5 evaluating factors for retail media networks

Five factors for eCommerce players to consider before rolling out their retail media ad networks

Retail media networks are slowly becoming the hot favorites for brands, especially in the consumer product goods category, to spend their advertising dollars. Spending on eCommerce platforms grew by almost 50% in 2020 and is expected to expand by another 28% this year. As per an estimate by eMarketer, impressions on eCommerce properties will account for 12.5% of the total digital ad spending. 

BCG estimates this high-margin revenue opportunity to be around $100 billion annually.

So it doesn’t come as a surprise when more and more retailers and eCommerce players are launching their retail ad-media platforms, allowing brands, partners, and third-party advertisers to bid for their traffic (and consumer data). 

Apart from Amazon, which has had an existing demand-side platform since 2018, Walmart, Target, eBay, Home Depot, Best Buy, Costco, CVS, Kroger were among the retail giants transforming themselves into ad buying platforms in the last couple of years. 

The most recent additions to the space were the specialty retailers like Instacart, Ultabeauty, and Gopuff, who launched their retail media ad platforms in late 2020 and early 2021.

With so many retailers entering the race, others worldwide must be contemplating the move as well. So how would you, as an eCommerce player or online retailer, decide whether channeling your resources, time, and energy towards launching a retail media network would be worth it?

We are well aware of this dilemma and have come across similar apprehensions from many industry leaders from around the globe. So before taking the big step and going through a seemingly endless loop of evaluating partners, technologies, and blueprints, here are five factors you might consider - 

1. Your app or website traffic

This is one of the key metrics to consider when thinking about monetizing your eCommerce properties. The revenue that you can generate is directly proportional to the number of pageviews or screen views you generate monthly. As per our estimate, a website receiving 10 million pageviews (or screen views) a month can generate close to $6 million in additional revenues annually. This is based on rough calculations, and the actual revenue figures can vary based on the inventory pricing, product and category type, geographical location, audience niche, and the number & kind of advertisers. 

2. Consumer data and the ability to segment it

Consumer data or first-party data is a multiplying factor when calculating the monetization potential of an eCommerce property. The ability of retailers to make this data available to advertisers in a form that can be targeted through ads makes them particularly desirable. The highly relevant segments that are derived from first-party data tend to have a higher propensity to engage with the ads and eventually take the actions (most often a purchase) desired by the advertisers.

3. Marketplaces or Multi-brand or single-brand retail

Marketplaces and Multi-brand retailers or eCommerce platforms find it a little easier to transition into a retail media network than single-brand retailers. This is because, in the case of multi-brand online stores or marketplaces, multiple brands compete to sell their products to a common set of consumers. This competition allows retailers to create ad inventories and let the brands bid for them. That doesn’t mean that single-brand eCommerce apps or websites are out of the race. They still have the traffic and precious consumer data that can be monetized if they look beyond the typical retail media networks. There will be brands and advertisers outside of the core domain of the retailer who would want to reach out to these specific sets of consumers. 

As an example, let’s take a beauty and wellness retailer that only sells products from one brand on their website. Even though they can’t and won’t allow other beauty products brands to advertise along with their existing products, brands from other categories will be welcomed. A health and fitness brand will be willing to reach out to audiences already into self-care with yoga and diet packages. 

An entirely unrelated advertiser like a financial institution can get interested as well, in case the said retailer segments its customers into well-defined income groups based on their spending habits and inclination towards discounts. The financial institute can go on to offer different credit cards to users based on the segments.

So what’s important for retailers is to find their niche and package their traffic to complement the advertisers’ offerings.

This brings us to another fundamental question - why would advertisers be interested in you?

4. The Unique proposition for Advertisers

Despite providing extensive customer interaction and deep first-party data, next-level personalization, ideally times ads, and other benefits, retail media comes with its own sets of challenges. These platforms are usually siloed and drive advertisers away from the omnichannel philosophy that most of them swear by these days. Another drawback with retail media is that there are too many, and the numbers will only increase in the future, making it difficult for advertisers to choose the right one for them. 

And just like the saying goes, retailers can’t make everyone (advertisers from all industries) happy, and they shouldn’t try either. Retailers should have an in-depth understanding of their traffic, users, and user personas and use this information to approach the advertisers who would value it. The unique proposition can comprise of a combination of customer segments (geographical location, demographics, usage patterns, devices used, spending patterns, seasonality, and other attributes) and the product vertical.

5. Availability of Appropriate Inventory

Last but not least, the eCommerce players need to take a deeper look at what inventories they can offer for advertising while keeping intact or even improving the existing customer experience. This step seems easy but needs experts’ help and careful testing to arrive at optimized inventories on the properties. 

The number and position of the inventories directly impact the revenue that your retail media network or advertising platform can generate.

Our next article covers more about ad inventories and popular ad formats in the retail media space.

Once you have thought through the abovementioned five deciding criteria, you would need to factor in the time, money, and resources required to create a full-fledged ad network.

Kritter technology solution can help you get market-ready within weeks, at a fraction of the cost (saving millions of dollars), and with constant resource support. At the same time, Kritter Ad Trading Stack allows retailers to roll out the features and functionalities at par with the best retail media networks in the world.

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