It’s been a big 12 months in retail media down under. Coles formally launched its Coles 360 media division, Cartology splashed $150m on Shopper Media (a network of outdoor advertising screens), and Endeavour Group announced its foray into retail media with its new MixIn by Endeavour offering. Village Cinemas also recently announced it had partnered with Zitcha to leverage its first party data to enable advertisers to better target customers across their network and on platforms like Meta.
Whilst retail media creates impressive margins for retailers, enabling them to sell space on owned channels at a yield of 50 - 70+% profit by all accounts, retail media is still very much an emerging market in Australia.
So where is it headed and what are the key trends that will shape the landscape over the coming years? In this market spotlight we unpack the retail media landscape today and what we anticipate the future holds.
In this feature we look at;
The global & US retail media market
According to recently released data from WPP-owned GroupM, the global retail media market is expected to reach a staggering USD $125.7 billion this year alone, and by 2028, it is predicted to surpass TV advertising spending, reaching annual revenue of total of US$176 billion. According to the GroupM report, retail media is now the third fastest growing advertising channel this year, behind OOH and connected TV – but growth of these channels is coming off a much lower base.
In the search space it is a similar story, with retail media growth outpacing non-retail media growth. Research from Insider Intelligence showed that in the US retail media search, ad revenues will grow at a rate of 18.7% this year, nearly four times faster than the rest of search advertising (5.0%), according to their forecast.
Whilst market share stats vary, Amazon leads the pack, commanding a whopping 37% of total market share (according to an analysis undertaken by MediaRadar). In 2022, Amazon is said to have attracted over 14,200 companies, representing 17,000-plus brands to its advertising network- and ad sales grew by 19%. What’s more, Amazon is continuing to innovate and evolve the network in order to command a bigger slice of the ad spend pie. In May this year, Amazon revealed a slate of streaming content and associated advertising capabilities at Newfronts. As part of the announcements, Amazon highlighted a number of new and upcoming capabilities for brands in the Amazon Ads space, including the launch of Amazon Marketing Cloud (AMC) Audiences, which is launching worldwide. AMC provides a privacy-safe clean room in which advertisers can combine their own inputs with Amazon signals to create a full picture of customer journeys across channels and buying stages. New brand storytelling ads will launch in beta on Amazon Freevee, enabling advertisers to tell a more immersive story over multiple, sequential commercial breaks to name a few.
Outside of Amazon, general mass retailers - including Walmart and Target - made up the second-largest retail media allotment (about 36% of the total market). The global advertising division at Walmart grew nearly 30% to $2.7 billion last year and their investment suggests they see far more upside to come. Walmart is innovating to take a bigger slice of the ad pie announcing an array of content partnerships in 2022 with the likes of TikTok, Snapchat, Firework, TalkShopLive and Roku.
The local retail media market, adoption and key players down under
In Australia, PwC forecasts that retail media spending could hit almost $3 billion a year by 2026. That is a significant chunk of new additional revenue for retailers to be chasing after.
But where will the growth come from?
According to the State of Retail Media report by the IAB Australia, 31% of retail media spend is already coming from new budgets, whilst 69% of spend is coming from existing budgets. Interestingly, of those shifting spend from existing budgets, 41% stated they are shifting budgets from social media. And it is easy to see why, with nearly half of all brands leveraging retail media to tap into first-party data from the retailer – something social media platforms simply don’t have.
A closer look at some of the key players down under
CARTOLOGY
Cartology was founded in 2019, and according to the AFR it is estimated that it posted more than $300 million in revenue in the 2021 financial year. Cartology boasts 34.3m monthly visits via their site and app and a whopping 71.6m of monthly instore transactions across their 1081 store network. The offering provides a full funnel advertising approach providing solutions that are on-network, off-network and instore. The retail media business expanded to New Zealand about a year ago, and launched in the first half of 2023 into discount chain Big W and Metro stores.
COLES 360
In 2022, Coles officially launched its retail media offering. In October 2022, Coles announced they were helping brands connect with more than 21 million customers each week who are at our checkouts, in the aisles, who use Flybuys, visit the Coles website, watch TV, listen to Coles Radio, read Coles magazine, use social media or watch streaming services. Like Cartology, Coles also boasts a full funnel approach to provide solutions across awareness, interest and purchase. In April, the AFR revealed that Coles had put its Coles Radio account up for tender as part of its strategy to increase revenues from the retail media advertising sector – which provides signals for how some of their network might evolve in the near future.
MIXIN BY ENDEAVOUR GROUP
In September 2022 Endeavour Group (which consists of Dan Murphy’s, BWS, Jimmy Brings and more) launched a retail media subsidiary, MixIn by Endeavour. According to mi-3, Endeavour Group’s MixIn is eyeing a $400m alcohol ad market. Whilst an off-network strategy was not the immediate focus for MixIn, the network is leveraging Microsoft's eCommerce ad platform, PromoteIQ, which provides direct links into Netflix which could, over time, support initial build of their off-network strategy. Key to MixIn’s approach is to partner closely with ad agencies who are responsible for $200m of yearly ad spend.
MixIn’s network allows suppliers to adopt an omni-channel ad strategy across their network which consists of more than 1675 stores, 344 hotels and scalable digital platforms (according to Inside Retail). Their network is said to offer advertising opportunities, including: tasting programs, in-store digital screens and radio, sponsored product listings, and advertising placements across the group’s roster of brands, websites and apps.
DAVID JONES' AMPLIFY
In August 2023, David Jones soft-launched its foray into retail media with its Amplify offering which will give brands access to more than 475 in-store media formats, 102 digital formats and 70 print and digital editorial formats. A spokesperson for David Jones at the launch suggested the network was a game-changer for endemic and non endemic brands - which demonstrates David Jones is focussed on its existing suppliers as well as attracting those from other verticals to leverage its offering from day one. However, David Jones will offer brands within its stable first-refusal for access to its networks before allowing a “curated” list of advertisers within the premium and lifestyle categories to bid. David Jones is positioning its offering as the network to reach a more affluent shopper - with roughly two-thirds of Australia’s most affluent households David Jones customers, making the consumers sought after to advertise to by premium brands.
What does the future hold?
Better / improved omni-channel measurement
Whilst many retail media networks proclaim that they provide closed loop measurement, there is still a big gap between expectations of brands using the networks and the reality. As brands increasingly shift towards NeXt commerce and really looking to put digital at the core of their business to drive sales and growth, brands will increasingly seek out reporting frameworks that provide insight into the true influence of digital on all sales.
According to Maren Seitz, Senior Director, Head of DACH, Analytic Partners, “Amazon is showing that there is a huge omnichannel impact in retail media. On average, 45% of the sales volume that Amazon Display drives is on non-Amazon sales. 23% of the sales volume that Sponsored Brands & Sponsored Products drive is on non-Amazon sales, according to research from a forthcoming report by Analytic Partners. If advertising is placed on Amazon, then sales are also happening on other sales channels due to the halo effect. Retail media is likely being under-reported as this halo measurement would not be as readily available without a comprehensive piece of analysis, i.e. CMA (Commercial Mixed Analytics).”
The same is true of traditional bricks and clicks retailers – the key to continue to unlock growth will be retailers’ ability to demonstrate the true omnichannel impact of digital spend, which will be an area of focus for retail media networks in the year ahead to continue to fuel their growth.
Intermediaries & aggregated retail media networks to streamline the planning and buying experience for brands
As more and more brands build retail media networks, the buying landscape for brands becomes more complex. Over time we will see more intermediaries emerge to simplify the buying process across networks as well as the emergence of retailer partnership networks to create a compelling offering that commands a bigger than fair share of the retailer media market.
CarreFour’s partnership with PublicisGroupe is one such example of the retailer partnership network models. In June 2023, Carrefour Group and Publicis Groupe launched their joint-venture, named Unlimitail, to address the booming retail media market in Continental Europe, Brazil and Argentina. Unlimitail has onboarded an initial 13 retail partners, representing together more than 120 million loyalty customers and 1.5 billion pages viewed a month. Until now, the fragmentation of the market in Europe and Latin America made it difficult for all players to fully unlock its potential. While representing 85% of the ecommerce market in those territories, traditional retailers only attract 15% of retail media investments from brands. Unlimitail aims to bring to Europe and Latin America the same scale, connectivity and consistency that is enabling the retail media boom in the U.S.
Privacy at the core of retail media networks
With first-party data being one of the key differentiators for retail media networks – the overhaul to the Australian Privacy Act will push retail media networks to innovate and reinvent the experience for shoppers to ensure their data is managed in a privacy protected way. At its core, these networks will need shoppers to willingly continue to be targeted with personalised messages and communications. Retailers will need to work harder than ever to provide the transparency and trust in how they manage data to enable them to deliver on their promise to suppliers of providing closed loop measurement and the ability to target an individual shopper at scale. According to the State of Retail Media report by the IAB, 55% of customers are 'somewhat' or 'very' concerned about what retailers are doing with data provided via transactions.
A level of standardisation is on the horizon
As the retail media industry is still in earlier stages of its infancy, it lacks a level of standardisation that other parts of the media industry take for granted. As retailers command a bigger slice of the advertising pie, brands are seeking greater transparency in performance and are looking to be able to assess their investment across various retailers - which is a task made harder by a lack of standards that exist within the retail media ecosystem. Albertsons Media Collective (one of the major grocery retailers in the US) is championing an industry-wide Retail Media Standardisation Framework, which was announced at Cannes earlier this year. In a press release, it was revealed that the framework aims to place focus on four key areas including;
"Streamlining product characteristics for ad formats, drawing on existing guidelines established by the Interactive Advertising Bureau. It also proposes that networks adopt shared metrics for tracking campaign performance. Third-party verification is another mandate, with a checklist touching across fraud detection, ad placement and viewability and brand safety. Lastly, the framework argues for network disclosures on staffing, processes, and data-technology-oriented services, or what it terms “capabilities.”
Whilst this will first and foremost influence the US market, other markets like Australia will likely follow suit as more players enter the market and brands demand greater consistency in baseline metrics, formats and verification to best manage their investment.
The adoption of AI to drive enhanced decision making
Both locally and globally, we will see greater adoption of AI to empower users to make smarter investment decisions via retail media. Predictive tools that enable brands to assess different outcomes on the basis of investment and mix are likely to come to the fore, as will AI to drive optimisation of activity across the network. These tools will become hygiene as brands increasingly are empowered by Meta, Google and others to do just that. The question, however, is the level of trust users place in that capability, as networks seek to deliver better outcomes for themselves whilst balancing the needs of the marketer or sales leader seeking to leverage AI to optimise and improve decision making.
Arktic Fox has partnered with a number of retail players to establish and support implementation of their retail media networks. Find out how we can help your brand to leverage the opportunities that retail media affords.