Curious about the strategies that drive retail giants like Walmart and online platforms like eBay to expand their revenue streams beyond mere product sales? 

Welcome to the realm of retail media networks (RMNs). From personalised ads to tapping into vast audience pools, RMNs offer retailers a powerful tool to not only generate additional income but also enhance their brand presence. But how exactly do they work, and what challenges do retailers face in building and managing these networks?

Read on to uncover the inner workings of RMNs and explore the future of advertising in the retail landscape.

Key Points

• Retail media networks (RMNs) allow retailers to generate additional revenue and help brands enhance their brand and increase sales through personalised ads and targeted audience engagement.
• Retailers can choose to rent, buy, or build their own RMNs, each option with its pros and cons influencing factors like cost, control, and scalability.
• RMNs function as advertising platforms, allowing brands to run targeted campaigns across digital properties, leveraging retailer data for enhanced online presence and business growth.
• Despite challenges such as managing expectations versus reality and market saturation, the future of RMNs looks promising, with significant growth projected in advertising spending within these networks by 2027.

What Is a Retail Media Network (RMN)?

A retail media network (RMN) is an advertising platform operated by retailers that allows brands to run advertising campaigns across a retailer’s digital properties and utilise their customer data for advertising campaigns on other platforms and channels, such as social media and connected TV (CTV). 

By using the retailer's own data, a RMN allows brands to display personalised ads to their desired audience and measure the performance of their ad campaigns. Brands can also combine their own data with the retailer's data, usually through a data clean room, to enhance ad targeting, measurement, and attribution.

Amazon pioneered this concept by bringing retailers together on its platform and selling advertising space to retailers through its Amazon Advertising retail media network. This model has been widely adopted by other retailers.

Retail media networks provide retailers with new revenue streams through advertising, which helps offset the low and fixed profit margins on products and services.

Several examples of retail media networks include:

• Walmart Connect: Walmart's RMN, which saw a revenue increase of approximately 26% in 2021.
• Walgreens Advertising Group: This RMN offers access to audiences on over-the-top (OTT), CTV, and linear TV platforms.
• Instacart Advertising: Focusing on fast-moving consumer goods (FMCG), Instacart utilises its own data to reach its active user base of around 9.6 million people.
• Retail Media+: Home Depot's network offers programmatic advertising, social media options (such as Pinterest and Facebook), and Google Shopping opportunities, all based on Home Depot's data.
• eBay Ads: eBay's platform allows advertisers to reach approximately 135 million active users.

Retailers with a broad and engaged user base have a valuable opportunity to establish their own retail media networks. By leveraging their existing business model, audience, and the capabilities of advertising technology, they can generate additional revenue at scale through the Internet.

How Do Retail Media Networks (RMNs) Work?

Retail media networks are essentially just advertising platforms, so they include features akin to your standard AdTech platforms, such as:

• Self-serve functionalities: Advertisers can create and manage their own ad campaigns directly on the retailer’s digital properties.
• Media-buying capabilities: Advertisers can purchase various types of inventory across multiple channels, such on-site ads, off-site (e.g. CTV ads) and in-store ads.
• Data integrations: Many retail media networks have integrations with data platforms, such as customer-data platforms (CDPs) to allow advertisers to utilise a retailer’s data to power ad targeting and measurement.
• Reporting and analytics: Retail media networks provide advertisers with reports and dashboards, allowing them to view the performance of ad campaigns.

The process of creating an ad campaign on a retail media network is fairly straightforward. An advertiser will provide the details of the campaign, e.g. targeting criteria, flight dates, budget etc., launch the campaign, and then view reports of the campaign’s performance. 

The retail media network handles all of the technical processes needed to run the ad campaign.

How Retailers Can Harness the Power of RMNs

Retail media networks offer a plethora of advantages for retailers. By utilising RMNs, they can boost their brand value, streamline online sales, compete for advertising budgets against giants like Google and Meta, gain valuable insights for product development, and strengthen ties with suppliers.

Moreover, these networks enable brands to tap into a retailer’s audience across various digital platforms, including:

• Video streaming ads: Advertisements shown during movies and TV shows on streaming platforms.
• Audio ads: Ads played between songs or during podcasts and music streams.
• Email ads: Promotions featured in a retailer’s or company’s newsletters.
• Social media ads: Advertisements appearing on users' social media feeds.

Harnessing these channels can significantly enhance retailers' online presence and drive business growth.

Should Retailers Rent, Buy or Build Their RMNs?

In recent years, there's been a significant surge in retailers creating their own retail media networks. This trend spans across both traditional brick-and-mortar stores like Walmart and online-only platforms like eBay.

When it comes to creating a retail media network, retailers have 3 main options:

1. Rent an existing AdTech platform.
2. Buy an AdTech company.
3. Build a custom retail media network.

To highlight and explain the pros and cons of each option, Piotr Banaszczyk, CEO of Clearcode, shared insights in ExchangeWire's Industry Review 2024.

Access Piotr's insights on retail media by clicking the link provided or visiting ExchangeWire to download the complete report.

The Main Challenges Retailers Face When Building a Retail Media Network (RMN)

Despite the rise in popularity and investment, the retail media industry is facing growing pains. While most of these issues are business related, some are connected with the technological side of building and running a retail media network.

Expectations vs. Reality

Creating a retail media network (RMN) sounds promising, but it's no walk in the park. It takes a lot of time and money to make it work. 

Marketers diving into this world find themselves dealing with the tricky task of handling ad purchases across various networks. While the potential to reach a wide audience is there, it often comes with a hefty price tag and eats up a lot of time. 

Those thinking of building their own RMN soon realise that developing the technology to run it smoothly is no easy feat, even for tech-savvy folks. Without help from experienced tech partners, getting an RMN off the ground can hit some major snags.

Charting New Waters

Despite the potential benefits of closed-loop attribution, the absence of standard measurement practices makes assessing ad campaigns challenging. This lack of uniformity hampers effective evaluation and comparison across platforms. 

However, with the right technology and data strategy, retailers can overcome this hurdle. Plus, industry bodies like the IAB are likely to set measurement standards for retail media soon.

Transitioning from Expansion to Streamlining

As more retailers jump on the RMN bandwagon, the landscape could get crowded. This might lead to smaller players being swallowed up by bigger ones.

To stay ahead, retailers need to innovate, offer something unique, and keep an eye on market changes. Getting the tech side right is crucial for success and fully leveraging first-party data.

Keeping Things Exclusive and Attractive

While creating a walled garden approach can foster exclusivity, it also risks alienating potential advertisers.

Balancing the need for an attractive environment with the principle of openness is an ongoing challenge for RMNs, but it is achievable with the right business strategy and development partner.

The Future of Retail Media Networks

In the coming years, the fast-moving consumer goods (FMCG) and consumer electronics sectors are set to delve deeply into the potential of retail media networks. This exploration is likely to lead to a significant rise in advertising spending from these industries.

According to GroupM, spending on advertising within retail media is projected to surge by approximately 60% by 2027. This growth is expected to outpace the overall expansion of digital advertising channels.