Retail Media Networks Face Consolidation as Marketers Demand Performance Proof
Research from Keen Decision Systems indicates that while 65.2% of retail marketers anticipate an overall budget increase for retail media networks (RMNs), 26.1% plan to pull spending from certain RMNs to fund other channels, suggesting a consolidation phase during which marketers demand proof of performance.
The SaaS company surveyed 120 brand and agency leaders in February about their concerns around marketing mix and AI investments. Among those expecting budget increases this year, social media is seeing the biggest investment bump, at 69.6%, followed by retail media networks and AI chatbot advertising (47.8%).
Besides pulling dollars from RMNs that aren't working well for them, retail marketers said they'd likely pull spend from linear TV (21.7%) and digital audio (17.4%) to fund other channels.
"As economic constraints impact budgets for retail marketers, they’re becoming more selective in their ad investments – a flight to quality," said Bradley Keefer, CRO at Keen Decision Systems. "While retail media still remains popular, they’re choosing networks that are low-cost, but deliver higher efficiency. With more economic uncertainty expected this year, we expect these trends to continue."
Concerns over loss of human connection have many retail advertisers proceeding with caution on advertising within generative AI interfaces. Retailers additionally point to data quality and channel-specific creative needs as significant sources of media planning uncertainty.
Other findings include:
- Economic impact on marketing budgets: Economic constraints have led to 34.8% of retail marketers transitioning to lower-cost, high-efficiency channels. Another 34.8% said economic uncertainty is the biggest barrier to justifying marketing budget requests to their CFO.
- Preferred metrics: 26.1% of retail advertisers feel that click-through-rates (CTR) are highly overrated or misleading metrics. Marketers instead prefer to rely on customer lifetime value (CLV), at 30.4%, followed by total revenue at 26.1%, to define their media mix's success. This shift puts the focus on long-term business outcomes to prove real business value to CFOs.
- Hesitancy on AI: Four out of 10 (39.1%) retail advertisers are practicing caution when it comes to advertising within generative AI interfaces. Only 21.7% are actively spending on ads within generative AI interfaces such as ChatGPT. In terms of overall AI usage, 60.9% use it for media planning while 56.5% use it for brainstorming. The loss of human connection (47.8%) was the biggest concern regarding AI's rise in advertising.
- Media planning uncertainty: More than one in four (26.1%) of retail marketers said that creative requirements by channel generate the most uncertainty in media planning. Budget cuts and channel allocation, at 21.7% each, were the next most cited concerns. Additionally, data quality (34.8%) and too many stakeholders changing plans mid-flight (26.1%) were the biggest roadblocks to having more reliable forecasts.
