The State of Retail Media

From the more established retailer media networks such as Kroger Precision Marketing (KPM) to newer ones including Ulta Beauty’s UB Media, there has been a proliferation of retail media and retailer media networks in recent years. With the rise, fundamental issues of investment, strategies and measurement of retail media have come to the forefront. As retail media continues to quickly evolve, the Path to Purchase Institute sought out to take the pulse of the current state of retail media by fielding an online survey (during May 2022) of CPG and durable goods professionals. There were 72 respondents to our survey, all of them either leading or working in roles for a CPG or durable goods manufacturer that include branding, marketing or advertising. Forty percent said they worked in shopper or customer marketing. The results of that research, detailed on the following pages, help identify the challenges and opportunities in retail media that are essential for commerce marketers to understand as they adapt their strategic roadmaps for this new age of media. WORKING WITH RETAIL MEDIA: Which RMNs, Investment & Importance As one would expect considering the rise of retailer media networks and e-commerce adoption in recent years, a majority of survey respondents are working with networks. Seventy-eight percent of respondents said they worked with at least one network — and of that group, 79% are working with at least three or more individual networks. When asked if they worked with any retailer media networks, only 22% said they did not. Of those respondents, 31% said they were actively looking to or had plans already in the works, while one-fourth had no plans to work with any networks and 44% said they weren’t sure. For respondents who said they were working with networks, 52% of them said they worked with 3-5 networks in total. About one-fifth said they worked with 1-2 networks, and one-fifth worked with 6-10. Six percent said they worked with more than 10 networks. For those who said they were working with networks, 57% said they worked with Amazon DSP, and 52% said they worked with Walmart Connect. Other leading networks called out were Kroger Precision Marketing (46%), Target’s Roundel (43%) and Instacart Ads (43%). When asked how their organization’s 2022 investment in retailer networks (in terms of budget or attention given) has changed compared to 2021, 24% said it experienced a significant increase, and 32% said there was a minor increase. Twenty-six percent said it had decreased. We also asked from which budget their retailer media network spend was most often allocated, and shopper marketing (46%) was the most frequent selection, followed by national media (32%). (Those percentages were very similar to the results gleaned from our Trends 2022 survey conducted in October 2021, when we asked the same question.) When asked to exclude Amazon from consideration, shopper marketing was selected for budget allocation by 54% of respondents. To get a sense of how important retail media is to their organizations, we had respondents compare its importance to that of other strategies or tactics. A significant number of respondents said that retail media was more important than each of the strategies or tactics we listed, although the percentage of respondents answering that was less than half in every case. But add in the “about the same” importance, and 70% said retail media was at least as important for each of the strategies or tactics on our list. At one end of the spectrum, 47% of respondents said retail media was more important than in-store media/signage, and another 46% said it was equally important. At the other end, 29% said that retail media was less important than in-store display activity for retailer-driven programs. And only 23% said retail media was more important than traditional media, but 59% said it was equally as important. Retail Media Strategies A portion of the survey focused on the on-platform vs. off-platform assets of retailer media networks. When asked which was most valuable to their company’s marketing goals, 42% of respondents said on platform, while 29% chose off platform and 29% chose integrated assets. When asked which delivered the best ROI, 59% chose on platform, while 21% said off platform and 20% said integrated assets. As far as which particular assets deliver the most value, 83% of the on-platform respondents answered “paid search/boosted products/sponsored ads.” Among the off-platform respondents, 50% said “off-platform display advertising” delivered the most value. And 69% of the integrated assets respondents said “in-store marketing” delivered the most value. When asked which particular assets deliver the best ROI, 73% of the on-platform respondents answered “paid search/boosted products/sponsored ads.” Among the off-platform respondents, 58% said “off-platform display advertising” delivered the best ROI. And 55% of the integrated assets respondents said “push notifications” delivered the best ROI. Retail Media Ecosystem To get an understanding of the players beyond the retailers themselves, we asked respondents if their organizations worked with any media inventory aggregators. (Editor’s note: we define a media inventory aggregator as a single point of contact that buys inventory from multiple retailer platforms for the purposes of reselling.) Seventy-seven percent said they did, indicating that they work with Criteo (46%), Quotient (39%), CitrusAd (38%) and PromoteIQ (29%). Beyond aggregators, 96% of respondents said they worked with third-party media sellers, and most indicated they worked with at least six of these companies. (Editor’s note: We define third-party media sellers as media providers that are not part of the retailer’s media network and do not have access to the retailer’s first-party data.) The top players cited most by respondents included Facebook (54%), Ibotta (46%), Instagram (45%), Google (45%), TikTok (38%), YouTube (34%), Neptune Retail Solutions (34%) and Pinterest (32%). Furthermore, half of respondents said they worked with a SaaS (software as a service) platform provider. Pacvue (25%), Perpetua (16%), Marin Software (13%) and Skai (13%) were the providers named most often. Among the different players, we wanted to understand the breakdown of retail media budgets among retailer networks, aggregators and third-party sellers. On average, nearly half of respondents’ retail media budgets go to retailer networks, while the other half is split between third-party sellers and aggregators. When respondents were asked if they felt their spend was over-indexing on retailer networks as opposed to aggregators relative to sales potential, there was no clear answer on the best strategic approach. “Yes” and “no” each garnered 43% of the responses, with “not sure” coming in at 14%. Respondents who work in shopper or customer marketing roles were more likely to answer “yes” than others, as well as those who worked with six-plus retailer networks. Capabilities and Metrics To understand what retailer networks needed to offer to deliver an effective campaign, we provided respondents with a list of capabilities and asked them to choose three. Targeting options (77%), data sharing (57%), closed-loop measurement (43%) and goal-based optimization tools (39%) were the top picks. (The percentages were even higher among respondents who worked in shopper or customer marketing.) To understand outcomes for retail media tactics, we asked respondents to choose two from our list. ROI (66%) and sales growth (59%) were identified as most critical. We then asked how satisfied respondents were with the measurement capabilities as well as the data-sharing capabilities of retailer networks. For each, 66% said they were satisfied with some or most of what the net-works offer, and 34% said they were not satisfied. Getting into particular metrics, we asked which metrics were most valuable when assessing campaign performance on retailer networks. (Respondents could select up to three metrics from our list.) The metrics that rose to the top were incremental sales (55%), return on ad spend (46%) and return on investment (43%). Challenges with Retail Media With an open-ended question, we asked our survey takers what the most challenging aspect was when working with a retailer media network. Answers related to data and reporting were the most common, named by 25% of respondents. Additionally, cost/ROI, lack of consistency, processes/communication and minimum spend requirements were some of the other challenges faced most often. Related to data and reporting, respondents identified these challenges: • “Getting access to the right data and segmentation for targeting.” • “Lack of metrics and a consistent way to measure retail media across retailers.” • “It is not possible to determine whether the [shopper] group is valuable.” Other specific challenges with retailer media networks identified were: • “Calculating a true ROI versus other channels.” • “Lead time and having a key contact to work with.” • “The ever-growing minimum investments that these retailer partners are asking for.” • “Standing out from the competitors who use the same media.” • “Their ‘templated’ creative has many guardrails restricting messaging and how creative assets are leveraged.” • “It’s a new medium and constantly evolving yet quickly ramping up, so you have to stay on your toes. Also, each platform has different capabilities and requirements, and it can be difficult to keep track of it.” Now … And Then As a gut-check to finish our survey, we asked respondents: Is retail media the new slotting fee? Sixty-four percent said yes. (In our Trends 2022 survey released earlier this year, 33% said retailer media platforms were a simple money grab for the retailer.) Additionally, we asked if respondents have found the extra cost of retailer media networks worth it to their organizations. Nearly two-thirds answered “yes” — 39% said it was worth it for incremental merchandising space and other return-on-relationship benefits, and 27% said it was worth it for access to first-party shopper data/targeted audiences. Finally, it wouldn’t be a 2022 research report without inquiring about the metaverse — and how retail media might be intertwined with it in the future. Eleven percent of respondents believe that metaverse buys will be part of retail media by the end of this year, and another 62% said they will be in the next 2-4 years.