It is anticipated that by the year 2028, the value of the global advertising income generated by e-commerce sites that are owned by retailers would have surpassed the money generated by television. This medium is referred to as retail media.
According to GroupM, the largest media buyer in the world, it is anticipated that advertising income from retail media channels would increase by 9.9 percent to reach $125.7 billion in 2023 and will surpass revenue from television in 2028, at which point it will represent 15.4 percent of overall ad revenue.
According to the 2023 Global Mid-Year Forecast study published by WPP owned GroupM, retail media is the third fastest growing advertising channel this year. The two channels with the most rapid growth are digital out of house (OOH) displays and connected TV (CTV). However, those two platforms only make up a small portion of retail media’s overall reach.
Digital privacy has changed everything.
The findings of this survey, which were released on Monday, are consistent with a previous prediction made by the market research company eMarketer.
Retailers such as Amazon, Walmart, and Target, as well as grocery stores such as Carrefour, Ahold Delhaize, Tesco, and Sainsbury’s, are making strenuous efforts to entice major marketers to their own websites.
Getting consumer companies who sell items through their websites to pay for advertising is a win-win situation for retailers since not only do they gain money from the sale of each product, but they also get money from the advertisement.
The fact that major consumer goods companies are willing to pay a premium for prominent positioning on retailers’ websites is reflected in the fact that profit margins for retailers from retail media can reach as high as 90 percent. This is crucial income for retailers when returns from their primary business line have been impacted by the rising cost of living.
During the pandemic, buyers made much more use of digital channels, which made retail media a more attractive option for brand marketers.
It also provides advertisers with the opportunity to diversify their advertising expenditure outside the “duopoly” of Alphabet’s Google and Facebook-owned Meta Platforms, who are the two largest digital ad vendors. The term “duopoly” is a term used in the advertising business.
However, the movement in the landscape of digital privacy, such as the General Data Protection Regulation (GDPR) of the European Union, has been the game changer. This shift has forced large internet players to restrict the gathering of personal data, which has changed the game.
This has had the consequence of boosting the value of the data that merchants acquire themselves, which is known as first-party data, and which can be used to assist brands in targeting their advertising and measuring the efficacy of the advertising more carefully.
While Walmart’s retail media business, known as Walmart Connect, has developed significantly, with revenues growing nearly 30 percent to $2.7 billion in the company’s fiscal year that concluded on January 31st, Amazon is the pioneer in retail media, having disclosed $11.6 billion in revenue from its ad business in the fourth quarter.
Although US players have been at the forefront of the creation of retail media networks, European retailers are beginning to see the possibility presented by these networks.
Ahold Delhaize, a Dutch grocery store chain, has reached “roughly half” of its aim to boost income from companies other than food shops to 1 billion euros by 2025, with CEO Frans Muller telling Reuters that the effort is centered on selling advertisements on its supermarkets’ websites and monetising insights based on customer data.
Nectar360 is a new program that was developed by Sainsbury’s, the second largest grocery chain in the United Kingdom. This program integrates the company’s customer loyalty program with various marketing services. Already dealing with 700 different brands, it anticipates an increase in earnings from the business of more than 113 million dollars, or 90 million pounds, by the year 2026.
Mark Given, chief marketing officer at Sainsbury’s, spoke to Reuters on the “significant opportunity” that exists, stating that “more and more brands are using Nectar360, to improve their return on ad spend and grow their business.”
According to research conducted by consultants from McKinsey, retail media networks in the grocery sector of the UK have the potential to produce a profit of one billion pounds within about two years.