What: Nordstrom launched its retail media network in the fourth quarter of 2021 and has already seen success driving millions in revenue.

Why it is important: An opportunity has emerged for multi-brand fashion retailers to drive revenue with their own advertising arms. So they are now under pressure to launch their own units. To avoid being shut out of the digital advertising market, they’ll have to move quickly but launching a retail media network requires for them to build out their own technology or partner with existing firms that offer ad tech solutions.

Pressures in the digital advertising space are increasing, due to both rising costs and new data privacy rules that make ad targeting more difficult. Rather than trying to make sense of ever-murkier customer data from Google, Facebook and Amazon, media networks offer retailers the ability to instead grab first-party data themselves. The benefit for brands advertising on retailer platforms — as opposed to more broadly across the internet — is that they are able to get in front of consumers when their intent to shop is higher, that is, on the retailer’s website itself.

While much attention has been paid to the cost of advertising on Facebook and Google, the cost to advertise on a fashion retailer’s advertising platform will likely be subject to the same auction-style dynamics. And just like with social media and other digital platforms like Facebook, Google, and Amazon, fashion retailers will own the data that indicates how effective the marketing is.

The Nordstrom example

Nordstrom, following the lead of not only Amazon but other retailers like Walmart, CVS and Target, became the first major fashion retailer to launch an official in-house media network. This new digital advertising arm allows brands to purchase advertising space on Nordstrom’s owned e-commerce platform, bringing participating brands to the forefront of shoppers’ minds when they’re searching Nordstrom’s site.

Nordstrom’s initial media network offering includes sponsored product ads on its website that appear alongside non-sponsored results, dedicated brand pages and “off-site” options like video, paid social, direct mail and display ads that will appear elsewhere on the internet. Right now, only brands Nordstrom stocks have access to these options, but eventually, Nordstrom plans to make its advertising network available to brands that it doesn’t stock but that customers could be interested in.

For Nordstrom itself, it drove $40 million in revenue in 2021.

Fashion retailers race to become ad giants