With the online shopping boom As a result of the Covid-19 pandemic, the digital advertising in retail became an increasingly present reality.
During years, Facebook and Google have been the ‘kings’ of this area until it appeared amazon. For the first time, earlier this year, the e-commerce giant included its advertising business in its annual earnings report and reported A$9.7 billion in Q4 2021a year-over-year increase of 32%.
With an eye on the fruits of these digital investments, Walmart has also followed in the footsteps of amazon and, for the first time, it has also included its income from advertising in its income statement, reporting over AU$2 billion last year.
This is part of a trend that, in recent years, has gained great prominence: the rise of retail media.
Precisely, as predicted in a report the consultancy PwCuntil $1.2 billion will enter the Australian ad market over the next five years.
Specifically, this growth will be driven mainly by e-commerce players led by Amazon, but also by the retailers that will further increase their media offerings.
Digital advertising: profitable medium for retailers
The «Retail Media» it is not a new phenomenon, nor should it be limited to online advertisements on e-commerce sites. From product catalogs, retailers have offered their suppliers access to banner ads on your owned media assets.
In Australia, this approach to fully commercializing media assets within a separate unit was first visible with the launch of the Woolworth’s Cartology business in 2019. Recently, Coles has also declared his intention to increase his presence with a Coles Media business unit.
Similarly, it is also believed that others such as Endeavor Group, are developing a media division. On your side, Chemical Warehouse has also traded media assets through its association with the agency stratosphere.
Finally, the consultancy highlights that retailers that have started to advertise within their platforms may have great growth in the future.
However, regardless of which individual business wins, they believe this sub-segment will develop through:
- Sales sophistication: To compete with traditional media sales companies, retailers will scale or will partner with ad sales teams, along with the creation of governance and technology. This will not be a simple and cheap path, particularly as media sales is not a core and strategic capability of most retailers, but can be built over time.
- Data sophistication: We are at a point in the evolution of advertising that plays into the hands of retailers, namely the demise of cookies as the currency of online targeting. Retailers with large groups of real, identifiable customers will benefit from advertisers looking for options to fill the gap left by cookies.
- Measurement to purchase: Not only can centralized real-world data be used for audience targeting, it also offers the promise of closed-loop reporting to understand whether consumers have bought. Target cohorts from your data sets and measure sales, thereby proving ROI, should win.
- Standardization and reporting: Historically, business spending on media, co-branding, and other collaborative marketing efforts was not tracked in industry reports. Revenue was, and still is, attributed to business expense budgets and was not evaluated against standard media industry measures. Some standardization would be needed as media agency buyers enter the market and with standardization comes less friction for buyers.
- Entry of non-commercial buyers: At a time when many advertisers are reassessing their approaches to a cookie-free world, options that target real individuals and can connect online and offline will appeal to adjacent brands that aren’t necessarily store-stored, but whose audience is captive there.
- Price inflation: As more buyers enter online auction-based environments, such as within Amazon listings, prices per placement are expected to rise as competition heats up.
- Further growth of e-commerce: Although the broader economic concerns of consumers, such as rising inflation, remain faster mobile internet, entrenching online shopping habits, and developing approaches, particularly for FMCG in direct-to-consumer markets, should drive greater acceptance of paid media lists.