The escalation of first-party data in retail media ads

The escalation of first-party data in retail media ads

Lately, retail media has become a growing opportunity for retailers with first-party data. On the surface, the game rules appear to be simple: retailers auctioned their first-party consumer purchase data to advertisers who turned it into tailored advertising. However, in reality, surfing on the whole retail media wave is much more complex as most, if not all, retailers still have a lot to achieve before reaching the buried treasures of the shore.

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The commencement of retail media

Let’s take a step back and understand the machinery behind retail media. Contrary to typical advertising, which targets customers outside the store, retail media advertising occurs inside, near the end of the customer journey. Retail media is not a dashing new practice; traditionally, brick and mortar retailers have been auctioning various locations inside the store for ad placements and self-placement to brands. Moreover, this article digs into the latest online retail media advertising developments.

The e-retail media advertising

Online retail media advertising follows similar rules to the traditional: retailers trade online spaces for brands to display their products. So, retail media boosts product visibility and ultimately fuel sales and conversions. In-store brands fancied the endcaps and eye-level shelves, whereas online, they want to push products as high as possible on the listing. According to Profitero researches, upping products from page 2 to page 1 increases sales by 50%. Major retailers are multiplying their investment in retail media. For instance, Walmart has introduced Walmart Connect a new face for their online retail services (paid search, Display, Brand Amplifier). It also appeared that, thanks to Walmart Connect, click through rate increased by 200% year-over-year. Furthermore, as the Pandemic and the attractive high margins have accelerated the proliferation of online shopping, retail media has become a well-established and imperative advertising channel for brands. According to a Kearney article, Analysts predict that retail media revenue will reach $15 to $20 billion by 2024 in the United States alone. Moreover, retail media also took on a much more significant role in 2021, thanks to first-party consumer data.

The first-party data of retail media

The establishment of digital advertising brought new privacy regulations as governments, and tech giants have hindered standard advertising tools — most notably third party data, commonly known as browser cookies. Therefore, advertisers that rely on a web cookie tracking specialist, for consumer data, are looking for source-owned free information or first-party data (figure 1). Publicis Sapiens CTO advices brands on how to prepare for a “cookie-pocalypse”. Yet the question remains: where is this El Dorado of first-party data?

first-party data vs third-party data

                                                                                                                                                                                                                                Figure1. Different types data of retail media            

Several players have volunteered solutions. One of the most popular is to leverage retailers extensive consumer traffic to catch deep first-party data (figure 2). This intelligence is priceless for three reasons. First and foremost, it is proprietary, so perfectly legal. Next, it is most relevant to the company and its consumers, and third, it is of the utmost quality as it comes from a primary source. These three attributes unlock a holistic view commonly referred to as closed-loop marketing. The SaaS marketing agency Directive describes the concept of gathering insights throughout the entire customer journey delivering unique predictive models so as to increase ROI on ads spend.

average number of monthly visitors on Amazon

                                                                                                                                                                                                                                         Figure 2: #1 visited online retail website worldwide in 2020 (Source: Statista)

This solution is quite popular among retailers jumping on the opportunity to commercialise their data (figure 3). A BCG analysis has estimated that the industry would generate annual revenue of $100 billion with colossal margins going up to 80%. Amazon has grabbed the lion share ($26 billion revenue in 2021) while other leaders are rushing behind. In 2019, a Digiday survey of 71 US media buyers measured that 90% advertised on Amazon, 23% at Walmart, 17% for eBay and 16% for Target. All in all, retail media will enhance the consumer experience, secure consumer loyalty and increase sales.

how sellers commercialize the data

                                                                                                                                                                                                                                                                  Figure 3: The life cycle of first-party data

The challenges for retail media

Retail media with first-party data is lucrative, but most retailers are still young advertisers. As consumer package goods (CPGs) brands have gone from simple suppliers to clients, retailers must quickly adapt their offerings to fit CPGs’ needs and compete with tech giants and agencies. In addition, according to a BCG research, scaling the new business branch comes with challenges such as:

1. Finding the right value proposition. Retailers have to clearly outline their scalable business strategy about price and areas to focus on. In addition, the offering should be aligned with CPGs interest to ease the commercialisation and avoid conflicts.

2. Attracting the right talents. Countless retailers still have much room to grow as advertisers specialists. Therefore, they need to hire the right experts and build convincing versatile teams.

3. Developing the right tech. Finally, the data needs to be cleaned and processes automated to propose a user-friendly ads campaigns platform.

Retailers must urgently take action in order to tap into the entire length of retail media.

The next step for retail media

Retail media is rapidly evolving, with opportunities arising from first-party data. However, this is a first-come, first-serve treat. The market will likely be segmented into different categories, but with very few seats. Now is the time for retailers to decide where they want to sit before rooms get too crowded.

Hugo & François

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April 10, 2024
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