Here’s a channel that is redefining the way brands advertise! Going beyond the digital ads, it creates a win-win situation for brands, advertisers, and end customers. 

Introducing Retail Media Network, the next big advertising channel, as Forbes likes to call it. 

With retail media advertising expected to grow by about 60% by 2027, it is all set to overtake digital ads as a major advertising channel and disrupt the advertising space. 

Given the growing popularity of Retail media networks (RMNs), it is now more important than ever for brands to explore how they can generate an extra revenue stream through RMNs while also adding more value to their customers. But the key to this boils down to having a highly lucrative and effective loyalty program software. And this is what we try to explore through this blog. 

How Does a Retail Media Network Work

Consider two brands, let’s call them brand A and brand B. You are scrolling through the mobile app of brand A, but you notice a similar product ad being shown, but just that it’s of Brand B.

How can this happen? Why are you seeing another brand’s product on Brand A’s mobile app? 

Welcome to the world of retail media networks or RMNs. In simple words, it’s a fancy term for retailers using their own digital platforms to sell advertising space to brands. Think of it as a way for retailers to make some extra revenue by letting other companies promote their products to shoppers who are already browsing their website or app.

Retail media networks have been in existence for quite some time now. E-commerce giant Amazon has been dominating this space for a while now with an impressive share of 76.9%. 

And there’s a strong pillar that adds this extra layer of income for Amazon, their 230 million members strong loyalty program; Amazon Prime. 

How Loyalty Programs Can Generate Revenue Through Retail Media Networks 

While loyalty programs are by themselves a great revenue generator for businesses, they also open up a new revenue stream through RMNs. 

A brand running loyalty programs has one of the biggest treasure troves, access to first-party data about their customers. The end-to-end customer behavior data that loyalty programs bring in can be used to open up their platforms for other similar retailers to reach and target this customer base. They can use this customer data to create audience segments to deliver highly targeted ads and offers and also reach new customers. Retail media networks create a win-win situation for both brands and advertising retailers.

Retailers looking to advertise can use RMNs by brands to: 

• reach a broader audience
• reach target audience segments
•  generate higher ROI

In the case of brands with loyalty programs, RMNs create an

• an added layer of revenue through the ads placed and,
• add more value to their existing customers by showcasing products and offers that are more relevant to them

The success of this partnership boils down to the accuracy of the data and insights that loyalty programs can provide. Brands planning to create their retail media networks need sharp customer insights that go beyond purchase history and recent searches. This is where Capillary’s Insights+ can help in understanding data that can be used to create ads that are more relevant and less intrusive.

Popular Retail Media Networks Ruling the Space

How Amazon became one of the biggest retail media networks  

Amazon’s retail media network is known as Amazon Advertising and it operates through various channels such as Amazon.com, Amazon devices (like Kindle and Fire TV), and Amazon-owned platforms like IMDb and Twitch. Brands can place ads on Amazon’s website and app, targeting specific products, categories, or even individual shoppers based on their browsing and purchase history. Amazon offers various ad formats, including sponsored products, sponsored brands, and display ads

Expanding retail media network to physical stores through Walmart Connect

Walmart’s retail media network, known as Walmart Connect, offers an added advantage over Amazon through its physical stores. Through Walmart Connect, brands can place ads on Walmart’s in-store digital displays, website, and mobile app, targeting shoppers based on their demographics, interests, and shopping behavior. While the revenue through Walmart Connect stood at 2.1 billion US dollars in 2021, it is expected to reach 4 billion US dollars in 2024.

Retail media network in grocery retail through Instacart

Instacart’s retail media network allows brands to place ads within its grocery delivery platform. Brands can target shoppers based on their shopping habits, preferences, and location, reaching them while they are actively browsing for groceries online. Instacart offers various ad formats, including sponsored product listings and banner ads, providing brands with opportunities to increase product visibility and drive sales.

Read: 5 Best Grocery Loyalty Programs from APAC and MEA

Challenges and Considerations in Retail Media Space

We are still in the early days of RMNs, with brands still exploring the best possible ways to make RMNs a part of their customer experience as well. It comes with challenges and considerations at this stage, a few of which are listed below:

• According to the Wakefield study, 99% of respondents say that the retail media network requires a minimum audience of 6 million monthly, creating a hurdle for smaller and upcoming brands to compete with the larger RMNs in existence.

• In its current state RMNs offer more targeted ads and not personalized ones. Though the ads will be highly relevant to the customers, adding more value to their experience, personalization is still far from reality. With more emphasis on AI and ML in the coming years, we can hope to see more advancements in this area. 

• A brand with its own RMN needs to tailor their vast data to the brands buying the data. They will have a huge set of data through their loyalty programs but not all this will be needed for the advertising. They can segment their customer data and trim it down to the requirements of the buyer brand, thus ensuring effective targeting by reaching only the customers who will benefit from this targeting

• Considering the fact that RMNs are nothing but data monetization, it is natural to ponder over the data privacy concerns. However, the ethical principle to run your own RMN is about protecting data through a secure data collaboration, which uses anonymized customer data and does not expose any personally identifiable information (PII). 

As of now, while industries like CPG and retail heavily rely on RMNs, a recent study by McKinsey found that more than 75% of non-CPG brands plan to increase their spend with media networks in the coming years. Thus, opening avenues and opportunities for media networks outside of retail. 

With newer and innovative ad formats like shoppable video ads etc. waiting to enhance the customer experience, retail media networks are creating new waves in the loyalty landscape. This brings us back to what we mentioned in the beginning- Retail media networks are the next best advertising channels. 

Kickstart your journey towards creating a successful RMN with a strong loyalty program. Get in touch with us now!

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With a knack for creating engaging content and crafting effective social media campaigns, Anjali wants to make it her mission to leverage the power of content as a strategic marketing tool for businesses. While she is not working, she is either binging movies or writing about them on her blog.