The term ‘retail media’ has been heard more and more frequently lately. The concept is not new, but attention to this advertising opportunity is increasing again. The Dutch bank ABN Amro shows in a just published report that the value of this advertising market is increasing sharply.
First of all: What is ‘Retail Media’? Retail media is the collective term for advertising space in online shops, apps and on digital screens in stores. The operators usually use these spaces to advertise their own products. However, these advertising spaces are no longer just used for your own products; more and more external companies are also getting the opportunity to place themselves there.
Hema announced at the end of October that it was setting up its own “Retail Media” network. The retail chain has already tested advertising from drinks manufacturers Lipton and Coca Cola, whose products are also sold by the Dutch chain, on screens in its stores. Hema emphasized that non-suppliers can also use the screens. In total, Hema uses 289 digital screens in 280 Dutch stores. These screens are located on the sales floor, but also in the shop windows and can therefore also be reached by passers-by.
“Retail media is becoming increasingly important in brands’ marketing mix. With the large and diverse clientele we have in and around our stores every day, it is a logical step for us to offer our screens to advertisers,” said Bas Verheijen, Chief Customer Officer at Hema, “By the way, this is just a first step for us. Not only will we significantly increase the number of screens in the short term, but we will also expand the options for advertisers from 2024 onwards.”
Europe lags behind when it comes to retail media
Hema is far from the only retail company offering retail media in physical stores. The Stuttgart fashion retailer Breuninger recently invested in marketing its own online and offline advertising space, and the department store group Galeria has also recently started focusing on this area. In Belgium, digital billboards are already widespread in Albert Heijn and Delhaize supermarkets. E-commerce platforms such as Amazon, Alibaba and JD.com have also been offering retail media options for some time. Amazon generates around 38 billion US dollars (around 36 billion euros) per year, according to ABN Amro. Retail media is expected to account for 20 percent of Amazon’s total revenue by 2023.
However, there are markets where retail media is already being used more frequently. It is a common advertising option in China and is also a popular strategy in the United States. In fact, in China, around 30 percent of total digital advertising spending is spent on this form, and in the USA it is 17 percent. Europe, on the other hand, is about three years behind and remains at 11 percent of spending, according to the ABN Amro report. In Europe, Germany is the leader in spending on advertising strategies.
The ABN Amro report also specifically addresses the Netherlands. By 2022, retail media spending will have increased by around 42 percent. This means that advertising expenditure reaches a level of 210 million euros. This in turn represents six percent of total digital advertising spending. By 2025, ABN Amro expects retail media spending to be just over €550 million.
Advantages and disadvantages of retail media
As with everything, there are advantages and disadvantages to retail media. ABN Amro first points out a few points that may be a little more difficult. No matter how well advertising fits into the style of a webshop, app or store, it can impact the shopping experience. It can also annoy other retailers who don’t advertise.
However, there are of course many advantages. For example, this makes it easier for advertisers to collect data when advertising to retailers. Due to increasingly strict data protection laws, especially in Europe, it is generally more difficult to obtain data about (potential) customers. In addition, advertisers can advertise very specifically via retail media and are close to the point of sale.
According to ABN Amro, the use of retail media offers high benefits at low costs. The infrastructure is already in place in the form of a website, app and retail space. The advertising spaces can of course also be used by retailers for their own advertising. According to an estimate by the Boston Consulting Group, the margins for retail media are between 70 and 90 percent for online retail media. It’s no surprise that more and more retail chains are seeing retail media as a great way to make extra money.
This translated and edited post previously appeared on FashionUnited.nl.