From gigantic profit margins to its potentially transformative impact on customer experiences, retail media has a great deal to offer for today’s businesses. But as clear and abundant as the opportunities may be, that’s not to say that creating a framework for retail media success is easy.
From finance to operations, numerous challenges exist, many of which are systemic across the industry rather than being specific to any one retailer. In this post, I’m going to look at five of the most common challenges that retailers face when building out their own retail media operations.
1. The great technology disconnect
While we tend to talk about retail media as though it’s a singular concept, the reality is very different. Retail media has been on a path of gradual evolution, and with each channel that has been added into the mix, software vendors have created new platforms to help retailers manage and monetise them.
As a growing number of grocery organisations have begun to formalise their retail media operations, that fragmented technology landscape has become increasingly problematic. For a start, those disparate systems don’t always play well together, meaning that retailers and their brand partners face a complex ecosystem of solutions when trying to plan and execute a campaign.
Perhaps more importantly, the disconnect between products means that data often gets “trapped” between them. Rarely is there a way to coherently share or analyse insights across platforms, making it impossible for retailers and CPGs to understand the real impact of a campaign beyond a channel-by-channel approach.
While that has obvious implications in terms of results and accountability, it’s a significant challenge for anyone who wants to understand the true effect of retail media on the customer experience, too.
2. Making “new” money
Another issue that has links to legacy practices is that of revenue cannibalisation. Historically, a lot of the media opportunities offered to CPGs have been included in trade deals negotiated by commercial teams. While that isn’t necessarily a problem in and of itself, it does mean that retailers risk shifting existing revenues between functions rather than generating something genuinely new.
For retail media to be truly effective, it needs to work as an incremental revenue stream rather than just by cannibalising existing incomes. This is particularly true at a point in time at which many CPGs seem to be deprioritising trade spend in favour of investments elsewhere.
The real problem here, which relates to the first point above, is that the fragmented ecosystem means that many retailers aren’t always sure exactly how much money they’re making from those media/trade deals. That, in turn, makes it impossible for them to know whether they’re fully realising the incremental revenue opportunity.
3. Nurturing a new dynamic with suppliers
Interwoven with the above is the issue of supplier relationships, many of which have traditionally been based on commercial arrangements alone. To ensure that retail media is delivering everything that it can, grocery companies need to evolve their relationship with suppliers.
In practice, that means taking the time to truly understand what advertisers want and building a retail media proposition that aligns with those needs. As much as this may be an inversion of the traditional retailer/supplier dynamic, it’s also one that retailers will need to get used to as their “product” becomes ever more compelling.
Retailers and brands aren’t the only parties at play here, though. One of the biggest challenges for retailers is in creating a proposition that appeals not just to CPGs, but the agencies they employ as well.
That has implications for everything from campaign booking (many agencies prefer to manage activities through self-service platforms, for instance) through to reporting.
4. Living up to advertiser expectations
Whether they’re working with agencies or brands, retailers are also under increasing pressure to provide advanced audience targeting capabilities – and hard proof about their effectiveness as well.
One of the unique things about retail media is that it gives advertisers the ability to track the results of their activities all the way through to the actual purchase. With the right measurement techniques in place, a brand can effectively track the cumulative impact of their marketing efforts down to an incredibly granular level – a critical advantage in an age where marketing budgets seem to be under growing scrutiny.
At the same time – and as a result of that disconnect between data and technology referenced above – many retailers still struggle to provide the concrete evidence about campaign performance that brands need in order to spend with confidence.
5. Creating a structure for success
One of the recurring debates around retail media surrounds the issue of structure – specifically, how retailers can create an operational framework that gives them the best possible chance of success.
This is an area that many retailers continue to battle with. Retail media often takes shape as a new division within an existing department, which leads to a lot of discussion about exactly where it should sit. Often, responsibility will lie with marketing or commercial teams, but occasionally can be housed within the IT department as well.
The “right” answer, of course, depends entirely on the retailer in question, and how their structure, strategy, and objectives stack up. But with marketing teams typically being closely aligned to the voice of the customer, there’s usually a very strong argument for retail media to sit there. Ensuring that retail media is – above all else – a customer first proposition is crucial to its long-term success.
Much as I’d like to close this post off with a series of sure-fire solutions to these challenges, the truthful answer is that there’s no single right way to tackle them. As important as it is for retailers to find a customer-centric omnichannel technology platform, for example, they also need to think about issues like change management and training. And, crucially, the right approach for one retailer may be entirely wrong for another.
That said, I think that a few guiding principles can be helpful when thinking about the best way to address these five major challenges:
i. Stay true to the customer
If your retail media offering doesn’t add value for your customers, then it won’t be sustainable long term. Being able to track and understand the impact of media on the customer experience across every channel at once is key.
ii. Ensure that your proposition is truly omnichannel
Ecommerce might be where a lot of the buzz about retail media is right now, but between 80–90% of transactions still occur in-store in most markets. A complete solution is essential.
iii. Understand what advertisers are looking for
Take the time to develop your knowledge of what CPG brands and their agencies need from your proposition. Understand what their KPIs are, how they measure them, and what they need from you to help them report on those objectives.
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