What is retail media?

The latest forecasts show global retail media spend hitting $140 billion in 2024, transforming how consumers and brands interact in both digital and physical retail spaces. This meteoric rise underscores the shift towards a more personalized, data-driven shopping journey.

 'What is Retail Media?' is not just a question – it's the gateway to understanding the future of advertising and commerce media. In this comprehensive guide, we will unravel the layers of retail media, exploring its evolution, mechanisms, and the unprecedented opportunities it presents for brands and retailers alike.

What is retail media?

Retail media traces its roots back several decades, historically referred to as shopper marketing. In its early iterations, the focus was primarily on in-store strategies, aiming to influence purchasing decisions at the crucial moment when consumers stood before the products on the shelves.

While the essence of retail media remains constant, it has evolved significantly. With the increasing prevalence of data-driven strategies in advertising, retail media has seamlessly transitioned from its traditional in-store focus to a more dynamic and online-centric approach. This shift is not only a response to changing consumer behaviors but also a strategic alignment with the digitization of retail spaces.

In today's digital-first landscape, online shopping represents a formidable 20.3% of all retail transactions. Driven by this change in shopping habits, retailers have amassed vast amounts of shopper data. This data is a treasure trove, offering valuable insights into shopper behavior and outcomes. Retail media capitalizes on this digital data wealth, enabling retailers to share these insights with brands. In essence, retailers transform into media owners, providing brands with a high-value and authenticated addressable audience.

The projection of retail media as a $45 billion industry today underscores its ascension to a critical position in the advertising ecosystem. This growth is fueled by the increasing recognition of the symbiotic relationship between retailers and brands. Retailers benefit by monetizing their data-rich environments, while brands gain access to a targeted and receptive audience, creating a mutually beneficial scenario.

What is a retail media network?

A retail media network is a first-party data advertising solution that enables retailers to leverage their audience insights and data intelligence to empower brands and media entities to deliver targeted advertising with unprecedented precision.

Amazon, a trailblazer in the retail space, notably pioneered the concept of a retail media network with the launch of its advertising solution in 2012. Fast forward to today, and the success of Amazon's media business is staggering, generating a substantial $9.5 billion in quarterly revenue as of Q3 2022. This triumph has become the catalyst for a ripple effect across the industry, prompting numerous other retailers to unveil their versions of retail media solutions. Noteworthy players in the US, spanning both brick-and-mortar and digital realms, including Walmart, Walgreens, and Home Depot, have harnessed their first-party data to enhance addressability and precision, not only on their own platforms but also across broader media inventory like social channels.

Beyond the shores of the US, the trend has transcended borders. In the UK, a dynamic landscape is emerging, with media owners collaborating with retailers and retail data owners, such as loyalty cards or behavioral organizations. This collaboration aims to curate tailored media solutions that amplify marketing performance, creating synergies with both new and existing shopper experiences.

What’s the difference between retail media and commerce media?

The digital advertising landscape is constantly evolving, with terms like 'retail media' and 'commerce media' often used interchangeably. However, there are subtle yet significant differences between these two.

Retail Media primarily refers to advertising and promotional activities within the retail environment, both online and offline. It's closely associated with specific retailers and their channels. This includes in-store advertising, promotions on retailer websites, and targeted ads using retailer customer data. Retail media is about leveraging a retailer's ecosystem to engage customers at various points in their shopping journey.

Commerce Media, on the other hand, is a broader advertising approach. By collaborating with other media owners, for example, publishers or connected TV providers, brands are able to target consumers across not only the retailer’s owned properties but also those properties owned by the other media partners. Additionally, all these parties contribute data that can be utilized for smarter targeting and creative.

Key Differences:

• Scope of Influence: Retail media is specific to individual retailer platforms and their physical stores, while commerce media spans across various digital platforms.
• Data Utilization: Retail media leverages first-party data from the retailer, whereas commerce media might use a wider range of data sources.
• Customer Journey Engagement: Retail media is more about engaging customers in the context of a specific retailer's environment, while commerce media seeks to influence purchasing decisions across the entire digital ecosystem.

Both retail and commerce media are crucial in today’s digital shopping landscape, each playing a unique role in influencing consumer behavior and driving sales. While retail media offers the advantage of proximity to the point of purchase, commerce media provides a broader reach, engaging potential customers across various stages of their online journey.

What are the retail media use cases?

Shopper Marketing

Shopper marketing, often considered fundamental in retail media, is an owned media activation that enables brands to target shoppers across a spectrum of owned channels, encompassing web properties and in-store environments.

Using data clean room technology, retailers are able to safely make their shopper and audience data available for brands to either match their own first-party data against or segment audiences based on the retailer's demographic and behavioral attributes. Additionally, the multi-party nature of data collaboration enables additional data providers to be utilized to enrich a brand and retailer's understanding of their target audience for more refined segmentation. 

For example, a consumer electronics brand is able to target its latest TV model at individuals already known to them (e.g., website subscribers, current and lapsed customers) as well as those unknown to them who are browsing new TVs on the retailer’s site. Using enrichment data, the consumer electronics brand can segment its target audience by interests, for example, sports enthusiasts and gamers. The retailer then delivers advertising to this audience as they browse products both online and in-store.

Off-site Activation

Moving into the realm of commerce media, increasingly, media owners are collaborating with retailers to brands to not only target consumers across the retailer's properties but also across the media owner's properties. This approach enables brands to target individuals while they consume content before the point of purchase - a strategy known as off-site activation. 

If we continue our previous example, in addition to the retailer, brand, and data provider already running analysis, a media owner can join the collaboration. With these addressable audiences available, the brand can use the customer knowledge gained through their shopper marketing analysis (in-market customers segmented by sports enthusiasts and games) to target these individuals as they consume content across multiple channels. 

The consumer electronics brand can now target those in-market TV shoppers while they are reading electronic reviews on a tech publisher site, digesting the latest gaming news, or watching various sports broadcasts on connected TV devices.

Measurement

As the shopping experience continues to be divided between online and in-store, there is an increased focus on closed-loop measurement, e.g., measuring the success of media campaigns based on outcomes both in-store and online. Through a retail media ecosystem, retailers have an opportunity to offer brands increased insight into the effectiveness of their campaigns.

‍Using data clean room technology, brands, retailers, and media owners can transparently measure the effectiveness of individual campaigns and channels by bringing various datasets together:

• Brand: Outcome data (e.g., both sales and individuals who put a product in-cart) from their own eCommerce (where available)
• Retailer: Outcome data from their online and offline stores and individuals who were exposed to the ad campaign and a control group not exposed (importantly, the latter must be created pre-campaign) 
• Media Owner: Individuals who were exposed to the ad campaign and a control group not exposed (as with the retailer, these must be created pre-campaign)

In the final step of our example, the consumer electronics brand, retailer, data providers, and various media owners all make their data available in the data clean room environment. Each party can now analyze the intersection between each of these data sets to determine the incremental uplift (e.g., those who purchased or nearly purchased the consumer electronic brand’s new TV and were also exposed to the marketing campaign). 

Importantly, because each party has the ability to run this analysis, there is complete transparency over the effectiveness of the campaign. The consumer electronics brand can understand the effectiveness of each approach (shopper marketing and off-site activation) and where activating across multiple media owners, the channel (display, advanced TV, audio, etc.) that delivered the strongest results - enabling them to optimize media spend for future campaigns.

Equally important,  the retailer and media owners can accurately demonstrate the effectiveness of their audiences in a transparent way.

Second-Party Audiences

A challenge faced by many brands is a lack of first-party data, an issue often common in companies with no direct-to-consumer strategy, such as CPGs. CRM augmentation enables brands with low levels or no CRM data of their own to augment and enrich their customer intelligence by safely tapping into knowledge held by retailers, media owners, and other second and third-party data providers. 

Through data collaboration, brands can safely access a retailer's data, enabling them to better understand consumers who have previously purchased their products. Federated learning technology can then be used to identify characteristics and behaviors across other data sets that are most common among those individuals. 

This actionable insight can then be used to create buyer personas that can inform custom audience creation and targeting at a greater scale.

Revisiting our consumer electronics brand, if they had a lack of first-party data, they are able to use the retailer’s data to create an audience segment of those that have previously purchased their TVs. They model these individuals against a third-party dataset to create a buyer persona and create a custom audience for targeting.

What are the retail media use cases?

Shopper Marketing

Shopper marketing, often considered fundamental in retail media, is an owned media activation that enables brands to target shoppers across a spectrum of owned channels, encompassing web properties and in-store environments.

Using data clean room technology, retailers are able to safely make their shopper and audience data available for brands to either match their own first-party data against or segment audiences based on the retailer's demographic and behavioral attributes. Additionally, the multi-party nature of data collaboration enables additional data providers to be utilized to enrich a brand and retailer's understanding of their target audience for more refined segmentation. 

For example, a consumer electronics brand is able to target its latest TV model at individuals already known to them (e.g., website subscribers, current and lapsed customers) as well as those unknown to them who are browsing new TVs on the retailer’s site. Using enrichment data, the consumer electronics brand can segment its target audience by interests, for example, sports enthusiasts and gamers. The retailer then delivers advertising to this audience as they browse products both online and in-store.

Off-site Activation

Moving into the realm of commerce media, increasingly, media owners are collaborating with retailers to brands to not only target consumers across the retailer's properties but also across the media owner's properties. This approach enables brands to target individuals while they consume content before the point of purchase - a strategy known as off-site activation. 

If we continue our previous example, in addition to the retailer, brand, and data provider already running analysis, a media owner can join the collaboration. With these addressable audiences available, the brand can use the customer knowledge gained through their shopper marketing analysis (in-market customers segmented by sports enthusiasts and games) to target these individuals as they consume content across multiple channels. 

The consumer electronics brand can now target those in-market TV shoppers while they are reading electronic reviews on a tech publisher site, digesting the latest gaming news, or watching various sports broadcasts on connected TV devices.

Measurement

As the shopping experience continues to be divided between online and in-store, there is an increased focus on closed-loop measurement, e.g., measuring the success of media campaigns based on outcomes both in-store and online. Through a retail media ecosystem, retailers have an opportunity to offer brands increased insight into the effectiveness of their campaigns.

‍Using data clean room technology, brands, retailers, and media owners can transparently measure the effectiveness of individual campaigns and channels by bringing various datasets together:

• Brand: Outcome data (e.g., both sales and individuals who put a product in-cart) from their own eCommerce (where available)
• Retailer: Outcome data from their online and offline stores and individuals who were exposed to the ad campaign and a control group not exposed (importantly, the latter must be created pre-campaign) 
• Media Owner: Individuals who were exposed to the ad campaign and a control group not exposed (as with the retailer, these must be created pre-campaign)

In the final step of our example, the consumer electronics brand, retailer, data providers, and various media owners all make their data available in the data clean room environment. Each party can now analyze the intersection between each of these data sets to determine the incremental uplift (e.g., those who purchased or nearly purchased the consumer electronic brand’s new TV and were also exposed to the marketing campaign). 

Importantly, because each party has the ability to run this analysis, there is complete transparency over the effectiveness of the campaign. The consumer electronics brand can understand the effectiveness of each approach (shopper marketing and off-site activation) and where activating across multiple media owners, the channel (display, advanced TV, audio, etc.) that delivered the strongest results - enabling them to optimize media spend for future campaigns.

Equally important,  the retailer and media owners can accurately demonstrate the effectiveness of their audiences in a transparent way.

Second-Party Audiences

A challenge faced by many brands is a lack of first-party data, an issue often common in companies with no direct-to-consumer strategy, such as CPGs. CRM augmentation enables brands with low levels or no CRM data of their own to augment and enrich their customer intelligence by safely tapping into knowledge held by retailers, media owners, and other second and third-party data providers. 

Through data collaboration, brands can safely access a retailer's data, enabling them to better understand consumers who have previously purchased their products. Federated learning technology can then be used to identify characteristics and behaviors across other data sets that are most common among those individuals. 

This actionable insight can then be used to create buyer personas that can inform custom audience creation and targeting at a greater scale.

Revisiting our consumer electronics brand, if they had a lack of first-party data, they are able to use the retailer’s data to create an audience segment of those that have previously purchased their TVs. They model these individuals against a third-party dataset to create a buyer persona and create a custom audience for targeting.

What data is involved in retail media?

Retail media is inherently a first-party data solution. Various parties bring together a diverse selection of data that plays a pivotal role at different stages of a campaign, offering insights that drive strategic decision-making and refine targeting approaches.

Pre-Campaign 

‍The Retailer's Shopper Data: The retailer's shopper data is a treasure trove of insights encompassing buyer behavior and preferences. This data serves as a foundation for understanding the unique characteristics and tendencies of the retailer's audience.

‍The Brand's First-Party Data: Brands leverage their first-party data, cultivated through direct interactions with their target audience, existing customers, and lapsed customers. This information provides a nuanced understanding of customer preferences, enabling brands to tailor their messaging with precision.

‍The Media Owner's Addressable Audiences: Media owners contribute their addressable audiences, providing valuable insight into consumer viewing habits and interests. This intelligence enhances the potential for targeted and resonant ad placements.

Data Providers' Enrichment Data: Enrichment data from external data providers introduces additional layers of demographic and characteristic customer knowledge, further refining the understanding of the target audience. 

By bringing these various pre-campaign data sources together, personalized advertising campaigns can be planned and activated to reach high-value and on-target audiences. 

Post-Campaign

The Retailer's Outcome and Exposure Data: Post-campaign, the retailer contributes outcome data, such as online and in-store transactions, offering insight into the tangible impact of the advertising effort. Where ads have been served across the retailer's media properties, exposure data is also made available to determine the individuals within the target audience engaged with the ad.

The Brand's Outcome Data: Brands with an eCommerce presence benefit from outcome and sales data, shedding light on the direct correlation between the campaign and consumer actions. 

The Media Owner's Exposure Data: Media owners, akin to retailers, provide exposure data indicating who within the target audience viewed the ad. 

By bringing these various post-campaign data sources together, the effectiveness of the advertising campaign can be measured. Increasingly, brands, retailers, and media owners are leaning on incrementality analysis to determine the impact a campaign has on key metrics, such as sales uplift.  

What role does a data clean room play in retail media?

‍Traditionally, the data solutions that underpinned retail media offerings required vast amounts of sensitive data to be shared, centralized and commingled. This raised significant concerns related to commercial trust, consumer privacy, and data security.

The meteoric rise of retail media can directly correlate to the rapid adoption of data clean room technology. Using this data collaboration technology, retail media networks are able to offer performant first- and second-party data advertising solutions while maintaining privacy and security. 

‍Data clean rooms provide a secure and protected environment where companies can connect their first-party data for targeting and measurement while retaining control and ownership of the data. They address the challenges posed by the deprecation of third-party cookies, regulatory restrictions, consumer privacy, and the rise of media silos.

Importantly, data clean rooms address:

• Commercial trust: The centralization and commingling of data require each party to sacrifice control of their data and trust not only each other but also a third-party provider with one of their most valuable assets, data.
• Consumer privacy: While consumers have given consent for their data to be collected by the individual company, they may not have given consent for it to be shared with other companies.
• Data security: Data in transit is at risk of leakage, and vast amounts of data stored in a single location, such as a data warehouse or data lake, create a honeypot for potential hackers.