Retail Media Networks

Amazon, Walmart and Target are the top retail sites for ad spending, drawing over $2.3 billion from May 2021 to January 2022, according to an analysis by MediaRadar. The firm reviewed advertising activity on 22 large retailer sites.

Retail media has been a major discussion point in the industry as a wide array of companies stand up advertising networks and court brand dollars that have historically been earmarked for Facebook and Google. The MediaRadar findings help delineate some winners as the race heats up, though the pack leaders are hardly surprising. Amazon has the most formidable e-commerce operation in the category, along with significant bets in streaming, while Walmart and Target wield the biggest brick-and-mortar footprints.

Total advertising buys within the research sample, which included 24,000 companies promoting nearly 38,000 brands, topped $3 billion. A large portion (88%) of those dollars flowed to native advertising, while 11.5% was put toward display units.

Consumer packaged goods made up 17% of the total pool, accounting for about $500 million in spending. Reckitt Benckiser, Kellogg and Mondelez were the most substantial CPG spenders, underpinning how large marketers are adjusting their media strategies amid an acceleration of e-commerce adoption.

The retail media field continues to grow more crowded, raising the question of whether there could be an eventual shakeout.

Short-term, brand interest in retail media is expected to remain healthy enough to support a wide playing field. E-commerce habits driven by the pandemic are sticking, if not quite at the meteoric heights they once reached. Meanwhile, the pending deprecation of third-party cookies is forcing marketers to change their ad-targeting tactics as they seek media placements closer to the point of sale. MediaRadar, which tracks campaigns across channels including online, TV, mobile and print, found Reckitt directed 14% of its total media spending to retail sites. Kellogg allocated 10% of its budget toward the category and Mondelez did 18%.

"The retail industry has seen dramatic changes over the last few years, especially during the pandemic," Todd Krizelman, CEO and co-founder of MediaRadar, said in a statement. "As such, companies are advertising on e-commerce sites in hopes that their products will be seen by the right buyer, ultimately ending with a purchase."

MediaRadar examined not only the total amount of spending on retail sites, but also how consistent the advertiser pool was. Fourteen percent of companies buying ads in January 2022 had done so every month since May 2021. Overall, the sample saw a 59% retention rate from December 2021 to January 2022.

The lowest amount of spending occurred in May 2021, with ad spending hovering at around $218 million. December — the thick of the holiday season — notched the highest figures, with $426 million. January of 2022, which is typically quiet, saw $343 million spent, suggesting strong momentum carried over from the fourth quarter into 2022.

As retail media activity surges, retailers have made a point of calling out their strengths in the category. Amazon and Walmart have both started breaking out revenue from ad sales in earrings reports. Walmart Connect, the company's media unit, generated $2 billion in revenue in 2021. Amazon's advertising arm saw about $31.15 billion in revenue for the full year, and $9.7 billion in Q4 alone.

With a higher level of investment, ad offerings in retail media are expected to evolve. Native and display units still command the lion's share of brand dollars, per MediaRadar, but those placements could be nearing a saturation point on mature websites. Some companies this year are focusing on premium units, including video ads, shoppable media and bespoke landing pages.

Marriott broke ground in early May of 2022 by launching the hospitality industry’s first media network. It is unlikely to be the last hotel owner to do so, and marketers shouldn’t be surprised if other sectors, from airlines to financial services, chase the same early-mover advantage in the later months of 2022.

The demand for first-party data isn’t going anywhere with the death of cookies looming in 2023. Companies that own reams of personally identifiable information derived from digital properties like apps and websites are wizening up to the fact that those assets are very monetizable. As in, break out a new revenue segment monetizable. But as these media networks proliferate and scale, questions arise as to whether they’re lessening complexity for brands or simply adding another layer in a landscape that’s already notoriously hard to navigate. Marketers faced with a surfeit of options might get pickier in their choice partners and more demanding of transparency, narrowing the playing field.

“In the wake of third-party cookies disappearing, companies that have a lot of first-party transaction or sales data and customer data really understand that's a true source of competitive advantage,” said Julie Jeancolas, global head of media and customer engagement solutions at Dunnhumby. Dunnhumby works with Walmart, one of the leading retail media players, on a customer data-sharing platform called Luminate.

“Any sector that has access to addressable first-party data that you can actually then target — and you have the consent of the customer — or any sector that has a large media estate can build a retail media network,” Jeancolas added.

Retail has set the trend when it comes to media networks, and the pace is staggering. Companies ranging from big-box stores like Walmart and Target to niche and local players are rushing to stand up offerings that combine aspects of ad sales, technology and commerce. Ulta, the beauty brand, unveiled a UB Media network in May, speaking to how category-specific companies are coming around to the idea. Sephora, a rival, was hiring for a position that would help build a similar-sounding platform earlier in 2022.

Retail media is the fastest-growing segment of media behind only connected TV, according to Michael Harrison, managing partner at Winterberry Group. Spending on retail media in the U.S. alone will double to $40 billion in 2022, according to research from the consultancy. A major factor supporting growth has been the pandemic, which pressured companies to accelerate investments in digital transformation and make the jump to e-commerce and mobile channels. That’s been a rocky journey but provides clear benefits now that all eyes are on first-party data.

“They're riding the wave of everything becoming more digitally-driven,” said Harrison. “The shift to commerce is driving all of these retail media networks or media networks populating. You'll continue to see it.”

Fresh coat of paint

Marriott’s announcement was noteworthy in billing the platform, which draws on the Bonvoy loyalty program comprised of 164 million members, specifically as a “media network” versus a traditional marketing arrangement.

“Marriott has historically sold advertising targeted around the hotel you're staying at,” said Harrison. “They have done that as one-offs or within email, so it's been more like a newsletter rather than a real media network. Now, they have so much traffic to their properties that they own and operate, they can drive media revenue off of that.”

UB Media, which relies on the brand’s Ultamate Rewards loyalty scheme, takes a similar approach. While Ulta has operated a marketing practice for years, this is technically its first retail media network.

Other categories adopting the media network moniker recognize the success that retail has had with the branding and potentially see it as a method of attracting more advertiser dollars. These companies could “reposition, replatform and resell an existing marketing partner or points program or display program into something a little more sophisticated and modern,” said Chris Parker, founder and managing partner at the ad agency Scrum50.

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"The more interaction you have with the customer, the more you learn about them, the more you capture their preferences and the more you can personalize."

Julie Jeancolas

Global head of media and customer engagement solutions, Dunnhumby

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That’s not to say all media network rollouts are simply slapping a fresh coat of paint on old goods. Marriott Media Network brings a full tech-stack collaboration with Yahoo, leveraging its sell-side and demand-side platforms.

Still, it’s not hard to see other businesses taking stock of their marketing products and using the media network boom as an opportunity to unify and expand them. Mastercard in 2019 acquired the customer data platform SessionM to improve its marketing personalization and loyalty program. Car-trading marketplaces like Carvana and Cars.com could feasibly hawk media to insurance providers or ancillary companies, per Harrison. Even intermediary platforms like Instacart and GoPuff are ironing out ways to integrate more advertising into their properties.

“Airlines will be the next ones to go, because you have so much data and you know where people are going, and then financial services,” said Harrison. “They're all working toward building this infrastructure where they can sell media.”

Point of differentiation

Retail may be the model to follow in establishing a media network, but some pages of the playbook may be easier to copy than others. Greener industries dipping their toes into the space must consider what types of data they wield, whether that data is addressable and what kinds of activations are actually going to appeal to their target advertisers, experts said.

“The more interaction you have with the customer, the more you learn about them, the more you capture their preferences and the more you can personalize,” said Dunnhumby’s Jeancolas.

This setup benefits businesses like grocery stores that people visit on a regular basis and where they tend to buy the same things repeatedly. It isn’t necessarily something that translates to hospitality, barring special cases like business travel.

“If you look at a Tesco or Target or Kroger, they have those frequent interactions with customers. Marriott doesn't. I don't think you visit a Marriott every day or every week,” said Jeancolas. “How [is Marriott] going to enhance their understanding of their customers, their loyalty database?”

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"There's going to have to be some sort of shift toward transparency... which of the big retail networks is the first to crack?"

Michael Harrison

Managing partner, Winterberry Group

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Data alliances with complementary brands are one potential solution, according to Jeancolas. Tie-ups like Marriott’s with Yahoo are at the same time indicative of how many brands will rely on outside tech assistance to get their media networks off the ground.

“You'll see very similar partnerships to Yahoo-Marriott,” said Scrum50’s Parker.

“Even as sophisticated or progressive as Marriott has been in relation to digital, they recognize that this is an ever-changing, slippery, politically-charged technology,” Parker added. “They would rely on somebody with the wherewithal both from a scale perspective and an experience perspective and, frankly, someone they can turn to if something goes wrong.”

Working with third-party solutions providers could also be integral to aspects of running a media business like campaign measurement and managing marketing channel mix. Retailers thrive on the pitch around “closed-loop” measurement: They can serve an ad for Coca-Cola, measure foot traffic in stores and then track whether someone actually makes a purchase via point-of-sale. That’s a markedly different structure than, say, running a hotel.

“It would be more around driving awareness or consideration, maybe less around sales,” said Jeancolas of how hospitality media networks might operate. “It's very different accountabilities than, obviously, a grocery store.”

Mounting frustrations

Broader adoption of the media network concept also arrives as some of the honeymoon phase wears off for retailers. For one thing, the sheer number of retail media networks may be nearing a saturation point. Brands are naturally going to gravitate toward the platforms that deliver the widest reach and most bang for their buck. Increasingly, those look like a lot of the same names that have dominated brick and mortar and e-commerce to date.

“Brands or agencies, especially, will try to find the platforms that give them access to the maximum amount of inventory available,” said Jeancolas. “There will be some consolidation.”

How retailers keep brands in their ecosystems has occasionally proved frustrating as well. Retail media networks are frequently promoted as a break with digital advertising’s long-standing walled gardens of Google and Facebook. Marketers have made clear that these alternatives can be just as opaque. With media networks becoming a larger portion of retail growth strategies, they may also become mandated spending allotments for CPG partners versus a nice add-on to have.

“Six months, a year ago (in 2021) people were talking about Walmart Connect and Kroger and [Target’s] Roundel as a way to grow sales,” said Harrison. “Now, you're starting to hear them talk about it as a tax and that it's trade promotion masked in a retail media network.”

While that's a potential warning sign for new media network entrants, it also suggests they have an opportunity to shake up the model in substantive ways.

“There's going to have to be some sort of shift toward transparency,” said Harrison. “What will be interesting is, which of the big retail networks is the first to crack? Once one does it, it would seem that all of them would.”

The past few years have seen a boom for e-commerce and online marketplaces, but what does the future look like? In an era of economic uncertainty, rising inflation and continuing labor and supply chain disruptions, how can online marketplaces remain competitive and profitable for the foreseeable future?

One accelerating growth lever is onsite advertising, or retail media. As every company from Marriott to Target to Instacart looks to monetize through advertising, marketplaces would be wise to explore this route too. A key benefit is gaining a new source of revenue beyond the core business.

More crucially, retail media paves a new way to grow gross merchandise value (GMV) by helping merchants reach and convert the right audience with context-based targeting. Shoppers see more personalized content from targeted ads, encouraging them to buy more, raising the profitability and stickiness of the platforms.

The retail media opportunity

Amazon was a pioneer in retail media — uncovering profitability for both themselves and their merchant partners. As CNBC reported, Amazon’s ads business is growing by 32%, hauling in $31 billion in 2021. And everyone else is hot on their heels.

According to Insider Intelligence, advertisers in the U.S. alone will spend more than $40 billion on retail media ad placements. By 2023, one out of every $5 spent on advertising will go towards retail media.

As a marketplace, you can’t afford to miss out on this massive revenue opportunity.

How marketplaces can capitalize on retail media

Identifying the opportunity presented by retail media is the easy part. But how can marketplaces actually capitalize on it?

Marketplaces largely derive their value from the volume of transactions on their platform – the more merchants and users, the more valuable the platform. But their challenge is achieving volume even without the scale offered by big brands like Target or Walmart. The key to advertising revenue success is to incentivize all parties in the ecosystem: Provide merchants with a channel to increase sales and discoverability, and better serve shoppers with more relevant items.

Imagine you’re a manufacturer of tennis rackets looking to reach shoppers at the point of sale. The obvious method would be working with major retailers, including those focused on sporting goods. Those big box stores could then show your ads to everyone typing in a tennis-related search on their websites and apps, or to everyone who has indicated interest in tennis in the past.

But that might not necessarily be the best approach. Just because someone is looking for tennis equipment now doesn’t mean they’re ready to buy – or buy from you. And this is doubly true for people who may have only searched for tennis-related items in the past.

Instead, what if the marketplace enabled merchants to show ads at precisely the right time to boost sales? Even if they have a smaller total addressable market, they’re likely to gain greater GMV through accurate targeting.

Here’s how this works: sophisticated technology can predict the best time and place to surface ads in a user journey — by analyzing historic and real-time user behavior. Following the same example, these systems would recognize the user’s preferences for certain features or brands, or recognize that she had purchased items in the past that suggest her skill level. Marketplaces, especially those with many merchant and brand partners, can capitalize on this information to target effectively and convert more.

Predicting the future of retail media

Creating an ads business comparable to that of Amazon sounds like an overwhelming undertaking, but is entirely feasible — backed by the right technology. More and more industry innovators are looking to machine learning to set up their ads business for automatic, smart targeting and performance optimization. Marketplaces can leverage this technology to jump-start their own ads business, and make their platforms the best place to buy for users and the best place to sell for their merchants.

Using predictive analytics focused on return on ad spend (ROAS) optimization, marketplaces can ensure a reliable and scalable new revenue stream while offering strategic value to their merchant advertisers. Their shoppers get more personalized experiences through seeing ads for products most relevant to them, and discovering items they didn’t know they needed.

The retail media opportunity is growing faster than ever, and with a slew of retail media networks out there, marketplaces need to assess their unique business needs, develop a criteria and choose a partnership that will help them realize the full potential of their available ad inventory.

Macy's is betting bigger on its retail media network at a transitional point for digital marketing that has seen rivals chase similar ambitions. The push also arrives as Macy's vies for a reinvention on the consumer-facing end, with a new "Own Your Style" brand platform unveiled mid-March that carries streamlined web design and a spotlight on personalization.

With a more robust suite of ad products on tap, the department store chain's retail media team is narrowing in on richer media formats and plans to launch a self-service marketplace later into 2022. Helping enable the unit's speed and scaling efforts is Macy's focus on handling most operations internally, according to executives.

"Maturity of retail media networks is really driven by the extent to which core functions are in house," said Melanie Zimmermann, vice president of the Macy's Media Network and the head of its dedicated in-house agency unit.

Zimmermann, a longtime Macy's veteran with prior roles in corporate strategy and analytics, was brought on to grow the retail media network nearly from scratch in 2020. She previously helped develop Backstage, an off-price concept Macy's debuted in 2015, and the retailer's revamped loyalty program. Retail media networks have become a hot item across the industry, with companies including Walmart, Target, Albertsons, Kroger, Walgreens, Nordstrom, CVS and Best Buy among the pack.

Macy's Media Network hit the market in August of 2020 and has quickly built out its tech capabilities as brands seek out alternatives to digital stalwarts like Facebook and Google. For the full year of 2021, the platform generated $105 million in net revenue. Advertiser count grew 2.8 times year-on-year in the key fourth quarter, while the number of campaigns running quadrupled (though there was only one prior period to measure against).

"We've been able to grow the number of clients we're working with substantially, and at the same time, we were able to substantially increase the year-over-year investment," said Zimmermann. "It's a combination of expanding to a broader number of vendors across different categories, plus significant increases in both contained count and average budget sizes, that helped us exceed expectations."

A Macy's spokesperson declined to share hard figures on Macy's customer base and campaign count. Spending on retail media in the U.S. doubled to $40 billion last year, according to research from Winterberry Group.

While Macy's has offered some form of sponsored product ads since at least 2015, the Macy's Media Network today wields a wider variety of options. On-site, sponsored and display ads are easily the most popular, per Zimmermann. Macy's in 2021 rolled out modular campaign landing pages with basic templates for smaller advertisers, features like style guides and shop-the-look for those with medium-sized budgets, and fully customized packages for the largest brands. Off-site, Macy's leverages channels such as programmatic display, video-connected television, online video and email advertising, as well as physical collateral like in-store screens, package inserts and an iconic billboard in New York City's Herald Square.

In the digital sphere at least, designing more tailored, interactive experiences is now taking precedence over ad saturation.

"There are not a lot of extra placements we can find. The next part of our journey is to make those placements even richer and [more] inspirational," said Zimmermann, noting there are about 40 placements on Macys.com and 23 on Bloomingdales.com. The latter site added Macy's Media Network services in 2021.

Some ideas in the cards include integrating quizzes or guided shopping into landing pages. Shoppable video is another project for both on- and off-site channels.

Building a toolkit

Another area of investment beyond premium ads for Macy's is expanding its tech stack. The unit recently introduced customer relation management and order management platforms, along with its first iteration of reporting automation for clients.

"I believe that we have found the secret sauce of what metrics to provide to our advertisers," Zimmermann said. "Now that we can speak around the metrics, it's all about automation, and of course, continuously refining the approaches we're using."

Macy's also aims to step into the self-service arena in 2022’s second half. Doing so is typically a mark of maturity for digital advertising platforms trying to reach a wider swath of brands. Other firms operating retail media networks, including Walgreens, have recently plotted similar moves.

"Today, we are almost exclusively managed services," said Zimmermann. "In the future, you'll start seeing more self-service solutions from us as well. Particularly with the upcoming launch of marketplace, we will provide even more choice to vendors that would like to run their campaigns themselves."

In-house versus outsource

Lastly, Zimmermann is directing resources into the back-of-house talent that has propped up the Macy's Media Network to date. Ninety percent of the hires at Macy's Media Network have been net new since she got the initiative off the ground. The group now has about 40 employees. Many of them are specialists in areas like ad tech and retail media, with a chunk joining Macy's Media Network from Triad, the defunct WPP shopper-marketing agency. Triad's largest client was Walmart, but the shop encountered troubles after the big-box store — itself an increasingly large retail media player — decided to in-house many advertising functions.

"You need to do a really good job running these campaigns and optimizing and targeting these campaigns. It is very problematic outsourcing this portion of your value chain externally, because that's truly the core of what you offer to the advertiser," Zimmermann said. "I went out to secure highly experienced talent across account management and particularly media planning and campaign management."

In terms of specialist talent Macy's is seeking out, Zimmermann pointed to areas like analytics as important. Other aspects of Macy's Media Network, such as trafficking, occasionally rely on outside labor so Macy's can keep pace on its goals.

"There are certain elements of the value chain where you can be operating in a more cost-efficient manner," said Zimmermann. "By having a balanced approach of in-house, and in some cases, augmentation, we're able to deliver the growth that you've seen in our business."

In the high-stakes race among grocers building out retail media platforms, Albertsons is a late entrant. The company unveiled its own advertising business in the final months of 2021 and officially launched it in late February of 2022 — well after competitors like Walmart, Kroger and Target had already built out their own shops.

Lagging the competition seems surprising for Albertsons due to its size, and because it's become known as a digital innovator and fast adopter of new technologies. But that isn’t hurting Albertsons Media Collective's ability to attract significant interest from CPGs that want to spend with the grocer, said Kristi Argyilan, the retailer's senior vice president of retail media. It also carries some advantages, she said, like being able to bypass many of the early growing pains retail ad businesses have had to go through and incorporate cutting-edge technology into the network.

Albertson's Media Collective is still in its early days, and the company is just starting to get data back on its opening campaigns, which shows a return for CPGs of up to $14 for every dollar spent, Argyilan said. The new business is also working on new offerings like a self-service platform and thinking about ways to expand its platform to include “non-endemic” advertisers, like car makers and travel companies.

“We’re pushing it all forward at the same time,” Argyilan said in an interview.

The ability for retailers to build incremental revenue through retail media is large and growing. Coresight Research estimates that global revenue from retail media advertising has tripled since 2020 and will hit $75.1 billion in 2022. 

Argyilan, who was recently president of Target's Roundel media division and worked for various media agencies before that, said she sees plenty of opportunities for Albertsons and other grocers to nab advertising share from Google and Facebook as cookies go by the wayside and CPGs increasingly prize first-party data. 

GROCERY DIVE: You worked briefly at Bed, Bath & Beyond and before that spent several years with Target. What was interesting to you about the Albertsons role?

KRISTI ARGYILAN: When you look at the size of Albertsons, the sales that go through Albertsons and all the related brands that Albertsons owns, it is a massive business and should easily be within the top five retail media networks that are out there. And they've been nowhere on that map prior to this moment. Realizing the scale and the potential was super attractive.

Then to understand how [Albertsons CEO] Vivek [Sankaran] has this as one of his strategic priorities for the next couple of years, that we represent a really great growth lever for Albertsons, and then to be working within the company’s digital pillar and to see how much growth, agility, speed that the group is operating at — it just all came together all at the same time.

GROCERY DIVE: Albertsons is a pretty late entrant to the retail media field. What challenges come with that?

ARGYILAN: Being a late mover is an advantage because now all of these capabilities can be built and are built knowing where data privacy is going, knowing what Google is going to be doing with cookies, understanding the impact Apple and all of their privacy policies is having on other media channels being able to measure. It allows us to build for where this is going. A lot of our competitors have to work off what we call the “Frankenstack” because they have a lot of legacy systems that have been in place for the last couple of years, if not even longer than that. We're coming in with the ability to just build it fresh in a more modern, more nimble sort of way. 

The challenge is that, in some instances, we are kind of putting some companies over the tipping edge of being able to take on more capacity, and especially something that's scaled at this size. You have to consider when you're working with partners and asking them to take on something at the scale and complexity of Albertsons, to make sure that they really can take it up.

GROCERY DIVE: A lot of grocers, including regional chains, have added retail media capabilities recently. How do you think about the evolving competitive landscape? Can brands meaningfully spend across all of these platforms?

ARGYILAN: I think that the brands are actually pretty excited about each of the retailers having a retail media network because they can see the return on their marketing spend. We are starting to see more dollars get pulled from other places and invested in retail media. There's more of a call for accountability, and retail media networks are obviously held at a very high standard for accountability. And because we have closed-loop reporting, we can prove that sales are happening as a result of the marketing campaigns that we're running. 

Amazon, Google and Facebook control 65% of the total digital marketing spend that is moving through the marketplace. If I can get a couple of percentage points of that, I'm in good shape. The industry marketers are looking for a more diverse partner system where they can spread their money out. And retail media networks, by the very nature of the importance of the broader partnership with CPGs, come to the table in more of the spirit of partnership and relationships so that all parties win.

GROCERY DIVE: You mentioned in 2021 that you see local advertising as a unique opportunity for Albertsons. Can you explain that?

ARGYILAN: Albertsons is made up of 14 local grocers. That’s how the company came up, by serving these local communities. So our ability to be at scale and to execute locally is a really unique place for us to play. None of our competition is really executing that way yet. They're still looking for the efficiency of being as broad and national as possible. We see brands really wanting to drive brand relevance. And you don't do that by being the same everywhere. You do that by recognizing the local nuances, the diversity that makes up every community that is within the country, and Albertsons is uniquely positioned to do.

GROCERY DIVE: Does that include advertising for smaller, more local suppliers? I think of retail media as focusing a lot on the large CPGs, but is there room for some of these smaller companies to play as well?

ARGYILAN: There absolutely is. I think the challenge for us is we need to provide self service so that it's easier for them to come to us if we don't have a salesperson that has found them yet. How can we direct them to a self-service platform that they can then go in and execute on their own? That's the work that we're doing right now.

GROCERY DIVE: Display ads and sponsored listings make up so much of retail media right now. When you talk to brands these days, what else are they looking for?

ARGYILAN: Most of the CPGs are taking advantage of all the individual products that we all have. For the most part, they're seeing pretty strong results across the board from all of us. I think the areas that they really would prefer advancement in are areas like being able to build their own audiences off our first party data so that they can then apply those audiences to the broader marketing and media buying that they're doing. 

There is a need for measurement for retail media networks to get integrated into the broader marketing measurement stacks that some of the big manufacturers are working off. Think of Procter & Gamble, PepsiCo, Coke, Unilever, how they all are doing a lot of marketing mix modeling to optimize their marketing spend. They're asking for retail media networks to figure out how to get integrated into that so that they're not just looking at one six-week campaign at a time to show that there's a great return on ad spend. 

And then the third piece is content. Albertsons has this really rich relationship that all of our customers have with food and the role that food plays in bringing family and friends together. Food is at the center of just about everything we do, and so there's so much rich content that we could add to the dynamic and to the science of retail media. 

GROCERY DIVE: How do you balance the need to grow revenue with making sure you’re not diminishing the consumer shopping experience?

ARGYILAN: I work very closely with the woman who is in charge of the customer digital experience, and we spend a fair amount of time talking about where advertising provides a service and provides information and enhances the experience. Every time that we launch something, we're observing the customer journey, just to make sure that it's not driving them away from the site, that it's enhancing the time that they spend there.

We'll understand better over time how richer experiences can really add to that. I think a lot of the retail media networks now are trying to figure out how to play with video in the shopping experience. You know, what kind of customer is that? There are some customers that want to linger. There are others that just want to go spear hunting and get exactly what they want and then get out. Understanding how different customer experiences either enhance or detract from their experience is key.

At some point, we see ourselves bringing what we call non-endemic advertisers to the platform too. So where does travel fit? Where does financial services fit? Entertainment? That goes back to the idea of content-rich experiences that we can bring to the marketplace.

GROCERY DIVE: Can you say a little bit more about what sort of non-endemic companies you’d be looking to partner with? Are these all companies that touch the grocery experience somehow?

ARGYILAN: Some of them are very complementary. You think of how cooking appliances, like a Krups, would very naturally be an easy, complementary non-endemic to food. But then you can also have a minivan or other things that are very fitting within the lifestyle of different audiences that absolutely could play a role in appearing in either something on our owned platforms or in some kind of an experience that we build that would be on Pinterest or Facebook or some other off-platform partner.

GROCERY DIVE: How do you see retail media integrating with in-store shopping?

ARGYILAN: In-store used to mean something just on paper, right? But it really is going full circle in terms of how digital is infiltrating the in-store experience. 

We're always leaning into experimentation to find out what kind of digital features we can bring to the shopping experience that provide a service for a customer, and then is there a way to monetize it that allows us to bring more of that to our customers? The simplest way I think about it is that our stores are also a really significant media channel for us. And so how do we use that in a really respectful way so it's not screaming at our customers all the time?

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"Amazon, Google and Facebook control 65% of the total digital marketing spend that is moving through the marketplace. If I can get a couple of percentage points of that, I'm in good shape."

Kristi Argyilan

Senior vice president of retail media, Albertsons

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GROCERY DIVE: What else do you see fueling Albertsons’ growth in this space?

ARGYILAN: I’m interested in watching what I call the third ring of data. It’s in the marketplace right now and marketers have been using it for years, but that’s going to go away as cookies go away. That is going to leave some really important publishers without a good database to be targeting from. I think that [with] retail media networks — especially given that they are in the content business and we are in the we-know-our-customers business — there's a really interesting marriage between some of these really rich content publishers and the ways that retail media can give them an alternative to the path that they're on right now, given that the databases that they're using are going to be diminished.

GROCERY DIVE: What does Albertsons Retail Media have planned for the rest of the year?

ARGYILAN: We will start to launch new products and new ways of coming to market with a different, more advanced partner ecosystem that will start to lean into some of these areas around audiences and allowing more and more marketers to be able to offer more on a self-serve basis. Media buyers right now are all operating off of some [demand-side platform] of their choice. How do we get integrated into those activities so that it's easier for them to engage with us?

Retailers building their own platforms to sell and place ads for marketers is a business firmly in its boom period, with the looming deprecation of third-party cookies and demand for alternatives to digital's old guard fueling a surge in interest. With a proliferation of retail media networks from big names like Walmart, Target, Home Depot and Macy's — and some offerings hitting new levels of maturity — consumer packaged goods marketers are expected to shift more budgets to platforms that can closely tie advertising messages to the point of sale and tap into a wellspring of first-party data.

Despite that promise, retailers already threaten to repeat some of digital's past mistakes, particularly in regards to ad volume. At the same time, companies with historical specialties in bricks and mortar face pressure to build out complex technical infrastructure on a compressed timeline. The upshot will be a period defined by a surfeit of activity as retailers try to avoid leaving money on the table, and accompanying that gold rush, a lot of trial and error.

"If you think of going online to an e-commerce platform now, the amount of inventory that is sponsored, that is sold, that is advertising has increased significantly," said Emily Turner, head of customer engagement and media, Americas, at Dunnhumby, a data science firm that specializes in the retail category. "There's been, in my opinion, compromises on the customer experience."

Any meaningful shakeout isn't really in the cards in the short term if for no other reason than that the market is so hot. The consultancy Winterberry Group estimates that spending on retail media marketing in the U.S. doubled from $20 billion in 2020 to $40 billion in 2021. The race to find a proper replacement for cookies, which are expected to be phased out sometime in 2023, will push brands to seek other outlets to reach shoppers, with retail media primed to benefit.

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"There's been, in my opinion, compromises on the customer experience."

Emily Turner

SVP of customer engagement and media, Americas, Dunnhumby

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In response, the list of retailers standing up some form of ad network that weds physical and e-commerce shopper data has grown long: Walmart, Target, Kroger, CVS, Best Buy, Home Depot, Lowe's, Macy's and Dollar Tree are among the many vying for a piece of the pie. That's leaving out Amazon — still the model many are following — which itself is realigning its advertising priorities to chase larger brands as ad sales continue to be a top-performing segment, as Insider reported. Services are also quickly evolving to incorporate cutting-edge features like data clean rooms or cloud-based management.

"In the one- to two-year timeframe, this represents such a big opportunity. Right now, they're in the investment portion," said Brian Gioia, director of product strategy at the e-commerce specialist agency Scrum50. "They're not worried about being profitable."

But the question lingers: Will retailers use the windfall wisely? There are plenty of gaps that need to be closed as mastering digital marketing remains a tall order for internet natives, let alone companies with little tech backbone and the need to demonstrate true omnichannel finesse and the much-ballyhooed "closed-loop measurement." The pandemic forcing retailers to jump to e-commerce has clearly demonstrated the pitfalls of falling short on the customer experience end.

"They've had growing pains going from traditional shopper marketing and trade marketing. What was working for them is no longer working for them in the same way," said Turner. "How do you evolve the way that you operate from a traditional trade and shopper marketing business to be a media [business]? That's learning a whole new skill set that they often don't have."

Transitional phase

As retailers make the uneasy transition, solutions providers see an opportunity. Dunnhumby introduced a solution called Dunnhumby Sphere that tries to streamline retail media functions like audience targeting, media booking, forecasting and measurement. The idea is that retail media is too fragmented and carries too much disconnect between platforms and their partners — a familiar story to emergent pockets of digital marketing.

Deeper integrations with tech providers could be in the cards for brands chasing the structure of established advertising heavyweights.

"The rate at which things are evolving, a retailer doesn't really have that much of a chance to wait to build slowly," said Turner. "In that race to go fast, they often need to partner."

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"Right now, they're in the investment portion. They're not worried about being profitable."

Brian Gioia

Director of product strategy, Scrum50

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Walmart made waves in 2021 when it teamed with The Trade Desk, a leading independent ad-tech firm, to develop its own demand-side platform. Walmart DSP, which went live around the 2021 holiday season for select partners, provides access to The Trade Desk's inventory across display, streaming, mobile, audio and connected TV and draws on shopper data from Walmart's website, mobile app and 4,700 brick-and-mortar locations. It serves as a significant test of whether a retailer can scale an ad-tech stack to rival the triopoly of Amazon, Facebook and Google — and may serve as a model for rivals to follow in casting a wider advertising net.

"The Trade Desk is building for them that self-service tool, which is something that a lot of the suppliers are looking for," said Ryan Gibson, vice president of strategy at performance marketing agency Adlucent. "When you're talking about being able to elevate customizations to the supplier, they want that visibility and transparency and ability to control to the extent that they can. That's where The Trade Desk partnership is going to be particularly appealing."

A similar theme animating the category will be the expansion of retail media networks off of a given brand's owned properties. Kroger, the largest grocery chain in the U.S., last fall rolled out a private programmatic marketplace through its 84.51° data and analytics unit. With broader reach comes the mandate for retailers to incorporate ad formats that cover more parts of the sales funnel. Richer media placements may help combat feelings of ad fatigue that are starting to degrade the user experience.

"You could look at the way Amazon has evolved their offerings," said Gioia. "You start with some sponsored product listings in search results that are very conversion-focused. You demonstrate some success and then you scale up from there in terms of more brand-building."

The pandemic has shown plenty of old chestnuts finding fresh relevancy on this front. Everything from QR codes to print catalogs has reentered the retail media marketing rotation and could carry newfound utility in an era where convincing customers to fork over their personal info is the top mandate.

Despite the resurfacing of some traditional media, retailers by and large will need help to round out leadership with a squarer focus on digital. Hiring could come from outside the category, from places like tech companies, while marketing services providers might be tapped to assist with integration. Similarly, CPG customers using retail media networks might need to build up some new muscles to deploy campaigns effectively.

"There's a lot of transformational work that needs to happen," said Gioia, who previously worked in management consulting. "I can totally see the Accentures of the world helping build out these new organizations."

Power consolidation

Marketers have long griped about the constraints of working within the walled gardens of the triopoly, but a limited number of platforms does eliminate some of the choice paradox from the equation. Conversely, advertising through Walmart Connect might look markedly different from doing so on Kroger, Macy's or Instacart.

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"The world of digital media is going to look a lot more diverse than it does today."

Brian Gioia

Director of product strategy, Scrum50

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That said, a variety of options might be welcome since different retailers cater to different audiences when it comes to factors like demographics or price points.

"The world of digital media is going to look a lot more diverse than it does today," said Gioia. "If you're a CPG company with different brands, some of your brands will probably overindex at Dollar Tree, others will overindex at Target. Your media plan will reflect that."

CPGs have already voiced concerns that retailers could be propping up new walled gardens even as they promote themselves as averse to the old ones. Though it's an increasingly crowded field, retail media could end up dominated by a select few that have both the physical footprint and digital savvy to match the scale large marketers require.

"Typically in the digital technology world, whenever there's something new happening, there are tons of new businesses popping up. That's not going to happen here because there are huge barriers to entry," said Gioia.

"Unless you spent the last 100 years building lots of Lowe's stores, you can't have a Lowe's retail media network," he added. "The thing that will dictate success is not necessarily who has the best technology or who has the best media offering. It's who has the biggest size."

While reservations persist, it will be hard for CPGs to ignore the pull of retail media. Cookies and other changes to identifiers will weigh heavier on performance and measurement during a period where improving those skills is paramount. And retail media, when based on quality data, ultimately promises something that the murkier areas of the digital world frequently struggle to prove: Someone at the other end is actually searching for something to buy.

"There's not necessarily a lot of trust in the world digital marketing," said Gioia. "At the very least, I trust that people are visiting Kroger's website and visiting Amazon and Walmart's website. I know real people are seeing my ads."

Walgreens continues to build out its retail media network, a late entry into the space that launched in December 2020. With self-serve programmatic and clean-room solutions, the retailer seeks to make running campaigns on its network easier and more privacy-friendly for advertisers looking to tap into Walgreens' wealth of data about its customers, which spans 95 million rewards members and roughly 1 billion daily customer touch points, per a press release.

"We're excited to bring our advertising clients more flexibility in managing the reach and frequency of campaigns on their preferred DSP, while dually building a better consumer experience through more relevant and optimized advertising," Luke Kigel, vice president of Walgreens integrated media and head of Walgreens Advertising Group (WAG), said in the press release.

Launching broadly in 2022's second quarter, the self-serve programmatic solution will let brand advertisers target consumers by using the retailer's first-party data on their preferred demand-side platform (DSP) and can be accessed through The Trade Desk or OpenX, with more connections to come.

The connection between WAG and The Trade Desk uses closed-loop reporting, allowing advertisers to tie campaign performance to sales data and optimize their campaigns in real time. The Trade Desk also strips audiences of directly identifiable information, a protection of customer privacy that Walgreens said led to the firm's selection. The Trade Desk in 2021 selected IPG's Kinesso and Acxiom to act as closed-loop operators for its Unified ID 2.0 cookie alternative.

The launch of an Epsilon-powered clean room comes as companies look to anonymize, aggregate and match their first-party data with that of their partners amid the looming deprecation of third-party cookies. Advertisers' data-related spending on identity, analytics, measurement and attribution surpassed $29 billion in 2021 and could grow another 13% in 2022, per a report by Winterberry Group.

Walgreens has previously added services to make its retail media network more attractive to advertisers as it looks to differentiate the service from those of its competitors. WAG in May 2021 rolled out new capabilities around television and first-party data, offering brands the ability to reach consumers via OTT, CTV and linear TV across 100 apps and 10 supply-side platforms and collaborating with OpenAP to allow brands to use its data as part of TV buys.

Walmart’s global advertising business grew 30% year-on-year in Q2 of 2022, according to an earnings release. The segment was a bright spot in a report that missed Wall Street’s expectations.

Walmart felt the same blows as many other retailers in Q1 of 2022 as inflation pinched consumer wallets and operations proved chaotic. Company leadership called out higher costs for containers, storage and fuel, as well as the heavier burden of wage expenses after employees returned to work faster than expected following absences during the omicron surge of COVID-19. E-commerce, which notched meteoric gains earlier in the pandemic, continued to cool off amid a bounceback for brick-and-mortar. Walmart’s core business could experience further turbulence as it contends with inflationary, labor and supply chain pressures. Walmart also lost a key fulfillment center to a fire.

Despite the headwinds, Walmart’s ad business showed promise at a time when marketers are investing more of their dollars on digital. Walmart Luminate, a tie-up with data-science firm Dunnhumby, has quickly gained traction, speaking to how brands are hungry for new data sources as they prepare for the deprecation of third-party cookies in 2023.

The retailer's ad unit, Walmart Connect, scaled up with an expansion of self-service capabilities and new products. Walmart Luminate, a customer data-sharing platform the company set up with Dunnhumby in October of 2021, saw more than 75% growth compared to the prior quarter, executives said.

“Our new data monetization business, Walmart Luminate, continues to accelerate with over 75% growth quarter-over-quarter as more supplier partners collaborate with merchandisers to utilize new customer insights in our platform,” Walmart Chief Financial Officer Brett Biggs said on a call discussing the results with analysts.

Walmart Luminate is intended to complement the big-box store’s fledgling demand-side platform (DSP), Adweek previously reported. The Walmart DSP was first made available to select partners in October 2021 and offers full access to the ad inventory of The Trade Desk. It is a key piece of Walmart’s strategy to focus more of its advertising efforts on automation. Roughly half of Walmart’s ad sales in the fourth quarter of 2021 came from automated channels.

Walmart Connect generated $2.1 billion in revenue in 2021, while the number of brand partners using the service grew 136% YoY, per its previous earnings release. Walmart records its advertising business either in net sales or as a reduction in cost of sales, depending on the nature of the arrangement with the brand.

Walmart’s broader troubles mirror those of rivals that are similarly ramping up their advertising bets. Amazon also saw some of its pandemic-driven momentum cool in Q1 2022, while its advertising services segment grew 23% YoY to $7.87 billion, missing analyst expectations.

Walmart in March laid out a roadmap for how its plans to expand its ad offerings in 2022. One agenda item is more premium ad experiences, such as on-site video ads on Walmart.com, tests of which commence later this year, and new formats for connected TV and digital video.