Retail media networks (RMNs) have dominated the digital advertising space over the past two years. In fact, eMarketer projects the market will reach $55.3 billion by 2024!
Why the sudden interest? RMNs are proving to be an exceptional strategy for third-party brands because of their VIP access to retailers’ first-party customer data. This allows for more relevant and personalized advertising experiences (a win-win for retailers and brands alike).
Throughout the blog, we will dig deeper into the value and limitations of RMNs.
A retail media network is an advertising infrastructure that allows brands/vendors to purchase space on various online channels (e.g., website, mobile app) to reach their target audience.
RMNs can either be owned by the retailer itself or managed by a third-party service.
In order for a retailer to build their own RMN, they have to have the budget, resources, and data. Because of these restraints, only big-box retailers are investing in this space like Target, Home Depot, Kroger, and Costco.
Smaller, mid-market retailers are relying on third-party services to manage all discussions and purchasing decisions with vendors.
Retail media networks have many benefits for both brands and retailers. Here are a few key highlights from both perspectives:
In a study conducted by Merkle as reported in eMarketer, retail media networks are rising in demand for multiple factors, with retailers’ first-party data access being first on the list.
Though RMNs drive value in many ways for retailers and brands, that is not to say there are no limitations. Below we discuss the negatives with both third-party RMNs and retailer-owned RMNs:
While third-party RMNs benefit a mid-level retailer (e.g., lower cost than owning your own, outsource digital ad negotiations), the biggest drawback is the lack of coordination.
Since the third-party service provider is handling all decisions with the vendor, the retailer is left in the dark on what ad spaces are being purchased and by what vendor. This can impact the performance of the ad.
Third-party RMNs allow brands to push out their product on more than one retailer’s digital platforms with ease. However, the brand often lacks visibility in what the retailers’ strategy and goals are for their digital platforms. This can negatively impact their ROAS, and result in the brand missing out on richer personalized ads.
When a retailer owns their own RMN, they not only have to invest a hefty amount of money, but they also need to increase their resources and time. The reason? The retailer itself is coordinating with all vendors on what ad space they will purchase, rather than third-party handling it.
Similar to retailers, brands have to pour more time and energy into working with a particular retailer on purchasing ad space, rather than a third party who is working with many retailers.
This can be especially time-consuming when a brand wants to be represented on many different retailers’ online channels.
According to Marketing Dive, “42% of advertisers report questioning their investments in retail media networks, viewing it as both a valuable advertising tool and a cost of doing business. A lack of both measurement standardization and transparency present additional challenges.”
As RMNs continue to evolve, there will be a push for more sophisticated ad strategies to ensure retailers and brands get more from their ad spend.
One way RMN campaigns can improve in performance is by coordinating RMN campaigns with promotions. Aligning on both strategies can improve chances of targeting the right customer, at the right time and place.
Additional benefits of coordinating RMN with Promo:
The digital world is evolving fast. Retailers and brands that are slow to adopt the latest solutions and trends will quickly fall behind. However, it is important to understand both the value and limitations of any trend or solution, and make a decision that is best for your business.
About Cognira
About Cognira
Cognira is the leading artificial intelligence solutions provider for retailers. Cognira is passionate about helping retailers unlock valuable, transformative business insights from their data.
We know retail. We love data.
To learn more, check out our website at cognira.com or contact us today to get started.
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