The relationship between retailers and brands is an interdependent one: brands, particularly CPGs and other manufacturers of physical goods, provide products for retailers to place on their physical (and digital) shelves; and retailers, in turn, get these products into the hands of consumers. But the nature of this relationship is evolving and deepening with the advent of retail media networks (RMNs).
While not an entirely new phenomenon, (Amazon has been quietly working on its media business for more than a decade) RMNs have seemingly burst onto the scene in the last couple of years, grabbing headlines and ad dollars alike.
A 2022 report by McKinsey showed that the “overall operating margins of retail media networks sit in the 50% to 70% range; companies across the retail spectrum are fully awake to the economic potential.” And it recently projected RMN spend to reach $100bn by 2026.
Amazon is the clear leader today: in February 2022, Amazon, for the first time, reported revenues the company generated with its advertising services segment at a whopping 31.16 US dollars globally, cementing its leadership position in the category. But many players exist – hundreds, in fact. By way of comparison, Walmart had ad revenues of 2.1 billion dollars in the same financial year.
As brands navigate the changing privacy landscape, they will increasingly turn to media companies (now including RMNs) who offer direct, privacy-friendly access to consumers and consumer data. For brands to take the greatest advantage of their RMN partnerships, they need to think beyond the traditional (well-worn) models of brand/retailer relationships.
In this R3 primer, we explore the retail media landscape and provide marketers with strategic advice on how best to approach RMNs as long-term, business-creating strategic partners.