In the run-up to Christmas, we’ve seen the usual barrage of festive television adverts from leading retailers and brands looking to tug at consumers’ heartstrings – and wallets. But behind the perennial schmaltz, tinsel and fake snow, the reality is that advertising itself is undergoing a fundamental transformation.
The key driver? As in so many other sectors, it’s the rise of digital technology and data – which is turning the old industry model literally on its head. And in doing so, it has been creating a major commercial opportunity for retailers.
Digital advertising tightens its grip…
To explain what this opportunity is, let me begin with some context. Today US$700bn advertising industry is increasingly dominated by digital “pureplay” ads. These currently account for 66% of total ad revenue, a share projected to rise to 74.4% in 2028.
When consumers sign up digitally, they provide a wealth of knowledge about who they are, what they buy, where they live, and a lot more. Retailers hold this unique insight like no other company does. This is where the retail media network comes in. Imagine being able to monetize this insight to such an extent that it brings a disproportionate amount of margins.
Today, the phenomenon of the retail media network is already claiming about 17% of digital advertisers’ budgets – and its momentum is expected to continue. With retail media networks now proliferating fast, it’s estimated that by 2026 they’ll attract 25% of all digital ad spend. And with margins between 30% and 70%, they offer an impressive return on investment.
Amazon, which started it all, is leading the way and reaping the benefits of the opportunity it has created. And other retailers are following suit. For example, Tesco and Sainsburys have partnered to create a retail media network that they’re now expanding. And Boots and Superdrug – collaborating with BMG and Optimo, respectively – are in the early stages with their own networks. However, realizing the full potential of next-gen retail media requires foundational shifts to catapult the shopper experience and brand experience to a new paradigm.
Three imperatives for success
What are those foundational shifts? The reality is that the vital enabler of retail media networks is strong data foundations based on scalable cloud technologies. This means a sweeping enterprise data reorganisation is often needed – and Cognizant’s future-ready research suggests all businesses struggle with such programs. Against this background, winning in the new world of retail media demands a laser-focus on three imperatives:
- Check your data readiness: first-party data is your gold mine. Without clean and reliable customer data, it’s hard to segment audiences and offer real-time personalization and compelling customer experiences. The ideal retail media ecosystem offers insight, audiences, and personalization at scale, together with true real-time capability. Using Generative AI to derive richer data insights to drive enhanced segmentation and marketing strategies can deliver 40% productivity gains – and act as a differentiator that can get you on the right path faster than you might anticipate.
Check your digital platform maturity: do you have technical debt? Many retailers have simply amassed as much customer data as possible in the hope it will automatically translate to value. It won’t. Implementing, running, and monetizing a customer data-oriented ad delivery network for brands demands a higher level of technological maturity that many retailers currently don’t have. This means modernizing old monolithic platforms and mixed technology environments.
Don’t do it alone: leveraging cloud and other advanced technologies requires partners with deep expertise. Few know how to build digital infrastructure that will scale for years to come. And talent scarcity means a partnership model is usually vital for building maturity. The first step may be to engage a partner who can help you navigate through the plethora of data management and technology infrastructure solutions in the market, while wading through data privacy challenges. But beyond these core technology capabilities, a tech partner should also bring you proven sector experience and the ability to support you with business change.
The message? The era of retail media networks is here since a long time – and retailers who have not yet made the move risk being left behind in the race to reap the rewards.
