In my conversations with advertisers about the upcoming holiday season, they’ve made it clear that, like consumers, they’ll be cautiously optimistic this year. Confidence in their ability to weather macroeconomic storms will mix with uncertainty about whether storms will hit – and, as always, CFOs will scrutinize every dollar they spend. Still, many brands and agencies will invest in retail media this holiday season given their ability to verify its revenue impact and prove its yield.
This season, advertisers will deal with the same persistent challenges that have constrained retail media’s potential since 2012, when Amazon first enabled third-party sellers to sponsor products on its site. According to Forrester’s Q4 2023 B2C Marketing CMO Pulse Survey, more than half of CMOs’ greatest challenge with retail media is “rationalizing retail media with our other media investments.” Other challenges include “retail media’s dependence on the quality of product detail pages,” having “too many retail media networks to manage,” struggling to “compare performance across [various] retail media networks,” and “aligning our organization on how retail media is funded.”
These challenges signal retail media’s growing pains and uniqueness: unlike other channels that effectively mitigate counterparty risk between publishers and advertisers, retail media relies on messy, tense relationships between merchants and suppliers. Nevertheless, retail media will be essential to many brands’ media mixes this holiday season. When running it in the next few weeks, advertisers must:
- Satisfy retail media’s prerequisites. Without robust distribution, excellent product detail pages, efficient product feeds, and low delivery defect rates, advertisers risk degrading consumers’ experiences. Running retail media despite inaccurate product feeds and flawed deliveries, for instance, impairs brands’ value exchange with consumers by advertising products that can’t be transacted conveniently onsite, offsite, and in-store. Once lost, trust is nearly impossible to regain, especially this year given consumers’ willingness to trade down to private labels and more cost-effective brands. What to do: To set up retail media for success, advertisers should work cross-functionally to ensure informative, credible product pages and accurate, detailed product feeds.
- Partner with technology and service providers to rationalize retail media’s performance. Retail media’s potential continues to be limited by the heterogeneity of variables like networks’ attribution windows and match rates. For instance, one advertiser told me that she couldn’t decide whether to invest in CVS Media Exchange or Walgreens Advertising Group despite their similarities because the networks’ measurement methodologies are qualitatively different. What to do: To mitigate this lack of standardization, partner with technology providers who unite and equate retailers in one automated platform that facilitates apples-to-apples comparisons. In addition, run retail media’s results through your agency’s cross-channel media management platform to put retail media into an omnichannel context.
- Exercise your power with retailers. Retailers control the physical and digital placements that advertisers need, but retailers also depend on advertisers’ spend for high-margin income that offsets losses in other parts of retailers’ businesses. Therefore, power dynamics between merchants and suppliers need not be imbalanced. What to do: Savvy brands flex their power by, for instance, showing retailers the cost of media in context of their total cost of service, including slotting fees, trade promotion, and fines. They strategically highlight their leadership of categories in which they know retailers want stronger positions and demand explanations from retailers for unfavorable results from media mix models. Take a page from their book this holiday season to foster mutuality and respect with retailers.
To learn more, schedule time with me. Stay tuned for more holiday-related blog posts by many of my Forrester colleagues in the coming weeks.
