Why Retail Media Networks Are the Future of Retail

Social media. TV. Influencer marketing. Search.

They’re big, they’re glitzy, and often seen as the most popular advertising channels. But there’s another serious contender on the block: retail media networks (RMNs).

Though online RMNs have been around since the launch of Amazon.com's ad business in 2012, it’s only recently that they're gaining real traction among media execs and retail brands. According to recent studies, retail media growth accelerated by 42 percent year-over-year in 2022, and is set to rise 60 percent by 2027.

And while major brands such as Amazon, Walmart, Target, and Wayfair are leading the charge — offering retail brands exposure to their huge customer bases — a number of smaller networks are jumping on the retail media bandwagon at a significant pace.

So what’s driving this shift, and how will this once unknown channel become the future of retail advertising?

Privacy Compliant, With a Breadth of Capabilities

As the sunsetting of the cookie inches closer, advertising channels that can easily transition to a third-party cookie-less world will inevitably gain more traction.

Since RMNs don’t rely on a customer’s search history, but instead use first-party data to connect with consumers throughout the buyer journey, they’re completely privacy compliant. This is because users will already be signed in or have consented to their data being shared via subscriptions, loyalty programs, etc.

Combine this with the fact that RMNs provide a variety of marketing capabilities to brands — across online, digital out-of-home (OOH), and in-store advertising — and it’s easy to see why they’re starting to become a leading channel.

Room for Smaller Networks to Grow

While big players like Amazon and Walmart will continue to grow, retail media will also open up more opportunities for smaller networks (e.g., niche retailers and category specialists) to increase their exposure and, ultimately, revenue streams.

In fact, BCG’s Commerce Media Survey predicts that smaller networks will grow more rapidly than Amazon or any of the other leaders over the next five years. Niche businesses are expected to reach a compound annual growth rate (CAGR) of 49 percent by 2026, while category specialists are expected to reach 32 percent. Meanwhile, Amazon’s predicted CAGR comes in at just 22 percent, with the other retail leaders coming in at 27 percent combined.

This is due in part to tech companies creating retail network marketplaces specifically for SMEs, enabling them to come together and strengthen their position.

The Rise of Social Commerce and Shoppable Content

While traditional channels (social, search, TV, influencer) continue to enable brand advertisers to connect with customers across a wide variety of platforms, social commerce and shoppable content enables the user to purchase products without leaving the platform or website.

This type of content is proving invaluable to advertisers because it answers consumer questions just at the pivotal stages of the buying cycle (i.e., consideration and intent) while also facilitating the next stage (purchase) in just one click.

As a result, more and more digital platforms have become shoppable, making them a key placement for retail media.

The Data Challenge

Since RMN environments connect advertisers with multiple data sources (OOH, online, in-store) and provide them with detailed profiles of their audiences, they need to keep on top of collecting, managing and analyzing terabytes or more of data.

Doing this manually can drain resources, which is why it’s so important to make the most of data automation. And, of course, this will become even more crucial as retail media data volumes continue to explode over the next few years.

By focusing on first-party data, embracing innovative ad formats, and automating performance analytics across multiple channels, retail media networks big and small will be poised to leverage the growing audiences at their fingertips.

Navid Nassiri is the head of marketing at Switchboard, a SaaS company that provides data engineering automation to aggregate disparate data at scale, reliably and in real time, helping marketing, analytics and revenue teams to drive better business decisions.