Since the COVID-19 pandemic struck, online shopping behaviours have undergone a significant shift, prompting brands to explore new avenues for connecting with customers. With 36% of consumers actively trying new brands and 73% recognizing the growing importance of online shopping in their lives, retail media has emerged as a powerful tool to bridge the gap between brands and their target audience at the moment they are most likely to make a purchase. But how does it work?
By leveraging retailers' first-party data, advertisers can target in-market shoppers across retailer websites, apps, or marketplaces, with opportunities available to target different phases of the consumer journey. Ads can be designed to blend in with surrounding content, offering a more native feel, or they can be displaybased. This flexibility provides brands with cost-effectiveness and audience resonance, with predictions suggesting that 70-90% of brand growth will rely on retail media.
Retail media encompasses various capabilities, both onsite and offsite. For instance, according to data from Tesco/Dunnhumby, 44% of products added to the basket are from positions 1 or 2 in the search results. By utilizing platforms like CitrusAd or Criteo, advertisers can reach users at or near the point of purchase by employing sponsored product ads. This strategy promotes their products to browsing customers and secures top positions within search results. Currently, sponsored product ads can be seen in most searches on online stores like Tesco, Sainsbury's, or Asda.
Furthermore, retailers' own data collection, such as through loyalty schemes, can be beneficial. More retailers are opening up the use of their data to target customers both online and offsite. A notable example is the partnership between Tesco, Sainsbury's, and TikTok, where advertisers leverage the retailers' first-party data to target ads on TikTok. This collaboration enhances advertisers' targeting capabilities and ensures that their ads reach the most relevant users in a more impactful manner. The result is an improved customer experience with ads tailored to their preferences, ultimately driving better results for brands.
However, like any new development, retail media presents challenges for brands to consider. As more brands and retailers adopt retail media strategies, the market is becoming increasingly saturated and harder to navigate. The space is becoming highly competitive on all sides, making it difficult for retailers and brands to stand out and reach the right users.
Similarly, retail media is still in its early stages of maturity, with many networks yet to offer the same level of sophistication as established platforms like Google or Meta. Third-party products are becoming more widely available to supplement platform capabilities. A recent Retail Dive article highlighted concerns around general practices, with 42% of advertisers questioning their investment and expressing hesitation over transparency and standardization across platforms. However, despite these concerns, 56% of advertisers are already working with at least 5 retail media networks. So, where do brands begin?
Brands entering the realm of retail media need to be innovative and, in some cases, open to change as they adopt strategies that align with their business goals. While driving conversions through retailer sites instead of direct-to-consumer (DTC) approaches may not align with short-term goals, it could be a missed opportunity in the long run. More and more consumers are turning to retailer sites before traditional search engines. Therefore, it is important to have accurate consumer insights, the right technology, and sufficient resources to effectively manage a retail media strategy that best suits their goals. This is something we're ideally placed to assist with at the7stars.
