Retail Media Networks: Good Value, or ‘Good Grief!’?

With huge customer bases and unrivalled distribution, the likes of Amazon, and increasingly Walmart and Target, are growing their already colossal media networks at an incredible rate.

In 2024, an eMarketer report stated that “retail media is growing faster than any other form of ad spend”¹. To put some numbers on that, an earlier 2023, report² projected that the US retail media market would reach $55.31 billion in 2024, more than double the 2020 figure of $20.81 billion, with over 20% year-on-year growth forecast going forward.

And to put that further into context, an earlier 2022 report³ said Linear TV ad spend was forecast at only c.10% more than retail media in the US in 2024.

There can be no doubt that Retail Media Networks(RMNs) are big business. A serious media powerhouse.

It clearly demonstrates the Retailers’ clout as a route to market for Consumer Packaged Goods (CPG) brands. They know that they need to invest in these platforms. And they’re investing heavily across Search, Display and Video, often allocating 10-20% of their digital ad budgets to retail media.

But do they actually know the value of this investment? Or are they simply not willing to risk being absent? Do they need to be ‘in it to win it’ to secure that final ‘add to basket’?

Compounding this, brands may feel that spending on RMNs is necessary to put them in the best light when it comes to maintaining prime position for more traditional trade activations and shelf-space in store.

Gamble or gameplay?

The trouble is, the reporting metrics retailers use for RMNs aren’t (typically) very sophisticated. Meaning measurement is somewhat lacking, especially compared with other media.

Yet trade budget that was traditionally reserved for in-store promotions is increasingly being diverted to Retail Media Networks (RMNs). Often without knowing the short-term sales lift available versus the more immediate short-term drivers of traditional Trade. But just as volume sold on promotion for traditional Trade isn’t all truly incremental, would the same not be true for RMNs?

These media tactics lie extremely far down the funnel, often only a click or two before purchase. Which means, as with other digital media and Attribution measurement, ROI can become over-inflated. And when measured in isolation, there is no sense of the role of the RMN spend in the path to purchase.

Given the proximity of RMN spend to purchase, even for brands using Marketing Mix Modeling (which aims to capture amore holistic picture), ‘traditional MMM’ may overstate the incremental impact of retail media investments.

With up to 20% of digital media budget going to retail media networks, it seems like quite the gamble.

Knowledge is power

To be clear, while they may have more leverage due to their brand, product desirability and budgets, even the biggest CPG brands are wrestling with this. They’re used to getting what they want, but no longer have the upper hand.

CPG brands need the big chains – and even the smaller independents – for their distribution.

What’s more, retailers have invested in loyalty apps and their online presence, which gives them considerable insight into consumer behavior, and with it, considerable understanding not just of how to reach and activate consumers, but the standing of those CPG brands in consumers’ minds. They know exactly how price sensitive they are. How promotion driven they are. How consumers search and make purchases on their platforms. What they buy, when and – to some extent – why.

This knowledge is power.

The shift in power

And this power is growing. According to a June 2024 eMarketer report⁴, nearly a quarter of US ad spending will go to Retail Media by the end of 2028.

A measurement blind spot to the tune of 10-20% of budget is already undesirable. With this level of growth in the channel, and distribution or shelf placements in the physical retailer potentially at risk, addressing measurement challenges becomes ever more urgent.

So, what can brands do to counter this lack of visibility and, perhaps more importantly, shift the balance of power. To give themselves the ammunition to demonstrate the role of RMNs to the retailers. To negotiate better terms.

CPG brands need to be very clear about what specific metrics they’re trying to improve through retail media. And ensure they’re tracking them effectively.

Which is certainly not measuring last click in isolation or relying solely on the media owner’s metrics. Because that would take no account of the effect of a brand’s broader marketing activity. Measurement can – and must – start as far up the funnel as possible. To consider the entire purchase journey and the role of brand as well as performance marketing in the path to purchase.

Knowing what drove that click throughout the funnel is the route to understanding incremental ROI. To understanding the balance between short-term sales lift and long-term brand-building.

MMM is the way to expose this. But it needs a new approach.

An evolved approach to Marketing Mix Modeling (MMM)

An approach that some CPG brands are already employing. Which increases the urgency further, as competitors at the forefront of measurement are already making gains through early action.

So what are they doing?

This evolution of MMM uses Secondary Sub-Models that expose complex interdependencies to explain the underlying causal structure of the entire funnel. Which is imperative to understanding the incrementality of retail media, as it explains the ‘weight’ of influence of each media driver on the sale in the context of the overall path to purchase. For example, using search clicks as the dependent variable, with other media tactics - such as TV - as independent variables, means you can understand the role of each media driver, as well as that final search click that took place on the Retail Media Network.

This equally applies to other elements of retail media too, such as sponsored product listings, display ads, off-site targeting and more. Knowing this level of granularity of performance in the context of all other media helps brands to be sure they’re delivering value from their retail media spend.

At a very basic level, if 80% of purchases would have happened anyway, the RMN spend may be disproportionate to the outcome. Of course this is a simplified view, but this understanding is what CPG brands need to seek parity.

That means:

• Asking for granular data on ad exposure and user behavior as part of your RMN contract
• Evolving your approach to MMM to include the RMN data, expose inflated ROAS figures and understand true ROI
• Using this new information at the negotiating table.

Ultimately, Retailers and CPG brands need each other. Which is why it’s about resolving the measurement blind spot and finding the balance that both acknowledges the shift in power and still means everyone feels like they’re winning.

So are RMNs a source of good grief? Or do they deliver good value? Only you can decide that for yourself. But what you invest doesn’t need to be a fait accompli.

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¹ https://www.emarketer.com/content/retail-media-accounts-one-fifth-of-worldwide-digital-ad-spend

² https://www.emarketer.com/content/retail-media-ad-spend-will-more-than-double-by-2027

³ https://www.emarketer.com/content/rapidly-surging-market-us-digital-retail-media

⁴ https://www.emarketer.com/content/retail-media-ad-spending-forecast-h1-2024#page-report