Challenges of Retail Media: Navigating the Complex Landscape

Retail media is transforming the way brands engage with customers

23:15 30 September 2024

Retail media is transforming the way brands engage with customers, offering unprecedented opportunities to reach targeted audiences directly within retail environments. From Amazon and Walmart to smaller retail players, businesses are creating their own media networks, providing brands with access to valuable first-party data and in-store advertising opportunities. 

However, while the growth of retail media presents many exciting prospects, it also comes with a unique set of challenges that both retailers and brands must navigate.

Managing Fragmented Retail Media Networks

One of the biggest challenges in retail media is the fragmentation of networks across different retailers. Each retail media platform operates in its own ecosystem, with unique targeting capabilities, data structures, and advertising formats. This can create difficulties for brands that want to scale their campaigns across multiple retailers. 

Unlike traditional digital advertising, where a single platform like Google or Facebook can offer broad reach, retail media forces brands to work with individual retailers, each with its own set of rules.

Solution:

Brands must develop customized strategies for each retailer, focusing on the unique audience and data insights each platform provides. Investing in technology or third-party solutions that help integrate and streamline campaign management across different networks can also alleviate the burden of dealing with multiple platforms.

Additionally, brands should consider establishing closer relationships with key retail media partners. By collaborating directly with retailers, brands can often gain early access to new advertising tools or secure premium ad placements, helping them stand out in a crowded marketplace.

Limited Access to Data

While retail media networks boast access to valuable first-party data, retailers often keep the most valuable customer insights for themselves. Brands may receive reports on ad performance but lack full visibility into the rich data sets that retailers use to build their media platforms. This can hinder brands’ ability to fully optimize their campaigns or get a complete picture of the customer journey.

For example, a retailer may provide data on how an ad performs in terms of clicks and impressions but withhold insights into broader customer behavior, such as how customers interact with competing products or their overall purchase intent. Without this information, brands struggle to make informed decisions about targeting and personalization.

Solution:

To overcome this challenge, brands should push for more transparency in their partnerships with retailers. While access to all data may not be possible, brands can negotiate for deeper insights into key metrics, such as conversion rates and customer demographics, to better understand campaign performance.

Another strategy is to combine retail media data with other first-party data the brand has access to, such as website analytics, CRM data, and social media engagement. By integrating these data sources, brands can build a more comprehensive understanding of customer behavior and make more informed marketing decisions.

Difficulty Measuring Return on Ad Spend (ROAS)

Measuring the impact of retail media campaigns on sales and revenue can be tricky, particularly when it comes to understanding Return on Ad Spend (ROAS). While some retail media networks offer closed-loop reporting that connects ad exposure to in-store or online purchases, many campaigns still rely on more indirect metrics like clicks or impressions. The disconnect between media investment and actual sales outcomes makes it difficult for brands to calculate the true ROI of their retail media efforts.

This challenge is compounded by the fact that customers often interact with multiple touchpoints before making a purchase. For instance, a customer may see an ad on a retailer’s website but later make a purchase in-store or through a third-party marketplace. Without clear attribution, brands struggle to connect the dots between their retail media campaigns and sales performance.

Solution:

Brands should prioritize retail media networks that offer robust closed-loop attribution models, which link ad exposure directly to sales. These networks provide more detailed data on how advertising impacts the bottom line, allowing brands to optimize their campaigns based on actual revenue generation rather than superficial metrics like clicks.

In addition, brands can experiment with omnichannel attribution models, tracking customer interactions across multiple channels and devices to gain a more holistic view of the customer journey. While this may require investment in advanced analytics tools, it offers brands a clearer understanding of how retail media contributes to overall sales performance.

Ad Saturation and Competition

With more brands investing in retail media, competition for prime ad space has become fierce. Major retailers like Amazon and Walmart host thousands of brands vying for the same digital shelf space. As a result, the cost of retail media advertising has risen, particularly in highly competitive categories like electronics, fashion, and beauty. This saturation can make it difficult for smaller brands to stand out, especially when competing against larger companies with bigger budgets.

Solution:

To overcome ad saturation, brands must focus on differentiation. Instead of simply relying on sponsored product ads or generic display placements, brands should invest in more creative formats, such as video ads, dynamic content, or interactive shopping experiences. These formats capture customer attention in more engaging ways, helping brands break through the clutter of traditional ads.

Brands should also explore niche retail media networks. While Amazon and Walmart dominate the landscape, many smaller retailers offer more targeted media opportunities with less competition. By identifying these networks and aligning them with their target audience, brands can gain greater visibility and higher ROI without competing head-to-head with major players.

Managing Privacy and Compliance

With the rise of stricter data privacy regulations, such as GDPR in Europe and CCPA in California, brands must be more vigilant than ever about how they handle customer data. Retail media networks, which rely heavily on first-party data for targeting, need to ensure that all data collection and usage are compliant with these regulations. Failure to do so can result in costly fines and damage to brand reputation.

Navigating these regulations can be challenging, especially when operating across different countries or states with varying laws. Additionally, customers are becoming increasingly aware of how their data is used and expect brands to respect their privacy.

Solution:

To address these concerns, brands should work closely with retail media networks that have robust data privacy and compliance practices in place. Retailers should clearly communicate how customer data is being collected and used, ensuring transparency and building trust with consumers.

Conclusion

Retail media offers immense potential for brands to reach their target audiences with personalized, data-driven ads. However, it’s not without its challenges. Fragmented networks, limited data access, difficulties measuring ROAS, ad saturation, and privacy concerns all pose significant obstacles for brands navigating this new landscape.

By adopting strategies to overcome these challenges—such as negotiating for better data access, focusing on creative ad formats, and ensuring privacy compliance—brands can unlock the full potential of retail media. 

With retail media services - quality proven over time, businesses can turn these challenges into opportunities for growth and long-term success in the competitive world of retail media.