms that will allow marketers to obtain data while being compliant with privacy laws and while being more transparent. 

Spencer asserts that retail media networks are a new client base for the ad tech industry.  From his experience with Kroger, he sees that retailers are becoming media companies and their need to work with the ad tech industry is increasing. 

“I think there’s a really cool opportunity for retail media to help the industry set a new level of expectations for being consumer-focused,” says Spencer. “Retailers like Kroger want what is best for the consumer because we rely on them.”