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Strategy & Consulting

Retail media: A highly profitable new business

June 8, 2022 5-MINUTE READ

RESEARCH REPORT

In brief

  • In this article, we explain from the retailer's perspective the "how" to build a scalable retail media business, not just the "why".
  • With the end of third-party cookies, retailers can leverage their wealth of customer data to offer advertisers targeted campaigns.
  • Retailers now need to professionalize their approach to selling ads, creating content, and using data to establish and scale a retail media business.

With the end of third-party cookies, many brands need to find new ways to target their customers. We believe that retailers will benefit from this trend as advertisers shift their media budgets. Retailers can leverage their wealth of first-party customer data to create new revenue streams by professionalizing and scaling their advertising business. Brands, on the other hand, value the unique opportunities retail media offers: They are incorporating this new advertising channel in their marketing mix, in addition to traditional trade marketing spending with retailers. With ads in retail media business, they can target consumers based on retailer’s first-party data and real purchase figures instead of derived interests from surfing behavior only. Customers will benefit by receiving more relevant content and offers leading to a better customer experience.

This leads to a win-win-win situation for all stakeholders. We are thus convinced that media will become an integral part of the retail value chain.

We believe that media will become an integral part of the retail value chain.

Retailers (media publishers) create a new high-margin revenue stream and maximize the value of media inventory with targeted campaigns that build customer loyalty.

Brands (media advertisers) achieve a higher return on advertising spend through more granular customer insights and a better view into how their media is performing and how to reach and convert more contacts to customers that matter.

Customers receive more relevant content and offers leading to a better customer experience.

Winning every value equation

With retail media, retailers can also strengthen their relationship with their brands and suppliers by offering more transparent, performance-based pricing.

The significant variety in possible advertising products allows them to address two different supplier budgets with retail media at the same time: the products of the retail media sweet spot offer the possibility to sell upper funnel awareness placements to trade marketing teams, whereas the lower funnel conversion products are sold to marketing departments distributing the media budgets across several channels.

For both sides, a new level of transparency and a clear connect of costs to performance opens up chances to redefine how advertising will look like in the future.

In order to achieve high profit margins that retail media typically offers to the retailer (up to 85%) the retailer should consider the following rules to sell their ad inventory at a premium:

  1. Offer ad products across touchpoints along the entire customer journey
  2. Target valuable shoppers with a high purchase intend when showing particular interest on a retailer’s website or mobile app
  3. Connect with their audience during the moment of truth at the Point of Sale in the buying journey
  4. Target consumers based on retailer’s 1st party data and real purchase figures instead of derived interests from surfing behavior only
  5. Provide clearly measurable MROI being in line with a trend on increasingly shifting media spend to transparent initiatives

With these unique selling propositions, retail media can stand out from the advertising models of Google, Facebook and others as they are not able to provide the same valuable insights of customer data as of today.

The soon end of third-party cookies will accelerate the growth of retail media in the advertising industry. Their first-party customer data is the biggest asset of retailers.

Patricia Mock

Managing Director Accenture Song

Nicole Richter

Senior Manager Accenture Song

Sebastian Schmidt

Manager Accenture Song

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