3 Strategies to Utilize Retail Media Networks for Profitability 

The retail industry is transforming from an industry powered by transactions to an industry that runs on data-powered retail media. In fact, some retailers say that their marketplace fees and ad sales will become more profitable than sales of merchandise within the next five years alone.

This is all part of a continued trajectory of the fastest-growing digital ad format in history. Retail media has reached $30 billion in revenue faster than both search and social, according to Luma Partners, and continues to fill a market need for consumer packed goods and branded manufacturers. Reuters projects that by 2028 revenue from retail media networks will account for 15.4 percent of all revenue from ads, eclipsing television as an advertising platform. Companies that use RMNs are seeing maximum ROI from untapped customer data and reaching highly engaged audiences. 

Here are some key strategies that retailers can consider to increase RMN profitability in 2024:

• Expanding into new markets
• Creating a value proposition for consumer-packaged goods (CPGs)
• Hyper-personalizing ad experiences

The proliferation of RMNs has not yet fully translated to the European market, leaving an opportunity for global retailers across sectors to establish themselves as regional leaders.

Because many European retailers hesitate to invest more heavily in RMNs due to a lack of confidence in returns from the European market, there is a massive opening for technology expansion in this market that begins with better targeting and data strategy.

“It’s becoming more and more necessary for European retailers to harness their first-party data for more advanced targeting strategies,” says Elliott. “Implementing more precise audience segmenting is what will elevate not only your RMN, but any digital advertising.”

In June 2023, Albertsons Media Collective proposed new industry-wide standards for RMNs, which include transparency on RMN capabilities, like targeting offerings. As the industry begins to more openly disclose how RMN metrics are calculated, retailers with robust first-party data capabilities in Europe and beyond will rise to the top.

While robust loyalty programs are already the backbone of successful RMNs, retailers have an opportunity to kill two birds with one stone by further segmenting loyalty members to use as a testing ground for new offers and targeted advertising.

In most cases, loyalty program segments are differentiated by recent spend and/or points accumulation. An incredibly diverse group of customers are all hit with the same blanket offerings and promotions, a spray and pray approach. While the contact information that these loyalty members provide is valuable on its own, RMNs that further segment their promotional offers within their loyalty programs receive higher engagement and return business.

For example, a delivery driver that frequents a U.S.-based convenience store for snacks will appreciate very different offers than a single mom stopping by for coffee on her way to work. A monthly coffee subscription that allows the latter customer to accumulate points to save on gas would not be appealing to the former customer. A BOGO snack and hotdog promotion notifying the former customer as they pull in for a rest stop wouldn't be appealing to the latter customer.

Generative AI can also enable these unique dynamic ad experiences for customers. While RMNs can segment audiences, Gen AI can analyze vast amounts of consumer data to identify specific audience demographics and behaviors. Using this data can help generate tailored ad copy and visuals based on real-time time customer data, improving ad performances and click-through rates. Gen AI is the  key differentiator, helping retailers stay ahead of the competition.

However, retailers should also think about consumer behavior trends within their sector when it comes to 2024 investments.

These are the top retail media network recommendations from our industry experts, based on consumer trends, proprietary research and sector expertise:

Fast-fashion returns proliferate: Gen Z will continue to opt for low-cost and fast-fashion; to keep costs down, retailers will need to find ways to connect supply chain data with retail media advertising to optimize supply and demand.

B2B sales go digital: While B2B sales thrive on customer relationships, younger B2B customers are craving streamlined, digital sales processes that they're used to in their personal life through marketplaces and hybrid sales processes.

RMNs combat brand switching: As many customers switched to owned brands to combat inflation, CPG brands will continue to rely heavily on RMNs to lure customers back to their products, despite the fact that CPGs will compete with ads from these owned brands.

Loyalty-based promotions bolster RMNs: C-store retailers can build strong RMN networks through closed-loop measurement via in-store screens and in-app advertising, relying on frequent visits and promotions served up through loyalty programs.