Retail Media Networks (RMNs): A Familiar Friend and Foe (Part 1 of 2)

Welcome to a special two-part series on retail media. In this series, I'll explore the evolution of retail media from its early days to how its become the shining star of the advertising industry. I'll examine how historical practices have shaped today's tactics and delve into the opportunity across Connected TV (CTV) and retail media networks (RMNs).

Introduction: The Evolution of Retail Media

I started my career in CPG, focusing on designing package innovation, creating volume bridges for Parkay, restyling products to secure presence within Walmart end caps, and negotiating grocery store promotions and slotting fees.

These were the banner years of packaged goods before the threat of private label competition, Covid, inflation, and the dominance of Amazon.

Trade budgets saw significant growth as retailers built relationships with manufacturers to bolster profit margins. These partnerships were founded on traditional advertising avenues, such as in-store slotting fees, newspaper circulars, and various promotions. These partnerships still exist today, but we’ve also seen the evolution of more modern partnerships in the form of retail media networks (RMNs).

Bringing Sexy Back: Data as Currency

What is true in both fashion and Fritos is that what is old eventually becomes new again. From Gatorade breathing new life into its famous "Is it in you? " campaign to Sonic’s revival of Frito Chili Pie , the same is true for marketing. What started with slotting fees has evolved into Amazon and Walmart demanding 'digital shelf' slotting fees. If you don’t pay for advertising, they won’t stock and promote your products.

Retail media is just another repackaged way to squeeze a little more profit from the proverbial toothpaste tube. However, McKinsey predicts $100 Billion in ad spend expected to go to RMNs by 2026 and retailers have something valuable: data, customer access, and the ability to report down to the item or category level. And even in today’s era of direct consumer access big brands still lack a deep direct connection with customers.

“Since most of our sales are done with our retailers,” said Morgan Millard, director of omnichannel spending and planning for Scott’s. “We don’t see our first-party data strategy as crucial to our overall targeting plan. Hence, why we lean into retail media.”

So the holy grail of proving out your ad spend is huge: $1 in = more $$ in sales = ROMI on marketing investment.

The Modern Retail Media Networks (RMNs)

Today's RMNs help retailers and e-commerce sites monetize first-party data and connect with customers beyond their own digital domains. They have redefined traditional retailer-manufacturer relationships, turning them into data-rich partnerships that drive substantial profit margins.

With data as currency and every CFO challenging their marketing teams to prove their investments pay out, we have the perfect story of ‘bringing sexy back’ — the repackaging of a tried-and-true tactic into a sexier term: ‘retail media’ or commerce media.

But wait, there’s more. What if you could use that data to not just reach people on Kroger.com or the Target mobile app, but to find your customers and lapsed customers who are frequenting your competitors’ stores  -- and reach them where they are spending their time watching TV?

The Streaming Shift: New Opportunities for Retail Media

Streaming viewers have surpassed cable and linear due to the shift of premium content to streaming platforms. Last year, we reached a pivotal moment when linear viewership (broadcast and cable combined) fell below 50% of total TV viewership for the first time ever. Just five years ago, linear TV viewership was more than 80%. It’s clear that streaming television viewership will soon eclipse linear TV viewership in totality. This is a watershed moment.

Connected TV (CTV) empowers advertisers to connect with the continually growing audiences who have cut the cord or never subscribed to conventional cable services. Thanks to its highly engaging and interactive format, CTV plays an increasingly important role in retail media advertising.

CTV advertising opens doors for RMNs to reach both existing and potential customers with highly personalized and premium ad experiences, in tandem with the sight, sound, and motion of the TV screen. Plus, viewers can actively engage with CTV ads on their smart TVs or via streaming devices like Roku and Amazon Fire Stick.

Offering reach extension through CTV is a powerful value proposition, especially for advertisers with access to a wealth of first-party data. And for retailers, restaurant brands and digital publishers, thinking beyond their owned & operated platforms (website, mobile app, loyalty apps, etc..) is crucial.   Epsilon did an analysis for a retail media  client and found that of the 53 million of their consumers, 88% were only reachable off-site because those people simply didn’t visit the retailer’s site. That’s 46 million people the retailer can’t reach by only using on-site advertising.

In Summary...What’s Next for Retail Media?

Retail media networks (RMNs) offer new ways for brands to reach consumers, but the big question is: what will it take for these networks to sustain long-term success? Are retailers ready to think and activate beyond their owned and operated channels? What about stepping beyond traditional mediums like search and display to embrace TV and streaming advertising?

And...are they simply 'walled gardens' where only the biggest players like Amazon and Walmart can thrive? Or is there room for smaller, regional retailers to capture ad dollars and compete?

A lot to consider, next week in Part 2, I'll explore how brands like Dollar General and Doordash are navigating this landscape and what it might take for others to succeed.

Share your thoughts, and be sure to catch Part 2.

Cheers!