Navigating the Fragmented Market of Retail Media: Understanding Different Perspectives and Looking Ahead to the Future

“Transaction data doesn’t lie,” says Nico Winkelhaus, Director of Digital Marketing at Payback. The bonus system operator company has relied on data-driven advertising for over 20 years – initially primarily via print mailings, now widely on its multichannel marketing platform with the Payback app as one of the shopping apps with the widest coverage at the center. Here, data is always the means to the goal of increasing the relevance for the end customer – and thus also for the advertiser. “Irrelevant retail media content in commerce environments can ultimately even be harmful if they lower conversion rates, i.e. if they cannibalize actual sales and thus produce negative sales effects on balance,” says Winkelhaus.

The advantage in the Payback ecosystem is that the company has all user actions behind one login – even the Payback swipe at the stationary checkout is ultimately a form of login. This allows the company to assign data – such as offline and online transactions, paper and digital coupon redemption or app usage data – to a single identifier and based on this, precisely target campaigns and, on top of that, evaluate them very precisely.

In practice, this can look like this, for example, that existing customers of one brand receive a 20-point coupon via the Payback platform, while buyers of competing brands receive a 40-point coupon. For both target groups, the company checked the incremental sales effects of the campaign using control groups with the same structure. “This is retail media in its purest form – based on hard transaction data,” says Winkelhaus. This is how Payback Retail Media defines advertising in commerce environments or advertising purely on the basis of commerce data. Commerce environments can be both online and offline, for example a fashion e-commerce shop, an online travel portal or a brick-and-mortar grocery store. Based on the commerce data, advertising can be placed outside of the commerce environment – for example, an advertiser could target buyers of a competitor’s detergent brand on Facebook.

Today, retail media is part of many advertising strategies and has numerous facets. But not everyone means the same thing when she or he talks about retail media. For Otto Advertising, the term retail media includes the cradle of retail media – namely conversion-driven media campaigns. It also addresses other clearly defined goals along the entire marketing funnel. “Retail media includes both advertising in the environment of online shops or marketplaces, as well as all online and offline advertising campaigns outside of the shop, which are controlled on the basis of user data,” explains Sabine Jiinger, Vice President Otto Advertising, the understanding of retail Media in your company.

Media agencies see great potential in the retail media sector, as a current trend survey by Dmexco shows. In their day-to-day work, the agency experts surveyed mainly struggle with a lack of standards and generally valid key figures for success: The large number of e-retailers and their different planning offers lead to a high level of complexity in the planning and implementation of campaigns, according to a result of the trend survey. But something is happening. Since the end of last year, the Retail Media Circle (RMC) has represented the interests of large retail companies under the umbrella of the BVDW. Other market participants in the retail media ecosystem have come together in the BVDW Retail Media initiative. Together they want to advance this market, which is currently one of the few growth markets.

According to Moritz Hoffmann, Managing Director of Retail Media at Pilot, the retail media market as a whole is still very fragmented and is not a media type in the traditional sense per se. “Rather, it is a special environment in which a wide variety of genres can take place. We also clearly include in-store radio or out-of-home campaigns on the retailer’s premises, as well as off-site campaigns that use the retailer’s target group data,” explains Hoffmann. In general, at Pilot, retail media is understood to mean all possibilities that either take place on the various channels of the retailer itself, or use their data to be able to control the campaign elsewhere. “This is precisely why my commitment as head of the retail media initiative within the BVDW is a matter close to my heart, in order to form overarching standards and definitions with all market participants and thus ensure more transparency on the subject, which ultimately benefits the advertising brands”, says Hoffman.

It would be worth it, because the market potential of retail media is great: According to an IAB forecast, European retail media sales are expected to grow by 150 percent by 2026, to 26 billion euros. In order to leverage this potential, however, technical advertising infrastructure is required. This, in turn, also attracts adtech providers such as Infosum. The company’s Data Clean Room infrastructure enables retailers, advertisers, publishers and data providers to conduct data collaborations across multi-actor retail media networks without the data being moved or shared at any point. Because all data remains decentralized, everyone involved remains in control of their data independently of one another. This allows them to gain audience insights based on first-party data.

According to Dennie Trost, Infosum’s director of sales for Central Europe, Retail Media enables brands to activate their first-party data at the most important point in the marketing funnel – at the point of sale. “Addressing customers at this point is the true power of retail media,” says Trost. Retail Media supports in raising the first-party data treasure and making it accessible. “And Retail Media ensures that everyone involved gets their fair share,” says Trost. This can happen in different ways. One use case, for example, is shopper marketing. It allows merchants to fully monetize their first-party data by acting much like a media company. To do this, they compare their data with that of the advertising companies. This gives advertisers new insights into their customers. Based on this data, they can address potential new customers via the retailer’s channels.

According to Trost, off-site activations based on first- and second-party data and closed-loop measurement – ​​which measures campaign success holistically based on results in online and offline trade – promise great potential. In addition, the expert expects retail media to grow together with other advertising formats such as connected TV (CTV) and audio. “In the future, it will no longer be a question of retailers acting as inventory providers for brands, but of offering advertisers a holistic and target group-oriented media solution.”

Many marketers still see retail media as a conversion channel. From the point of view of Otto advertising expert Jiinger, however, the great potential of retail media for advertisers lies in the use of data along the entire marketing funnel. “Why should we only use first-party data in the shop environment when we can set up media planning from awareness to consideration to conversion based on these insights?” says Jiinger. This increases the reach within the relevant target groups and makes optimal use of the data basis in order to achieve the goals in the best possible way.

Otto Advertising has exclusive access to first-party data from more than 31 million active Otto Group user accounts. A large treasure trove of data, on the basis of which advertising campaigns can be played out very precisely. With its own display network, Otto is connected to more than 90 percent of all AGOF marketers in Germany. Thus, not only the own reach in the Otto Group can be used, but also the inventory of partner sites.

But not only retail media networks or the merging with other channels should be interesting for retail media advertisers in the future. There is further potential that is still slumbering in secret. Since data is of particular importance for this segment, Hoffmann believes that food retailing would in principle be predestined as a growth area, since it could also develop an enormous data density with its high customer frequency and deep customer understanding. “However, compared to other retailer groups, the food retail trade is still in its infancy in terms of retail media, but it offers by far the greatest potential,” says Hoffmann.

In addition, according to the expert, money for advertising cost surcharges (WKZ) is currently still being viewed in a very isolated manner, which means that various campaigns are also thought of as singular and not played across the entire promotion portfolio. “A stronger link between marketing center and retail media leads to more efficient and effective campaigns in the long term.” Only then will uniform communication be possible and the full potential can unfold. “Retail media must therefore be considered holistically in the future, both on the brand and on the retailer side,” says Hoffmann. Last but not least, the topic will also become more relevant for non-endemic brands.

“Retailers can classify very well what phase their customers are in, which in turn is very exciting for industries that are not traditionally represented in retail.” This opens up many new opportunities for brands from other segments such as telecommunications, banks or insurance companies to reach their target audience at the right moment.