Retail media is seeing spectacular growth in Australia. Driven by the impending end of cookies and the need for first party data, it’s now estimated to be a billion dollar industry nationally, forecast to reach $3 billion in 2027. IAB Australia’s first report into retail media in Australia found that 31% of investment comes from new budgets, with 69% reallocated from other budgets.
There’s huge potential. Globally, retail media networks (RMN) are predicted to surpass TV advertising by 2028, by which time RMNs will contribute to 15.4 percent of all ad revenue. Currently, around 23 percent of retail media income comes from in-store, 22 percent from publishing (including catalogues) and 23 percent from emails. Website-sponsored searches and display banners account for only around 10 percent of spend.
For advertisers and media buyers, the primary opportunity is getting access to retailer first-party data. Other top considerations include reaching shoppers at the point of purchase, closed loop attribution and access to retailer marketing partnerships (such as credit cards and hotels).
Major Australian retailers are already jumping on board, from supermarkets and department stores to banks and telcos. But many analysts believe retail media assets are currently underpriced and not being fully leveraged. Sonder Media, which values owned media assets, estimates that the owned media market in Australia is worth $4.3 billion in commercial potential.
Here are four ways that retailers can seize this opportunity, enhance the efficiency of their retail media network and boost profitability.
- Enter untapped markets
Certain markets, such as Europe, are lagging the RMN trend, held back by concerns over data privacy regulations. In Australia, where Privacy Act reforms are also underway, this is also a valid issue. The government aims to "strengthen the protection of personal information and the control individuals have over their information".
Retailers can nevertheless benefit from first party data, media partnerships and clean room technologies to boost their segment profiles and better monetise media assets. The opportunity for Australian retailers and retail marketplaces is massive if anything experiences from the US Retail media market point to (US RMN revenue >1% of retail market size compared to <0.25% in Australia). It’s also a high margin business compared to traditional retail, retailers with 1% revenue from retail media could expect upto 10% in EBIT contribution.
RMNs however will need to be transparent about their capabilities and use of data. In the US, Albertsons Media Collective has proposed new industry-wide standards for RMNs. They point out that a lack of transparency in measurement methodologies is an obstacle for ad buyers,
- Create retailer partnerships
With a growing number of RMNs available, media buyers must decide which ones to pick. Major retailers - and in particular retail marketplaces - tend to offer the widest exposure. Amazon captured 75.2 percent of the US retail media market in 2023, more than ten times that of the second largest RMN, Walmart, and saw higher ad growth than Google and Meta (Facebook) combined. In Australia, while Cartology is the biggest, other players are also catching up with their new RMN offerings.
The dominance by a few major players is a problem for smaller retailers as well as advertisers, who could miss out on certain audience segments. One solution is the creation of data co-ops. By combining multiple retailers into a consortium-like structure and sharing data in a privacy compliant way, these networks can be more powerful and capable of competing with the big end of town.
- Form strategic partnerships
Another option for retailers is forming non-endemic partnerships (with brands who don’t sell their products through retailers) and leveraging data co-ops to boost RMN value for CPG (consumer packaged goods) companies. This allows them to merge smaller, disparate data sets in real time, providing a more detailed view of consumer behaviour.
For example, purchase history from a grocery retailer could be combined with a customer’s music streaming data. An energy drink brand could then target advertising to customers who frequently listen to high-tempo workout playlists, or a herbal tea brand could target those listening to meditative music.
- Segment loyalty programs
Retailers can segment loyalty program members to test new offers and targeted advertising. A working professional regularly buying lunch in the CBD would likely appreciate different offers than a retired couple who enjoy home baking. Segmenting loyalty programs results in higher engagement and repeat business.
Less active members can also be engaged through service marketplaces. Someone buying a new oven probably isn’t going to need to replace it for several years. But they may be interested in related home goods via third party partnerships, or services such as professional oven cleaning.
With first party data absolutely critical in a post-cookie world, retail media is a huge opportunity for both retailers and advertisers. But retailers must seize the opportunity and find ways to compete against the global marketplaces and aggregators that currently dominate the sector.
Sandipan Chowdhuri, Director, Strategy, Publicis Sapient