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Marketing is on the cusp of a new era through the rise of retail media, which now represents the fastest growing form of paid media in the history of the internet. To help understand how publishers and retailers are thinking about the impact of this emerging market, Button surveyed advertising directors and VP’s from 35 of the largest U.S. retailers and online publishers.
To preview our survey findings, Button hosted a roundtable discussion in New York with top industry players, publishers, investors, and journalists. This lively discussion explored what some of the smartest people in marketing had to say about both our survey findings and the state of retail media.
Key influencers who attended included:
The result was a thought-provoking conversation, diving into the now and the not yet for retail media. Here are some of the key takeaways:
Retail media lags behind more traditional forms of advertising
Search advertising is still king according to over a quarter (28%) of our retailers surveyed. These stats were no surprise to the roundtable participants.
“One of the challenges facing retail media networks is that brands, when considering on-site versus off-site, look at off-site and say, ‘Why am I going to pay the retailer another 5% or 10% when I can just go buy that ad space another, less expensive way?’ I don't believe that retail media is giving brands enough lift in commerce yet to pay that extra fees for offsite yet."
Most experts agreed with Blake, asking why would brands pay more for this other source of traffic? When you think about the biggest retail media networks – namely Amazon and Walmart – they're making 90% margin on the on-site products they promote through retail media. The on-site margin is so rich that when you then take into account putting that content off-site, the revenue shares are going to force retailers to make far less. That is causing what's really starting to be recognized as a huge supply problem in this industry where most of these large retailers with big retail media businesses are looking at their own sites and saying, "We're out of inventory. We can't create more pixels for this."
This additional cost can be a deterrent for retailers as they explore offsite retail media which rarely can match the ROI of their on-site solutions.
However, our experts also agreed that the tides of retail marketing budget spend appear to be changing.
A promising future for retail media
Of our total survey respondents, over half (57.2%) indicated that retail media is either important or very important to their future advertising strategy. For retailers, nearly 60% feel that retail media will capture share from other channels (display, TV, print) and 54% feel that retail media will make advertising more competitive.
“It is all about helping brands capture shoppers where and when there is high purchase intent, not only onsite but offsite too. It takes the right inventory, the right partner and creativity!”
In addition to capturing buyers closer to the point of purchase, several panelists spoke to the importance of first-party data as the advertising landscape changes:
“Retail media will help us clean up the preemptive mingling in anticipation of third-party cookies being taken away. That's why I love retail media. It's reaching the customer where they already have the intent to buy what they’re looking for. It’s not a wide approach that shows people, say, a truck ad or what a celebrity looks like today while they browse a news article. It's a tactic that is much more valuable for marketers. But getting publishers on board has proven to be a more difficult proposition.”
Publishers are unsure of retail media but it could save the stalling industry
While 53% of retail marketers are planning to expand their investment in retail media, 43% of publishers said they were unsure.
This data is fascinating as it appears to be in stark contrast with what we see in the market. Big publishers like The New York Times, The Wall Street Journal and New York Magazine have scooped up Wirecutter, Buy Side and The Strategist, respectively, and are seeing stellar retail media results from each.
“Media properties with highly endemic audiences can pair up with relevant retailers and see ads with higher revenue per lead and clicks per thousand (CPM) immediately because the audience is such a good fit. Direct advertising is completely blown away in comparison.”
Retail media benefits differ for retailers and publishers
Retail and publisher marketers see a strong potential for retail media to enhance their strategies, but for slightly different reasons. While both groups acknowledge the power of retail media to boost conversions and revenue, the ability to access new sources of ad spend is particularly important for publishers.
At Button, we’re seeing the retail media model shift how publishers think about generating revenue. Publishers who were previously making money only on their commerce sales or cost per acquisition (CPA) models are now able to see performance from the rapidly growing retail media products.
This data comes at an interesting moment, as the line between affiliate marketing and retail media begins to blur.
With budgets increasingly shifting towards retail media, our prediction is that we’ll see a fusion of retail media and affiliate - as retail media networks hunt for supply and affiliate marketers seek to innovate outside the channel’s historically static and fixed budgets.
Check out our blog for more on how retail media solutions can help both retailers and publishers expand their reach and drive increased engagement and conversions.
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