In retail, Retail Media Networks (RMNs) are proving to be highly profitable despite the industry’s typically slim margins.
RMNs are business entities where retailers sell ad space to brands, allowing them to target shoppers effectively based on their browsing and purchase history. It provides retailers with extra revenue while enabling brands to reach their target audience more efficiently in the digital space.
RMNs are becoming essential for retailers and brands to maximize their online presence and advertising efforts. As this sector grows, questions arise:
- What distinguishes successful RMNs from struggling ones?
- Do some retailers have inherent advantages?
- What strategies lead to billion-dollar success?
Let’s explore these questions and uncover the key factors influencing RMNs’ performance.
1. Learning from Retail Media Network shutdowns
As the number of RMNs increase, it’s important to view closure of some of these RMNs as opportunities to learn. We need to understand why they closed to help us address challenges in the industry and develop proactive strategies.
As an example, GAP halted its RMN operations finding that the actual performance of the network did not live up to the promise, indicating that it hadn’t become a self-sustaining investment at scale.
By studying cases such as GAP, we can identify factors contributing to success or failure in the RMN landscape and adjust our approach accordingly to strengthen our market position. While RMNs may seem easy to set up for generating positive cash flow, running one comes with challenges like scaling technology and managing talent. Many RMNs face issues like unproductive technology or teams not equipped for growth.
To set up your RMN for success, ensure that it is supported by robust technology and a well-equipped team, and set realistic goals and benchmarks. You should also regularly monitor performance metrics to ensure the RMN is progressing towards self-sustaining growth.
2. Grocery vs. non-grocery dynamics
Grocery retailers have an advantage in Retail Media because their customers shop for essentials frequently, giving them many opportunities to advertise. This makes it easier for grocery-focused retail media networks to demonstrate to their CPG partners that their advertising works.
To take advantage of grocery retail dynamics, retailers should:
- Use purchase data to create targeted advertising campaigns that show immediate results.
- Highlight seasonal items and limited-time offers to drive sales.
- Offer personalized promotions and coupons based on past purchase behavior.
- Organize in-store events and tastings aligned with advertised products to increase engagement.
On the other hand, non-grocery retailers, such as those selling appliances or electronics, face challenges because their customers make purchases less often. Despite this, non-grocery RMNs can still do well by using slightly different strategies to build and grow. Even though purchases are less frequent, items like TVs cost more, so more money can be put into advertising without suffering a loss. This makes those advertisements more effective.
To succeed in the non-grocery environment, retailers should:
- Offer premium ad spots for high-ticket items.
- Create ads that emphasize the unique features and benefits of expensive items like electronics and appliances.
- Use lifecycle marketing strategies to target customers at different stages of the buying journey.
- Implement cross-selling campaigns that recommend complementary products.
3. Harnessing BYOD (Bring Your Own Data)
BYOD allows RMNs to integrate external datasets, improving their capacity to target audiences and enhance campaign performance. Examples of first-party data include product subscription data (email-shipping address pair) utilized to exclude existing subscribers/shoppers and acquire new ones. This helps enhance targeting capabilities and campaign effectiveness.
Through the integration of external datasets via BYOD, retailers and advertisers can develop advertising campaigns that are more customized and personalized. This results in enhanced audience segmentation, increased ad relevance, and overall improved campaign performance.
4. Strategic in-store investments
While online retail brought retailers early wins, those revenues are now flattening and relying solely on it may not be the best approach for any RMN. Some networks are adapting their strategies to focus on in-store efforts, aiming for comprehensive omnichannel measurement throughout the entire sales funnel.
In-store retail media formats encompass a variety of options, such as endcap screens, self-scan devices, point-of-sale ads (e.g., on self-checkouts), screens on fridge/freezer doors, and mobile app engagement while customers are in-store.
These formats are complemented by in-store measurement, which closes the feedback loop and creates additional opportunities for brands to connect with customers at the moment of conversion.
5. Cracking the cookie-less measurement nut
Undoubtedly, precise measurement is crucial for the success of any RMN. However, browsers like Chrome are moving to restrict the use of third-party cookies making measurement more difficult. The shift into a 3P cookie-less environment emphasizes the importance of unified measurement approaches that incorporate robust frameworks like incrementality, Marketing Mix Modeling (MMM), and attribution models.
With these tools, RMNs can assess campaign effectiveness from both a top-down and bottom-up perspective. This allows them to fine-tune strategies and drive sustainable growth for both their own retail business and advertisers’ ROI.
An RMN’s success depends on understanding industry dynamics, adapting strategies, and using data for optimization. By mastering these aspects, RMNs can overcome challenges, discover new revenue opportunities, and achieve long-term success in the ever-changing retail media landscape.
Fractal’s Retail Media Networks Analytics in action
Ready to elevate your Retail Media Network? Fractal’s Retail Media Networks Analytics accelerator is your key to unlocking unparalleled insights and strategies.
With our analytics-driven solutions, backed by industry experts, we empower networks of all sizes—from grocery to specialty retailers in health, beauty, and personal care. Fractal tailors to your unique business needs, ensuring you maximize ROI and reduce time to market.
Contact us today and discover how our customized approach can transform your Retail Media Network into a powerhouse of profitability and efficiency.
