The Retail Media Revolution: How brands are unlocking new revenue streams

The retail industry has had a rough ride in the past few years. But startup growth specialist Daniel Groves agues that the advent of retail media networks will help them weather the storm

COVID-19 presented several obstacles, including prolonged lockdowns, supply chain disruptions, and shifts in consumer behaviour.

Additionally, the cost of living crisis has further strained consumer spending power, impacting retailers' bottom lines.

This essentially forced many retailers to rethink their strategies, as they searched for new ways to generate revenue amidst the tough market conditions.

Today, retail media networks (RMNs) are growing by more than 10% year-over-year in the UK and are showing no signs of slowing down.

UK shoppers appreciate the increased engagement provided by RMNs, whether it's in-store or online, and brands are beginning to expect this level of interaction from their collaborators.

In this article, we’re going to look at how retail media advertising is changing and how brands are utilising it to unlock new streams of revenue.

Defining retail media advertising

Put simply, retail media is the practice of using advertising within retail spaces, both physical and digital, to generate revenue.

Retailers offer these advertising spaces to brands so they can reach customers right where they're already shopping, creating targeted advertising experiences.

Previously in-store retail media consisted of end-cap displays (promotional displays positioned at the end of store aisles or shelves), sampling tables where you could try food, cosmetics or skincare items, and shelf offers.

Retail media has come a long way since then. Today, retail media refers to assets, such as interactive digital displays and targeted online advertising on retailers' websites or apps.

Plus, retail media already represents 10.7% of global ad spending, and GroupM forecasts that this figure will grow 60% by 2027.

So, what approach can retailers take to enhance their retail digital media strategies to stay ahead of the curve?

Retail media networks

While RMNs aren’t exactly a new concept, they now play a big role in connecting brands with shoppers within the rapidly evolving digital retail landscape.

These networks operate across various channels, including in-store displays, online platforms, mobile apps, and loyalty programs to deliver personalised advertisements based on shopper data and insights.

RMNs generate revenue through several formats, including:

• Advertising fees: Brands pay RMNs for advert placements in retail environments, with fees varying based on factors like placement, duration, and targeting. In 2022, Walmart achieved global retail media advertising revenue of £2.7 billion and continues to grow.
• Performance-based pricing: RMNs may adopt models where brands pay based on achieved metrics like clicks or conversions, encouraging investment in effective placements.
• Partnerships and collaborations: RMNs partner with brands and retailers, sometimes sharing revenue from sales generated through their advertising efforts.

By leveraging information such as purchase history, browsing behaviour, and demographic profiles, RMNs allow brands to create super relevant and engaging advertising experiences for consumers.

Additionally, and importantly, RMNs bridge the gap between physical and digital retail channels, ensuring a seamless and integrated approach to advertising across multiple touchpoints.

Omnichannel approaches

When online and brick-and-mortar shopping are brought up, conversations typically lean towards "this one is better than that one".

However, rather than viewing them as separate entities, retailers are embracing an omnichannel approach to unify the customer journey across all touchpoints.

Take a look at what shoe retailer Deichmann is doing with transforming its online and omnichannel business with the enterprise shop system.

By using both physical and online channels, retailers can offer customers greater flexibility and convenience in how they shop. For example, customers can browse products online and choose to either make a purchase online, pick it up in-store, or have it delivered to their doorstep.

To make things even easier, new tech such as interactive displays, mobile apps, and contactless card readers help to streamline the customer’s physical and digital experiences.

Plus, a study by Klarna found that half of all shoppers consider seamless payments, whether in-store or online, to be a top priority for retailers.

Due to customers moving between offline and online stores, businesses need to ensure both channels provide a cohesive customer experience.

First-party data

First-party data collection is becoming increasingly important for retailers and brands looking to enhance and revamp their advertising strategies.

By directly collecting data from customers (things like purchase history, browsing behaviour, and demographic information etc), retailers can create more personalised and targeted advertising experiences.

This enables them to tailor their messaging to specific audience segments, increasing the effectiveness of their campaigns. From here, retailers will also have the opportunity to create their RMNs by tapping into first-party data, simplifying collaboration with brands and enhancing revenue opportunities.

Brands, on the other hand, can utilise their owned properties, such as websites and ad networks, to better engage with their customers and, in theory, increase conversions.

Keeping pace with evolution

Retail media has evolved significantly since the days of static in-store displays and paper coupons. Today, retailers are embracing targeted digital advertising on platforms like mobile apps and social media.

This shift represents a fundamental change in how brands and retailers engage with customers, using advanced analytics and personalised marketing to improve the shopping experience.

With that said, consumers still enjoy the act of physically exploring brick-and-mortar shops and that isn’t going to change. The key is being able to merge retail media advertising and digital strategies with physical stores to improve the consumer experience.

As long as brands recognise this, they can start building a strong foundation to thrive in today's digital retail landscape.

Daniel Groves is a Startup Growth Specialist.