For the past decade, retail media has been a simple bolt-on revenue stream for many retailers. They leaned on vendor relationships rather than building specialized capabilities tailored for media buyers. With ecommerce surging and brands cutting back on trade promotion during COVID-19, profits flowed freely requiring little effort. Selling ad space was just an incremental add-on, not a major strategic undertaking.

Brands, enticed by the proximity to purchase that retail media offered, eagerly experimented with these new networks, sometimes spreading budgets widely across dozens of retailers. As a result, retail media has ballooned into a $90 billion global industry and is still expanding at a rapid clip. But this growth brings rising complexity. The days of retailers casually dabbling in media sales are ending. Retail media networks must get serious about understanding brand advertisers' needs and optimising their offering to match.

Growing Pains Emerge

Brand spending in retail media is forecast to grow at double-digit rates annually over the next 5 years. eMarketer predicts retail media spending will hit $38 billion in the US alone by 2023.

But massive growth brings new complexities and challenges:

• Fragmentation risk as more retailers launch their own networks. Ad inventory is proliferating, dividing advertiser budgets.
• New innovations like off-site ads and data-driven social campaigns require tech investments at a time when retailers face cost pressures.
• Economies of scale for larger networks like Walmart Connect and Amazon DSP which create an uneven playing field.
• Tighter budgets and demands for transparency from major advertisers who crave proof of performance and impact.

Most concerning is the view from brands that retail media underperforms on return on ad spend compared to mature digital channels like paid search and social media advertising. As economic woes put pressure on marketing budgets, demonstrating clear ROI and bottom line impact will only grow more crucial. If retail media can't compete on performance, budgets will swing back to more proven channels.

Time to Get Serious About Media

As retail media matures, the battle for budget share will intensify. Standing out in the increasingly crowded market dominated by retail heavyweights will require mastering 3 areas:

1. Sophisticated measurement and transparency. Transparency in measurement is seen as retail media challenge number one by ISBA (the UK’s trade body of advertisers). The discussion for networks is how much they want to share. Build a private garden and make your data a key asset, but only provide top line reporting? Or open up your data and entice ad budgets with full measurement transparency. Retailers with bricks and mortar stores and loyalty programs need to connect the customer journey and give brands clear insight on the full impact of their media buys.
2. Retailers must start to think and operate like media owners. Retailers often rely on vendor merchandising teams to sell ads. But advertisers have very different needs than retail suppliers. Retailers must start to think and operate like media owners. Networks need dedicated sales teams with deep expertise in digital media and advertising.
3. Accounting clarity. Network leaders should proactively collaborate with finance teams to ensure media revenue streams remain separate from vendor trade deals. Media revenue should be classified as a marketing cost by their advertisers, and not a cost of sale.

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Watch: How measurement can be a retail media network's point of differentiation.

To watch the rest of the webinar, click here.

The future of Retail Media Networks

The retail media market will bifurcate into two groups with less room for middle ground:

1. Large, highly sophisticated networks laser focused on driving performance, developing martech capabilities like onsite personalization, and maximizing transparency.
2. Smaller networks lacking the resources and economies of scale to match the investments and performance of retail media juggernauts. This will restrict their appeal to performance-driven national brands.

Mid-size retailers face a difficult choice. Do they attempt to boost investment and scale capabilities to compete head-on with the retail media giants? Or remain satisfied serving smaller regional advertisers who prioritize simpler options and high touch service over martech bells and whistles?

Marriages of convenience may emerge as retailers team up to consolidate audiences and offer unified market access. Media buyers crave simplicity and aggregating reach through one access point may fuel the future growth of retail media.

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Watch: Will Retailers collaborate to make buying retail media easier?

To watch the rest of the webinar, click here.

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The old days of casual media dabbling are waning. Building a high-performing retail media network that earns advertiser trust and wallet share requires moving with urgency. Retailers who fail to recognize retail media's new strategic importance risk a painful wake-up call down the road.