Retail media trends to watch out for in 2021
Guest Column: Rohan Rai, Co-Founder, Kritter, writes about the ways in which unprecedented growth in online commerce will shape the retail media ecosystem
In 2020, Amazon was the clear leader in the US retail media ad spending with almost a monopoly in the segment capturing over 76% of the pie, amounting to $14.31 in ad revenues, adding 50% more ad revenue in 2020 compared to 2019. Walmart was the distant second, with less than 5% of retail media or commerce advertising spending going through its channels.
eBay was third on the table with just over 2%, followed by Etsy getting less than 1% of the retail media ad spending.
So is the media advertising market saturated with just a few players reaping the benefits? This can’t be further from the truth. The pie is expanding at an unprecedented rate.
eCommerce ad spending in the US saw a growth of 38.8% in 2020, and is expected to grow more in the coming years.
Here is why.
When the total retail sales in the US in 2020 grew by less than 7%, eCommerce expanded by a whopping 44%.
This can primarily be attributed to the ongoing pandemic that restricted users from shopping from physical stores, thus ordering more online. With more customers coming online, more advertisers followed. As per Clikz, 76 percent of brand marketers now agree that "growth of [their] business depends on retail media advertising."
This unprecedented growth in online commerce and faster customer adoption creates room for more retailers and eCommerce players to take a share of the expanding retail media advertising.
Here are the four major trends that we can expect in 2021 in the retail media ecosystem -
1. More specialized retailers to gain momentum
Though Amazon gets a significant chunk of retail media advertising dollars, followed by Walmart and eBay, this doesn't necessarily mean that the fort is impenetrable. Amazon's strength lies in numbers. Being the top eCommerce retailer in the US and other parts of the world gives them a stronghold on vast amounts of customer data.
This is because Amazon horizontally covers a large number of product categories allowing anyone to buy anything on their website or their mobile app.
What lacks with Amazon is the depth in specific verticals that can give advertisers a deeper understanding of customer buying behavior in individual categories. This is where other players can fill in, and we see the trends. In a study conducted by Bazaarvoice, 41% of respondents said that they were currently shopping online for things they would typically shop for in-store. These include categories like groceries, hardware, health & beauty, sporting goods, among others. Corresponding to this growth, specialty eCommerce players and retailers are betting big on retail media networks.
Segments that are seeing considerable momentum are -
a. Health & Beauty
Ulta Beauty is a chain of beauty stores in the US specializing in Cosmetics, Fragrance, Skincare, and Beauty Gifts. In early 2021, Ulta Beauty launched its advertising arm to sell "sponsored product" ads on its eCommerce website, along with programmatic ads on publisher sites.
Walmart & Instacart
Groceries have been the next significant segment that eCommerce giants across the world have been trying to capture for a long time. The pandemic and the subsequent lockdowns expedited the adaptation among the users. During 2020, the number of online grocery buyers increased by 30.0% globally. It was no surprise when Walmart introduced a self-serve ad portal in 2020, added 40% more new advertisers in 2020, and recently acquired Thunder Adtech. The retail giant also rebranded its advertising arm WMG (Walmart Media Group) to Walmart Connect. The name signifies its unique ability to accelerate the connection between advertisers (brands) and its 150 million weekly customers.
In other news, Instacart is ramping up its advertising business with new investments and new hires. The grocery delivery and pick-up service provider in the US launched its self-serve ad platform back in May 2020. The move was very well received among the advertisers, given the rising demand for online grocery delivery during the time. The retailer has vowed to use a chunk of its recent $265 Million funding into the advertising arm. Recently, it hired a former Amazon sales director to be its vice president of ad sales.
In 2019, Home Depot launched its proprietary network, Retail Media+, where brands that sell at Home Depot can buy ad placements on HomeDepot.com and its social channels.
This year, the company plans to expand the program beyond its vendors to advertisers that do not sell at Home Depot. Imagine banks wanting to reach people who are thinking of home improvement. What better place than Homedepot to find such audiences.
Here's more about Walmart's & Homedepot's accelerated journeys towards becoming formidable forces in the retail media ecosystem.
Privacy debate to cover first-party data
When we talk about online advertising in 2021 and beyond, the discussion is primarily driven by data privacy. A lot happened in this regard during the previous years. In 2020, Apple rolled out iOS 14 for iPhones that require customer permission to track user data across applications owned by different companies. This was seen as a watershed moment concerning user data privacy in online advertising.
By bringing in consent at the fore, Apple has given its users complete control over who can use their data and for what purposes.
At the same time, policies like GDPR, CCPA, and CPRA are keeping close eyes on the collection, use, transmission, and security of data collected from users.
Now the question arises - does 1st party data come with inherent consent? To put it in other words - do brands and retailers not need permission from individual users before using their data for advertising purposes? Or who owns the users' data?
It's just a matter of time that consumers realize that the gold mine that the retailers say they own is not theirs to use without consent, and consumers should have the final say on it. Eventually, the retail media networks would accommodate this fact and create safer environments for consumers to provide their explicit consent to use their data.
No doubt the year 2021 would see more inflow of advertising dollars in the retail media ecosystem. This, in turn, will create more space and set the course for the privacy debate.
Increasing Challenge to the duopoly's dominance
Google & Facebook have long been ruling the digital advertising space with around 60% in the US & India and close to 70% in EU-5 ( UK, France, Germany, Italy, and Spain).
The duopoly will be facing some stiff competition from retail media networks this year. The two advertising giants are facing stiff competition from the Amazon advertising platform for a few years now. The rate and scale at which other retail giants enter the space will make a more significant dent in their fortress this year.
In 2020, Amazon grew its advertising revenue by 2.4 percentage points while the combined share of Facebook and Google dropped by a percentage point.
Amazon and the other retail/eCommerce players pose a very specific & fundamental challenge to Google's search advertising revenues. Search has been the crucial step at the top of the marketing funnel for a long time. Google has been a synonym for search for over a decade now. But with better reach and penetration, Amazon captured almost 4% of search ad revenue share from Google in 2020, while Walmart's share has increased as well, though it is still under 1% (see table below).
Source - eMarketer
At the same time, Facebook might face more heat from the marketers regarding transparency on its advertising platform. A survey conducted by Integral Ad Science in October 2020 reveals that 63% of respondents thought insufficient transparency concerning media quality metrics was most likely to affect Facebook, resulting in less advertiser spending on the platform.
Although Google and Facebook will continue to enjoy the bigger slices of the digital advertising pie, rising retail media players, spearheaded by Amazon—will impact the duopoly's stranglehold on the US market in 2021.
In short, digital advertising is set to undergo some permanent changes this year.
Offline presence is not going away, so it will evolve
2020 has been all about online. People were spending more time online, browsing & shopping. Brands were spending more advertising dollars online. Physical retail outlets took the biggest hit along with the aviation, hospitality, and travel industries.
Much of this shift may be temporary, but the way shoppers make in-store purchases will not be the same as in the pre-covid era.
The economies are finally opening up post one of the most severe pandemics the world has seen, and consumers are coming back to shopping malls and physical retail stores.
The time is ripe for retailers to create a genuinely omnichannel interface that will eventually translate to how brands advertise to the end-users.
Offline stores with online touchpoints will increase, creating a closed-loop for buyers' journey.
For example, with more than 170,000 screens installed across its 4,500 stores, Walmart can unify its customers' experience online and in the stores. These screens may replace some of the human interventions providing customers with smoother buying and checkout processes.
Additionally, ad inventories can be created on these screens in sync with the online channels, and brands can manage their campaigns comprehensively from one interface.
Similarly, Amazon can leverage its audience using Fire TV to deliver unified & personalized experiences on and off their mobile application and websites.
The idea is to deliver the ease and accessibility of e-commerce to brick-and-mortar stores.
In India, Flipkart, following the footsteps of its eCommerce rival, Amazon, launched a custom-built demand-side platform in partnership with Mediamath, to strengthen its advertising and monetisation portfolio. Others will be joining the bandwagon soon.
Here is how Kritter commerce advertising solution can help Retailers and eCommerce players join the bandwagon before the market gets crowded -
Quicker to market - Kritter has successfully delivered full-scale ad platforms (DSPs, Ad Networks) to some major eCommerce and retail players within months, thus saving a lot of time and resources.
Cost-effective - The Ad Trading Stack and the team of experts at Kritter work as an extended arm for the organizations, and the outcome can cost as much as 80% less compared to building an in-house advertising platform from scratch.
Best in class features - The platform allows retailers and eCommerce organizations to get their ad trading platform which is at par with Amazon's DSP in terms of functionalities, features, support for different ad types, and other parameters.
Complete data ownership and security - The ownership of all data onboarded and generated on the platform remains with the client company. Kritter also ensures the inheritance of in-house data security protocols and specifications to maintain the sanctity of data across the organization.
On-premise deployment - The platform deployment happens within the infrastructure provided by the client organization.
A solution tailored to your business need - You may be an eCommerce portal, an offline retailer transitioning into an online entity, or a payment application. We formulate a commerce advertising solution that perfectly falls into place with your business goals.
In the past, Kritter has enabled one of India’s largest payment platforms and a retail giant to build their own ad trading solutions.
Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com
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