We’ve seen this movie before.
A new tech-fueled, transformative business opportunity emerges; irrational exuberance takes over; and the bubble ultimately bursts. This is what happened 25 years ago with the dot.com era and then, much less spectacularly, with the programmatic, personalized digital advertising era and its poster boy for bad behavior, retargeting.
When it comes to the red-hot retail media sector, history doesn’t have to repeat itself. If we all become vigilant and clear-eyed about navigating the current challenges, we can create a narrative of robust, scalable, sustainable growth.
Retail media, despite all of its potential, is currently an immature marketplace that is in too many instances taking advantage of naïve marketers.
The space is hampered by an overarching lack of transparency that manifests in retailers’ myopic surfacing of ROAS reports that lack context and totality. This sanctioned black-box approach allows platforms to take credit for sales that would have happened anyway. And it’s the brands that are paying more to drive those sales.
Here’s how to add accountability and transparency to a space where those attributes are sorely lacking.
Consider your footprint: Retailer direct or agnostic marketplace
Are you better off going direct with a specific retailer? Or would your brand be better off plugging into an agnostic marketplace publisher like Instacart or DoorDash?
If you need to drive velocity and defend shelf space at a specific retailer, it would make sense to go direct, where arguably you can directly impact (and measure) that objective. If you have extensive distribution, then going to an agnostic marketplace might be more advantageous. You can avoid a retail behemoth like Walmart or Amazon squeezing you for every dollar.
On the other hand, the agnostic marketplaces are often not as generous with data sharing, unless you are a big spender. If you are considering them, it’s wise to assess if you are scaled and powerful enough to demand data back.
How do you evaluate true impact?
It’s important to acknowledge that retail media has been overreliant on two misleading metrics.
Measuring return on ad spend (ROAS) without measuring incrementality is taking credit for orders that would have happened anyway. Second, the “new to brand” metric is not all that it’s cracked up to be. It may sound like you’re growing your customer base, but there is so much opacity in how the platforms and retailers report that it’s difficult to ascertain whether your brand is generating new users.
And because there’s no consistency across retail media networks, there is no universal definition of NTB. Some measure this based on six months, others 12 months. And some RMNs attribute credit based on just an ad impression. This lack of consistency makes understanding the impact hard.
Direct retailers are also limited insofar as they can provide your brand with ad-attributed metrics but often won’t provide total sales and category growth numbers. Fragmentation is the norm, and this important data would need to be purchased from a different team.
Agnostic marketplaces like Instacart can share that sales and growth data (including category share). But even with these marketplaces, you aren’t getting a universal view: Is the customer really new to your brand? Or just new to your brand at that retailer?
To get a real understanding, it’s important to set up an internal tool to track household penetration; otherwise, you’ll get distracted by those beautiful but ultimately unfulfilling ROAS metrics.
Am I helping my brand or the retailer?
Retailer platforms like Walmart Connect are huge cash cows. Let’s say your brand has made a sizable ad investment on Walmart Connect. Having already spent dollars to acquire new customers, you also have to spend money to retain those customers because of how the RMNs have structured their ad ecosystems.
The fastest-growing segment of retail media is the one that deserves the most critical eye: off-site opportunities. RMNs are racing to monetize their audience data and take advantage of the limitless inventory offered by channels like programmatic display, CTV and paid social. Brands can target actual shoppers and receive closed-loop measurement.
But often retailers don’t have shopper-specific audience sizes large enough to target directly. The majority of your investment goes to running lookalike audiences based on their seed data. At that point, are you even targeting category shoppers at that specific retailer? Or are you running a prospecting campaign on behalf of the retailer?
What’s more, you’re likely paying the retailer an additional 10%-30% in management fees to create their next customer on your brand dime.
It’s critical to secure co-funding dollars for these prospecting efforts. Negotiate hard to mitigate excess dollars that you really shouldn’t have to pay for.
Standing firm and clear-eyed
Don’t be distracted by easy metrics. Perform due diligence with rigor and accountability when it comes to measurement and investment.
We all believe in the promise of what retail media can be – enabling CPG brands to operate like DTC brands, with access to real-time shopper audiences, and closed-loop online and in-store sales attribution from their media.
But we are in a moment where brands are rushing full-steam ahead into the channel. To ensure it delivers on its promise, we must soberly address its challenges on the road to maturity.
“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
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