This research is based on unique data collected from our proprietary audience of publisher, agency, brand and tech insiders. It’s available to Digiday+ members. More from the series →
Keeping the complexities of marketing channels in mind, Digiday+ Research has analyzed strategies and challenges across leading marketing channels — like programmatic display and social media — to identify key trends and best practices in our CMO Strategies series.
In this installment, Digiday+ Research focuses on an analysis of the retail media landscape and its role in marketers’ playbooks, followed by a spotlight on Amazon that shows the potential of retail media beyond in-channel conversions. Future reports in the series will focus on other retail media platform specifics and different channels. Our first report focused on social media usage and budgets.
Retail media’s popularity as a marketing channel has been increasing over the last few years, and retailers themselves have begun expanding their investments in the channel. Since at least 2019 with Target’s rebranding of its media network as Roundel and Walmart’s acquisition of ad-tech business Polymorph Labs for its ad business, and more recently with Kroger and Alberston’s announced merger and forthcoming retail media expansion, it’s clear that retailers see retail media as a huge opportunity — and they’re preparing for marketers to pounce.
Simultaneously, marketing channels have received a few shocks to the system in recent years, from shifts in privacy regulations to an increase in marketing costs and the impact of macro-economics on consumer marketing spend. In an all-out quest for returns on investment, many brands have turned to retail media networks to get ads as close to the point of purchase as possible.
This year in particular, retail media advertising’s star has continued to rise. At Cannes in June, Omnicom announced that it was launching Omni Commerce, which was described as “a connected commerce orchestration solution” that provides tools and commerce data to marketers by leveraging its retail partnerships. Frank Kochenash, CEO at Omnicom Transact, said the company’s first step would be “curating and connecting the right data from the right partners in a scalable, actionable way.”
“We’ve directly integrated this into Omni and been very deliberate about it so that we have one platform where all these things are connected,” Kochenash said. “It’s not multiple bolt-ons that we built or bought — we’re trying to do this the right way.”
As more options become available to marketers and barriers of entry lower, retail media advertising is becoming a cornerstone in many marketers’ strategy playbooks.
To map out marketers’ current digital playbook, Digiday+ Research sent out three surveys asking 635 respondents about past and upcoming investments, marketing channel tactics, preferences and business challenges.
Digiday+ Research also conducted a focus group and individual interviews with marketing executives across industries.
With retail media’s growth, along with the pandemic-led surge in online shopping behaviors that have largely persisted, digital retail spaces are becoming effective ad environments. And with the addition of new (or newly enforced) data regulation laws and the upcoming deprecation of third-party cookies, retail media is having its moment in the sun. The channel shows no signs of shrinking, either. eMarketer predicts that by 2024, U.S. digital retail media ad spending will increase to $61.15 billion, up from $20.81 billion in 2020.
Digiday’s survey found that over a third of marketers said they use retail media advertising, putting the channel just behind display ads and social media. (Digiday+ Research’s first CMO Strategies report provides an overview of social media spending.)
CPG companies originally dominated the retail media ad space due to their focus on advertising within retail media networks (RMNs), which often include in-store ads. But other industries, such as home goods and electronics, have also started investing in the channel to take advantage of retailer attribution and data capabilities.
Because of retail media’s practical applications at checkout, retailers have access to purchase and shopping behavior information that other channels don’t. Along with the product purchase date, retailers can also attribute conversions directly to ads. “For the last 100 years, we’ve optimized media on impression delivery — did I reach the audience that I said I was going to reach?” said Quentin George, partner at McKinsey. “The change here is, I can now connect an impression with a SKU-level sale — not with a [checkout] basket, not with a credit card, but with a direct sale. And that is incredibly transformative for the industry.”
While retail media has a ways to go before truly competing with the No. 1 marketing channel in Digiday’s survey, social media, it’s making rapid strides thanks to its clear strengths. One obvious edge over other channels for retail media is its access to purchase data through sites that are built for commerce. “The long-term opportunity with RMNs is about leveraging that retailer’s first-party data on people who are brand and category buyers,” said Andrew Lipsman, principal retail and e-commerce analyst at intelligence company Insider Intelligence.
With data privacy laws becoming stricter and Google continuing to inch closer toward the end of the third-party cookie in 2024, access to a network with customer purchase data is an attractive future alternative.
Retail media is not without its challenges, however. Aside from growing privacy laws, a big concern for marketers posed by the channel itself is the cost of media. Digiday’s survey found that 92% of respondents said the cost of media was a big concern in the retail media channel — also a common concern for marketers across channels.
But, according to Chad Fox, CMO at Dollar General, attribution is easier to capture on retail media networks, making cost less of a concern because there’s a better understanding of return on ad spend. “Because we’re leveraging first-party data versus model audiences and because we have transactions, we have the ability to provide the advertisers an incremental return on ad spend,” Fox said. “So we’re able to bring them both attribution and incrementality. So as long as that iROAS as a metric is in the sweet spot of what that particular advertiser is looking for — which is different for different partners — then the CPM or the cost of the media is a bit of a moot point.”
Although retail media has stronger commerce tools than other marketing channels, that has not prevented other channels, specifically social media, from trying to emulate retailer ad strategies on their platforms. For example, Meta, ByteDance and other companies have invested heavily in building out social commerce options, such as Instagram Shopping and TikTok Shop, to accompany their existing ad tools. However, despite bearing a resemblance to units and functions on shopping sites, social commerce tools accompanied by advertising have different strengths and use cases than retail media networks — in both cases based on the user’s context.
More specifically, the passive scrolling of social media is better for building brand awareness and engagement, whereas more purposive behavior on RMNs drives lower-funnel sales on owned platforms. “If you’re sitting on Facebook or Instagram … you’re not really necessarily in the shopping mindset,” said Amie Owen, U.S. head of commerce at UM Worldwide. “But if you’re going on, say a Walmart or a Kroger or even Amazon, you are in the mindset to find whatever you’re looking for, and you’re using it as maybe a search platform.”
This is also reflected in Digiday’s survey, with the majority of marketer respondents saying that they measure retail media success via commerce or sales rather than awareness metrics like impressions or engagement: 95% of marketers said their primary measurement of success is commerce or sales, versus 12% and 5% for impressions and engagement, respectively.
According to a 2022 McKinsey & Company survey, about 70% of advertisers see better performance with RMNs than other channels, indicating that retail media does lead to more sales than some of its counterparts, or at least is directly contributing to more sales. Retail media network operators also say they’re seeing successful results for their advertisers. “One of the things that we see is the ROI for our CPG partners,” said Laura Jones, CMO at Instacart. “And we have a lot of tools available … for them to measure on our platform. For example, AB testing and lift testing. [One of our partners], for example, saw an incremental sales lift of 35% from one of their campaigns. And on average our ads are delivering more than a 15% incremental sales lift for our brand partners.”
However, despite the benefits of retail media networks, spending on Amazon and other networks decreased from 2022 to 2023. This could be due to economic trends and fears of diminished consumer spending — or, more minimally, Amazon’s recent announcement about price changes from $0.01 CPM to 2.5% of spend. Digiday’s survey found that spending went down year over year, from an average of 1.23 points of relative spend for Amazon and 1.10 for other retailer sites in 2022, to 0.58 and 0.67, respectively, in 2023. Even with the financial pullback from marketers, retail media networks are still on the path to becoming a cornerstone of many CMOs’ strategies going forward.
For now, Amazon is the clear main character in the retail media story, with 76% of respondents saying they use the platform for selling their companies’ products. But, Amazon also plays a unique secondary role when compared to other retail media networks: Many marketers are now using Amazon as a platform to raise awareness for their brands, whether or not they sell on the site.
As a sales platform, Amazon has an advantage over other RMNs due to the sheer volume of consumer data it collects. Amazon is the fourth-most visited website in the U.S. — behind Google, YouTube and Facebook — and it is the most visited e-commerce and shopping marketplace, according to web analytics company SimilarWeb. Due to the massive number of monthly visits to the site — 2.3 billion total visits worldwide in May alone — Amazon is able to collect data from a wide range of demographic groups with varied audience interests. That means Amazon can offer brands access to more consumers, and their data, than other RMNs — putting it in the No. 1 position as a retail media partner in terms of scale.
Amazon’s secondary and rising role is as a platform where marketers can raise awareness for their products. The huge pools of consumers who visit Amazon on a regular basis access the e-commerce site not only to make purchases, but they also use it as a search engine for discovering new items — similar to how they might use Google. Many marketers have taken notice of this browsing trend and have started using the retail giant’s website as a place to position products in front of consumers for consideration, rather than just as a commerce platform. It’s becoming common practice even for brands that don’t sell through Amazon to purchase ads on the site to raise brand awareness.
Cheryl Gresham, CMO of Verizon Value who was CMO at Verizon’s Visible at the time of our interview, said, despite having partnerships with other retailers, her company finds value in advertising on Amazon. “A lot of our brands are sold exclusively at Walmart,” Gresham said. “For us, Amazon is more of an awareness play than a click to buy. We’ll use Amazon advertising to build awareness with certain audiences, the way you might use ESPN or Meta … even though the product might only be sold online or in-store at Walmart.”
In response to marketers’ increasing use of Amazon as a brand awareness play, Amazon has begun offering more custom ad service options for larger companies. The retail giant is making an effort to gain brands’ ad dollars, even if they don’t sell on the site. (While Amazon stands apart from many other RMNs thanks to its massive consumer base, Amazon currently has only a 7.5% share of global ad revenue, putting it well behind Google’s 28.4% share and Facebook’s 13.4%, according to Insider Intelligence.)
Hyundai, for example, partnered with Amazon to launch its online Evolve showroom, where consumers can browse the company’s vehicles on Amazon, but are directed to a local Hyundai dealership to make a purchase. Angela Zepeda, Hyundai Motor America’s CMO, said that although the automaker doesn’t sell cars on the site, Hyundai markets on Amazon because of the retailer’s audience reach and ad targeting capabilities.
“Amazon is the one big retail channel that we’re on because it’s the biggest shopping platform,” Zepeda said. “We wanted to accelerate things for consumers that wanted some of the shopping experience online. … All of our dealer inventory is now available on Amazon. It eventually takes [consumers] to a dealer website to transact, but we actually use Amazon for programmatic buying and to target customers.”
With its massive consumer base and sophisticated ad tech offerings, including applications like virtual showrooms, Amazon operates almost as if it’s its own marketing channel, a more evolved form of retail media. While the platform is categorized as a retail media network, it competes with platforms in other marketing channels, like Google, YouTube and Facebook.
Currently, Amazon is indeed marketers’ most-used retail media network. However, as more companies begin to expand their use of retail media networks for brand discovery, other retailers may begin to explore similar uses of their RMNs, as noted by Krystal Restaurants’ CMO Casey Terrell. “There are so many people going to [retailer sites] that just general awareness plays will grow,” Terrel said. “We do a lot with Amazon now with CTV and OTT because they’re one of the main players.”
In our next CMO Strategies report on retail media advertising, Digiday+ Research will dive deeper into other retail media platforms including Walmart Connect, Target Media Network/Roundel and eBay AdChoice to compare their relative strengths and weaknesses and to highlight more emerging marketing opportunities.