What: The FT makes a synthesis on retail media, its potential, the issues it raises and how they could be overcome.

Why it is important: Scale is based on ability to exploit data, which requires the right tech to do so. In the eyes of the FT, this is another reason for industry-wide concentration, as shown by Kroger’s acquisition of Albertsons, leading to a total audience of 85m households. Given the revenue generated at Amazon and Walmart, this seems worth the game.

The FT remarks that there are dozens of retailers, mainly in the US, that are trying to emulate Amazon’s success in building a marketing business on the back of a sales platform, therefore creating a new form of mass media competing with publishers and Big Tech.

For the journalist, Retail Media, estimated at $37bn in 2022, is the third wave in digital advertising, after search and social media. Retail media already outpaces radio and print spendings, and is closing the gap with TV advertising. Retailers realized the potential additional revenue that this network could represent by witnessing that Amazon earns more from its advertising services than from its subscription services, and almost double than its physical stores sales (including the Whole Foods grocery chain). As Accenture puts it, “the scale of digital attention allows to monetise data in a new way”, and Walmart is on track to generate $2.2bn revenue in advertising in 2022, with higher margins than in the retail business.

There are multiple advantages for brands: their advertising is much more embedded in the retailer’s platforms than banner ads, embedded videos or other online promotions. In addition, retailers owning the first party data, retail media networks solve the issue of Apple’s restrictions on following users and Google removing cookies. In addition, retailers have access to so much information that the knowledge of their customers is deep, and helps to carefully send targeted messages to the right person at the right moment.

This comes at a price for brands as it is not anymore unusual to pay 10 times what it costs to run a programmatic advertising on the Web, for slots on retail media networks, even though some marketers and brands are also now asking for a clear information about the ROI.

The main limitations to a full-scale expansion are:

-    Legal restrictions, especially in the EU and UK, where privacy laws are much more constraining than in the US,

-    The needed tech to make such a shift, in a context where smaller retailers already struggled to embrace e-commerce, let alone “digital transformation”,

-    Customers’ potential reluctance in the future as they will become increasingly aware that their data, including for instance purchases history, are made available to brands and advertisers.

Nevertheless, the Financial Times is confident that this new usage, which potentially creates a new and significant stream of revenue for retailers, will also expand in the EU and UK.

How retailers are reshaping the advertising industry