What is retail media?

A steady decay in third-party data quality — combined with solutions that make it easier to collaborate on data — have created a fundamental shift in the advertising space.

Now more than ever, brands need to rely on first-party data to find out exactly who their ideal audiences are for optimal targeting. But brands who sell their products through retailers don't own this data. This means retailers can enter collaborations with their supplying brands and help them leverage the vast amounts of first-party data they collect. At the same time, they can help brands to activate the insights about their audiences directly within the retailer's own media channels or physical stores.

This article will explore the concept of retail media, its benefits, and how you can maximize the potential of retail media networks in your advertising strategy.

Definition

Brands’ ability to reach consumers is seeing significant growth in the retail landscape. This goes beyond in-store advertising: opportunities extend to retailers’ online shops, digital weekly sales leaflets, mobile apps, and more.

Whether digital or in a brick-and mortar store, all these advertising possibilities fall under the umbrella category of retail media — a quickly expanding sector that opens up new ways for brands and retailers to connect with customers.

This is especially exciting for suppliers of consumer packaged goods (CPGs) and fast-moving consumer goods (FMCGs), who don’t “own” the conversion when a customer buys a product with one of their various retail partners. Thus, they are often missing first-party data of their own, and are increasingly reliant on their retail media partners to provide that rich first-party data.

While the concept might seem simple enough in theory, it requires a lot of moving parts in practice. Retailers, brands, media companies, agencies, and technology providers all play a role in creating, distributing, and measuring these types of advertising campaigns.

To streamline these processes and roles, many retailers operate retail media networks.

Retail media networks

Retail media networks are platforms that enable digital advertising, allowing the retailer to become a media channel in its own right. These platforms make it easy for advertisers to have an overview of all a retailer’s owned media properties and choose where they would like to run ads. They are owned and operated by the retailers themselves. This is commonly known as "online" — advertising that happens on the retailer’s site in the form of ad formats like sponsored products, sponsored brands, and display.

Brands who access retail media networks are also able to collaborate with retailers on the latter’s first-party data. This way, they can get a better idea of their ideal consumers' purchase behavior and target ads accordingly.

Benefits of retail media for retailers and/or brands

There are a number of reasons why this particular type of advertising has taken off recently:

1. Targeted advertising

Retail media leverages first-party data collected by retailers, which lets brands better understand who exactly to target. This data could include information about purchase history, browsing behavior, and demographics, allowing for highly personalized ad placements that are more likely to resonate with consumers.

When combined with a brand’s own first-party data — especially in cases where brands have their own shops in addition to selling their products through retailers — targeting can be even more precise.

2. High conversion rates

Retail media ads are often shown at or near the point of purchase. This can be on an individual product page in an online shop or near the product display in a physical store, for example. Because of this positioning, these ads are more likely to influence consumer decisions and increase sales.

3. Closed-loop measurement

Because products are sold directly where they’re advertised, retailers can provide brands with detailed insights into the performance of their campaigns. This closed-loop measurement capability means brands can see their return on ad spend in real time and lets them optimize as they go.

4. Monetization opportunities for retailers

Retailers’ supplying brands face many challenges against the backdrop of worsening third-party data quality. The root of these issues is signal loss brought on by lack of brands’ first-party data.

This puts retailers in a prime position to monetize their inventory data to provide brands with the data signals they need to run effective ads. And while powerful for “on-site" advertising, this also has numerous additional benefits when brands want to collaborate on that data to power "off-site" ad campaigns.

If this has you thinking “but surely retailers provided some information to their supplying brands about what they were selling” you’d be exactly right! Read on to discover how the supply and demand of this information is changing.

Challenges and opportunities

Despite its many advantages, retail media is not without its challenges. 

One major issue is how brands and retailers can get the information they need from one another without giving up control of their data. And as third-party data signals get worse, organizations with rich first-party data have a distinct competitive edge.

There are long-standing patterns regarding what information retailers traditionally give their supplying brands about who buys their products. But now that brands are eager to start putting first-party data from their retailers to use in campaigns, retailers have to be more dynamic and flexible in the information they can provide brands.

How data clean rooms let brands and retailers collaborate

Data clean rooms — particularly those with very strict privacy guarantees — allow brands and retailers to use the full power of first-party data without exposing this data to the other party.

Many retailers already have the basics of first-party data monetization covered. They often provide dashboards to their supplying brands with insights and enable offsite activation with walled gardens using Customer Data Platforms (CDPs) that they already have set up, as mentioned in the previous section. However, many are not yet equipped to activate their first-party data on premium web inventory, especially on TV, which is a significant concern since this is the inventory that their biggest advertising spenders are most interested in.

This is where data clean rooms come into play. A data clean room allows activation of retailer first-party data on premium web inventory, including CTV, in a secure and privacy-compliant manner. It also enables brands to combine their data with the retailer’s data to create more effective and targeted campaigns without compromising data privacy.

Decentriq, for example, is a leading solution in this space, offering retailers the ability to activate their first-party data across both walled gardens and the premium web, all within one easy-to-use platform. This capability is crucial for retailers looking to attract and retain their biggest spending advertisers, who demand access to premium inventory.

Retail media use cases with Decentriq

Four use cases are possible when brands and retailers collaborate in a Decentriq data clean room :

Consumer insights

Here, retailers put their data in a data clean room and brands can query this data to gain insights about their customers.

As mentioned earlier in this article, retailers often provide dashboards with this information to brands already. The attractive thing for brands here is that their questions to retailers about their consumers can be more flexible and dynamic when they use data clean rooms in comparison to traditional, standard updates.

Offsite activation

Retailers can use their data to run campaigns with premium publishers on behalf of their supplying brands. This can include prospecting, for example: Helping CPGs and FMCGs create additional reach and awareness powered by data.

Sales lift

Here, brands can see whether consumers exposed to ads actually ended up buying the advertised product from the retailer.

Brand first-party data onboarding

This use case allows brands to upload their own first-party data alongside the retailer's to run custom collaborations, such as audience exclusion campaigns.

How to get started

Brands and retailers should begin exploring their options for working together to better target audiences and unlock a new revenue source with their data, respectively. 

However, to fully take advantage of this opportunity, they must invest in advanced tools like data clean rooms to ensure secure, effective use of their first-party data. By doing so, both parties can stay competitive in an increasingly complex advertising landscape.