New digital storefronts are shaking up online retail and advertising

Last month, Walmart and Netflix launched a hub on offering an assortment of themed Netflix hit shows available exclusively through the retail giant. This is Netflix’s first “digital showcase” with a national retailer and an example of how e-commerce is disrupting the global $ 650 billion advertising industry.

Marketers in the B2B and B2B markets have recently been rocked by regulations aimed at protecting customer privacy and ending intrusive tactics such as harassing customers online through the use of third-party cookies. In true Silicon Valley style, these restrictions are now triggering a wave of marketing innovations that the Boston Consulting Group recently called “a radical change once in a generation, much like the shift from traditional media to digital media.”

Retail media networks are springing up like daisies, turning e-commerce sites into boutique advertising spots. BCG estimates they could make up to $ 100 billion a year in just a few years. That’s a boon for an industry with notoriously tight margins and a potential bonus for customers who might see lower prices as a result.

All about data

Here’s how it works: Most retailers, airlines, and other businesses that do a lot of online business have memberships and loyalty programs that they’ve used to collect a lot of behavioral data and customer preferences over time. This is completely legal as customers opt for these programs.

This data is valuable for businesses that sell through retail channels, such as businesses that sell consumer packaged products, or that offer complementary products like car rentals and hotel rooms. By advertising through direct-to-customer partners such as online retailers, they can take advantage of the signup data these businesses collect without breaking any regulations.

The deal is essentially a digital version of the in-store concept that has recently become so popular with retailers. In the same way that Samsung buys space at Best Buy outlets to sell gadgets, online merchants can do the same with the brands they sell in their stores. The relation can span several numerical and even physical properties. Brands get detailed data on how their ads translate to sales, and retailers get a much needed additional revenue stream.

The model is “based on buying behaviors rather than media visualization,” said Marty Kahnie, director of US business sales at InfoSum, which is building a security data sharing platform. “Each brand tries to find all the opportunities to monetize consumers. “

Flying effect

Retailers have been producing their own brackets for years, making companies like Home Depot and Lowe’s top destinations for DIY enthusiasts looking for tips on how to fix leaky faucets or hang drywall. But in the past, “the idea was to push the consumer into the store,” Kahnie said. “It changed after the pandemic to become more of a communication wheel,” in which advertising partnerships provide information that marketers can use to refine their messaging and drive more sales to the retailer. was a pioneer in this area and still controls 89% of the retail media advertising market. However, BCG estimates that an additional $ 75 billion in advertising activity is at stake and that others are poised to cash in quickly. BCG estimated that a single airline could generate up to $ 100 million in additional media revenue with an average profit margin of 75%. by such programs. This bonus revenue stream could even translate into lower rates for customers.

Many specialist agencies have sprung up around this booming industry, including Criteo, PromoteIQ (which was recently acquired by Microsoft) and Quotient Technology. Some major retail brands, including CVS, Walmart, Amazon, and Walgreens, have also launched their own wholly owned agencies, many offering self-service features that allow marketers to target their retail ads with the same precision they expect from search engine marketing.

Ad buyers believe

Ad buyers seem to like what they see. A survey by digital marketing firm Merkle found that 85% of consumer packaged goods companies shift more marketing dollars to retail media networks, and 95% report their spending on media advertising retail sales are additional to existing buying and trading programs. The same study found that half of retailers said finding the right partner is a problem, and an equal number said internal organizational barriers and data silos prevent them from taking advantage of opportunities.

This is typical of a new market, but the confusion shouldn’t last long. “The top three companies in each submarket will dominate, while others will find themselves largely excluded,” BCG wrote. “Time is running out for those who want to play. “

If your business is spending money on search engine marketing or traditional advertising, the retail media opportunities are worth a look. In some markets, they are arguably the best source of data on what informs a buying decision. And in marketing, that’s what it is.

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Copyright © 2021 IDG Communications, Inc.

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Anne G. Cash

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