How Retail Media Networks Can Conquer Complexity to Unlock Growth

Retail media’s ascent has been explosive with little slowdown in sight. However, beyond industry giants like Amazon and Walmart, there’s an exponentially growing host of retailers that are still grappling with how to transform themselves into media entities. At the same time, the retail media teams inside these companies are being tasked to grow at ten, 20, or even 50 times the rate at which the core retail business is growing. 

Put another way: if retail is growing at 1 or 2%, these retail media businesses are being asked to outpace the relative relationship of gross merchandise volume compared to media spend invested in their channels. This presents a huge challenge when one considers that, historically, investing in vendor-funded programs was done on the margin of gross merchandise delivered through the retail sales channel.

With each emerging retail media network (RMN) under pressure to perform spectacularly from the jump, enormous issues have arisen involving change management, scaling indirect demand, integrating new media operations with established retail processes, and orchestrating a diverse range of media formats from digital ads to in-store and offsite advertising. As a result, long-term effectiveness and profitability are impeded.

The rush to establish retail media networks

And scaling a retail media network is not as relatively straightforward as standing up the ad inventory on site or ensuring that there is shelf space in your grocery chain. To run a retail media business, several stakeholder groups must work in concert, including executive, finance, sales, and ad ops teams.

Retail media’s evolution into a cornerstone of modern advertising strategy has been extraordinary. Its roots stretch back to the in-store brand experiences that were the hallmark of classic trade marketing – such as endcaps of aisles, signage, and point-of-sale (POS) displays at checkout – designed to grab the attention of browsing shoppers. 

Traditionally, retailers also extended their media efforts outside the physical store, purchasing billboard space, newsprint ads, or circulars on behalf of the brands. These media offerings were part of joint business plan negotiations, ultimately influencing the price that the retailer would pay for the brand’s products.

The transition to digital formats created a dramatic shift. The retail organizations that depended on promotional units sold through their stores to generate razor-thin margins have found in retail media an extremely profitable, owned space that they could leverage to pad their bottom lines and operating margins.

This incentive, along with the accelerated market opportunities prompted by the COVID-19 pandemic, have led retailers to explore not only onsite digital media but increasingly offsite and other digital placements, in-store, and out-of-home as part of an omnichannel retail media offering. But fueled by competitive necessity, many retail media networks were launched prematurely, leading to practical challenges many are still grappling with today.

Challenges arising from fast-tracked retail media networks

Currently, advertisers have more than 200 RMNs available for their consideration and budgets – the lion’s share of which currently flows to market leaders Amazon and Walmart. These advertisers are open to alternative options that can reach their key audiences and achieve their goals, but most other retail media networks aren’t set up to capitalize on that potential demand due to foundational issues such as:

Fragmented tech stacks. One of the most pervasive issues arising from the hurried setup of RMNs is the prevalence of disparate technology stacks encompassing supply-side platforms, demand-side platforms, point solutions for media management and data analysis, cleanrooms, and more. These disjointed tools complicate integration, making it difficult for retailers to have a cohesive and efficient functional framework. This not only impacts the day-to-day running of RMNs but also poses significant barriers to scaling and adapting to new market demands, contributing to sizable missed revenue opportunities.

Data silos. The rapid deployment of RMNs have often led to the creation of massive troves of data that are not being shared or harmonized across different departments. This is data that needs to be rationalized to deliver the sales motion and measurement paradigms that brands require before they increase their investment in a given retail media network.

Vendor management. The swift establishment of retail media networks also brought about complexities in managing relationships with numerous vendors and suppliers. Collaboration with these external parties are crucial for the smooth running of RMNs. However, poor practices can lead to inefficiencies, strained relationships, and retailers being forced to leave millions of media dollars on the table – or, worse yet, being transferred to competitors – due to their inability to marshall their partners and tech stakes in concert to meet the needs of brand advertisers.

Retailers who can streamline their technology infrastructure, consolidate data insights, and optimize vendor relationships are better positioned to capitalize on retail media. Failure to tackle these issues could result in significant losses in potential revenue.

Challenges faced by different teams within retail organizations

For fundamentally retail organizations, being asked to become digital publishers means navigating delicate internal dynamics to reconcile media business models with existing retail operations. 

And scaling a retail media network is not as relatively straightforward as standing up the ad inventory on site or ensuring that there is shelf space in your grocery chain. To run a retail media business, several stakeholder groups must work in concert, including executive, finance, sales, and ad ops teams. 

However, each of these groups faces its own set of difficulties:

Executive teams provide high-level direction and ensure coordination of all teams within the organization with its overarching goals. They are responsible for communicating performance metrics and strategic updates to maintain transparency and cohesion across the company.

The rapid establishment of RMNs has often resulted in unclear directions and a gap between aggressive growth objectives and organizational capabilities, forcing executives to try to contend with the inertia of traditional business models and the internal resistance to change that stifles innovation and delays necessary reforms.

Finance teams oversee the financial health of RMNs, managing complex data to inform decision-making. Their role is critical in ensuring that every financial aspect of the media arm is tracked, analyzed, and reported accurately.

The lack of integration between sales and finance data streams can lead to delays in reporting and inaccuracies in financial forecasting. These ingrained challenges prevent finance teams from achieving the timely and accurate financial oversight needed to support rapid adjustments.

Sales teams are the frontline communicators of retail media offerings. They bear the responsibility of understanding and effectively conveying the value of a diverse array of media offerings to potential advertisers. There could be a dozen or more different media offerings that a retailer offers to a brand in their negotiation. Sales needs to know, see, and be aware of all of those different media offerings.

Legacy technologies and outdated information flows often leave sales teams without the timely data they need to accurately inform potential clients. This results in lost deals as teams struggle to adapt their strategies to rapidly changing market conditions.

Ad operations teams are at the heart of the retail media network’s functionality, responsible for the technical aspects of media campaign management and optimization, ensuring that the right ads are displayed at the right times and places to the right audiences.

Inherited tech stacks that are not fully compatible with modern advertising technologies can slow down campaign setups and adjustments, reducing the overall agility of ad operations. This hampers the RMN’s ability to capitalize on market opportunities and respond to consumer demands in real-time.

To navigate the complexities of modern retail media, it is essential for the entire retail business to undergo a strategic overhaul. This involves not only enhancing the capabilities of each team but also ensuring that all teams are working cohesively towards common objectives. Only through a concerted effort can the challenges of individual teams be properly addressed, paving the way for the sustained success of retail media networks.

Retailers need an ERP for their RMNs

This is not an unfamiliar predicament for large organizations. Since the early 1990s (with seeds planted decades earlier), companies have relied on Enterprise Resource Planning (ERP) platforms to help oversee complex activities, multiple departments, and large volumes of data – think of the likes of SAP, Oracle, Microsoft Dynamics 365, and many others. There’s literally no major business that doesn’t have an ERP of some kind in place today.

Similarly, retailers need a centralized operating system for their retail media networks in order to overcome structural inefficiencies, refine their media strategies, unify their stakeholders, and collectively hit their ambitious growth targets.

This sort of enterprise-grade technology solution would need to be designed to centralize essential tools and insights, enabling retailers to monetize their media assets at scale across channels while facilitating seamless collaboration internally. It would have to provide retailers with a holistic view of their media landscape, with advanced capabilities for data analytics, campaign optimization, and real-time performance tracking.

With their media processes consolidated in this manner, retailers would be able to efficiently and effectively unlock new revenue streams and enhance their competitive edge as commerce media becomes the dominant advertising channel in the years to come.

A modified version of this article was originally published in Total Retail.