How Retailers Can Grow Retail Media Profits

By Michael Vullings & Graham Christie
Updated 31 Jan, 2023 10:47pm AEST

The retail media opportunity

The next 3-5 years will see many traditional retailers and eCommerce players invest heavily in developing their retail media capabilities. Market reports suggest the Australian retail media segment is growing at 19% per annum and is expected to reach more than $2Bn by 2026.

For retailers, many of whom are facing increasingly challenging economic conditions and margin pressures in 2023, retail media presents a significant opportunity to generate incremental revenue by selling advertising to brands.  Some retailers are generating as much as 7% of their revenue from retail media at a 40 – 80% margin.

For brands, retailers are attractive advertising partners because they have close proximity to consumer traffic, and can offer advertising solutions which provide a relatively high return-in-investment compared with alternative marketing channels. This makes retailers an ideal marketing partner for brands.

Furthermore, the deprecation of cookies as a method of tracking and targeting consumers in online environments will push marketers to closed ecosystems, such as those offered by retail media publishers where targeting, measurement and optimisation can occur.

Key success factors for retailers

The extent to which individual retailers can generate significant and sustainable retail media revenues will largely depend on their market position and ambition. Large players are likely to be able to build a full-scale retail media network, while mid-market and smaller retailers are often better placed to focus on developing differentiated category-specific advertising solutions, or supply media inventory into aggregated networks.

When retailers are assessing the retail media opportunity they should consider six key areas, which will in turn shape their approach to developing a retail media business:

1. 1. Critical mass/scale. Is there a sufficient audience to convince brands to buy ads?
   2. Precise targeting capabilities. Can granular audience segments be targeted based on behavioural and predictive data, not merely demographic data?
   3. Differentiated value proposition. Media space is increasingly commoditised – can the retailer develop a differentiated solution to maintain high margins?
   4. Demand generation. What is the level of demand for advertising from brands to sustain a pipeline of bookings (either existing suppliers or those outside the retailer’s current network)?
   5. Delivery capabilities. To what extent will retailers play a role in executing client campaigns and measuring performance?
   6. Starting point. What is the scale of existing ‘trade’ marketing activity, and how can this act as a foundation for scaling a holistic retail media offering.

Taking action and scaling retail media revenues

The retail media segment is rapidly growing and evolving. However, many retailers are yet to define the full potential opportunity, mobilise and pursue this opportunity at scale, and this is where CTG Strategy can help. Our specialist team has extensive media and retail expertise and we partner with businesses to take advantage of the retail media opportunity. We offer support to guide, plan and implement both the establishment, and the scaling of world-class retail media capabilities.

If you are looking to have the opportunity independently assessed and developed, please get in touch.