MBUZZ: Ad to Cart: Retail Media May Prove to be the Future of First Party Data Collection
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Retail media is an advertising strategy which prompts retailers to set up advertising platforms within their own digital networks. This allows them to advertise their own products on their website. By the end of 2023, retail media advertising spend is projected to hit $45.15 billion, which will be a 20% increase in revenue compared to 2022. What makes retail media unique is that the retailer’s first party data is being used, rather than third party data from other sources. Brands can buy space on a retailer’s website, or the retailer can use the advertising space themselves. This new advertising strategy offers a means to incorporate in-store advertising online. Retail Media reaches consumers in a familiar atmosphere, while they are already planning to purchase. This non-disruptive ad experience adds to their scroll-based shopping, while creating an easily measurable back end for advertisers.
What this means:
Retail media has shown great success within its first years of being introduced into the advertising space. During the COVID –19 pandemic in 2020, consumers took to online shopping as it was their only option. This led advertisers to innovate new ways in which they could reach their online consumers while shopping; in turn spawning the retail media explosion. From 2019 to 2020, there was a 13% growth in retail media ad spend, and growth rates have only risen since then. As of 2023, 74% of brands have dedicated budgets to retail media, and 70% of brands rely on help from an agency to manage their retail media advertising. Because retail media is a fairly new strategy, retailers must overcome a learning curve to utilize their data and retail media opportunity. The only way to do this is with the help of an advertiser. Retail media ultimately creates benefits for all parties in the buying process. Consumers are given the opportunity to see products that they are already interested in, often advertised to them at a lower price. Because retail media utilizes first party data, retailers have less of an incentive to raise prices due to the efficacy of the targeted ads. These on-site ads also give consumers the chance to be introduced to new products while they are already shopping. As of 2023, Amazon is the largest retail media network and is projected to reach in spending this year, which is a 19% growth over 2022. While Amazon is the largest retail media network by far, other retailers that follow are Walmart, Target, CVS, etc. Retail Media has proven to be a successful form of advertising and is only growing; By 2028, retail media is anticipated to surpass TV revenues including CTV. This is great news for retailers, but how will they keep the space exciting for the consumer? With ad fatigue always being a present factor, advertisers will continue to come up with new ways to keep consumers interested in new products. The need for first party data will also keep retail media continuing its steady growth path.
By the end of 2027, retail media is projected to account for more than a quarter of total US digital ad spend. This is a major part of the business, and our recommendation to advertisers would be to begin utilizing the strategy as soon as possible. Retail Media is a $45 billion industry and rising, and smaller industries are beginning to jump into the mix as well. Events like Prime Day and other big sales are massive days for retail media, and advertisers are expected to raise their ad spending to break through the ad clutter, although once they do, success is apparent. Retail media is not going anywhere in the coming years, and as privacy concerns rise, the need for first party data will grow with it. This leaves retail media as an extremely reliable source to reach the correct audience at the perfect time, and it should be utilized by all retailers if possible.