Blog Article
February 7, 2022
The retail media market is one of the fastest growing segments in modern advertising. Major retailers like Amazon and Walmart have discovered new, sustainable growth by monetizing their platforms. There is massive potential for retailers and suppliers alike, especially as shopping continues its shift to online. With the Amazons of the world shaping the rules, what does the landscape hold for other e-commerce retailers and online marketplaces?
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What is Retail Media Advertising?
What is the Retail Media Market Size?
How Effective are Retail Media Advertisements?
Retail media refers to advertising within a retailer’s e-commerce or online marketplace usually by merchants and brands that directly sell products through the retailer. Most commonly, ads are displayed through sponsored search results on marketplaces like Amazon, where paid placements sit within standard product listings. Retail media enables retailers to generate incremental ad revenue, while enabling merchants to promote their products in a cost effective way.
Ads are not just limited to search results. They can cover other places within the retail environment, including the back of receipts in physical stores, in-store audio ads, and display ads on a shopping site. It encompasses every shopping category, from groceries to clothing to cars to travel, all of which can target different audiences.
Amazon’s success has spiked interest in the field. In Q1 2021, the retail giant’s “Other” category, which is primarily advertising, generated $6.9 billion in revenue for the company, up 77% YoY. And, with Amazon breaking out ad revenue for the first time for Q4 2021, the numbers are impressive: $9.7B in Q4 and $31B for the year. This tremendous growth is inspiring many other digital retailers, both large and small.
Key to this growth is the exclusive user data that retail media advertising can leverage. As third-party cookies and device IDs disappear, advertisers are hunting for other sources of valuable information. That’s why retailers have a unique opportunity to monetize the first-party data sealed within their platforms. According to eMarketer, 62% of CPG brands sought collaboration with retail media networks to gain access to their data.That trend is only rising.
eMarketer’s Inside Intelligence estimated that spending on retail media in the US would pass $50 billion by 2023. The same analysis indicates that retail media occupied 15% of the ad market last year, and will reach 19% in 2023 — of which two-thirds will be sponsored search. Furthermore, Technavio predicts that “the digital retail marketing market is set to grow by USD 524.18 billion between 2021 and 2025”.
Amazon is leading the pack. An eMarketer study found that the company holds a 78% lion’s share of the US spend, but that would decline amidst growing competition. Meanwhile, Walmart holds only 5% share, but expects 69% growth in ad revenue to reach $1.71 billion. Instacart has also joined the race, signaling its ambition for $1 billion dollars in ad revenue this year.
Retail media is taking off and set to dominate ad spend in the next few years. As platform owners gear up to play in this space, let’s look at how advertisers are winning.
To measure campaign success, advertisers use a variety of metrics, most notably return on ad spend (ROAS). According to Statista, 59% of brands selling on Amazon reported the highest return on ad investments (compared to 22% for Google, and 17% for paid social). Forbes indicates that nearly 34% of consumers are doing more of their shopping digitally due to the pandemic.
Moreover, Forrester found that 79% of product marketers saw ROI or ROAS improvements attributed to retail media. As we can see, headways in digital advertising are increasingly driven by strategic partnerships and dedicated technology. For instance, Moloco Retail Platform has enabled a 8x growth in ROAS for some sellers.
Retail media has become a boon for both retailers and their sellers — with incremental returns on both sides of the equation. While it seems daunting to embark on the same journey as Amazon, Walmart, and Instacart, modern advertising platforms make it easy for companies to set up ad businesses across multiple platforms. With the right tools, retail, e-commerce, and marketplace companies are carving out their pieces of the ad pie.
Learn more about building a thriving retail media business.
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