Leaders in the retail space gathered in New York last week for Adweek’s Commerce Week to discuss the rapidly evolving retail space and share perspectives and learnings. The keynote list was comprised of speakers representing brands, retailers, agencies, and leading retail ad tech partners.
Despite rapid change, many retailers and brands are still struggling to adapt. Established organizations are built off 50-100 years of legacy retail structures, and it’s only been 28 years since the online marketplace experience (Amazon/Ebay) launched.
Here are my conference takeaways from the perspectives of brands, retailers/retail media networks (RMNs), agencies, and adtech partners that showcases how leaders in the space are grappling with how to embrace change.
Takeaways for Brands
There were many brands present at varying stages of their commerce maturity. A main theme discussed was best-in-class organization of budget against the marketing funnel. There have been many arguments on LinkedIn where marketers have discussed it being “high time to retire the marketing funnel.” But many brands shared last week that the marketing funnel is not dead; there are just many (and sometimes new) ways to interpret the funnel. Your approach and philosophy on innovation will dictate which approach is right for your business maturity.
GM’s Chief Experience Officer, Donald Chestnut, opened the first day saying that they use a 60/30/10 framework – citing that 60% of commercial budget goes to foundational fixes, 30% to growth, and 10% to moonshot projects. New Balance CMO, Chris Davis, defined New Balance as a challenger brand and legacy disruptor, citing a similar motto of allocating at least 20% of budget to experiments in the mid to upper funnel, and growing brand with better creative to move reliance away from more bottom-funnel tactics.
The new reality is that the funnel is akin to the game “Chutes and Ladders,” with no such thing as a single direct path from start to finish. Marketers need a strong understanding of conversion and commerce just as much as brand building fundamentals to be a quick-moving adopter in the retail space.
Brands also shared that they are working to capitalize on opportunities to use first-and zero-party data as the most-trusted way to build the best customer experience. Soulcycle Vice President of Product, Drew Lesicko mentioned, “The best possible ad is the one with no ad,” to explain why the brand has moved away from third-party data and towards first-party: to advocate for the user with an empathetic mentality and avoid making the customer feel violated.
Takeaways for Retailers and Retail Media Networks (RMNs)
Inarguable numbers prove why retail media is one of the most important trends to get on top of. Percentage share of digital ad spend will rapidly increase in 2023 and 2024, and eMarketer projects that US retail media networks will exceed $52 billion in ad sales by 2023.
One of the main imperatives discussed between representatives from Kroger Precision Marketing, Tyson Foods, and eCommerce agency, Advantage Unified Commerce, was ensuring that retail media networks have vulnerable conversations internally within commercial teams to resolve the frustration of silos. There is a big disconnect between the monetization teams who are building solutions for advertisers in the digital space, and the merchant teams who are concerned about planning for margins, markdown, category space, sourcing, and pricing products in an omnichannel world.
As seen in our Merkle eRetail landscape research from 2021, the reality is that budget for retail media is increasingly coming from all sources - ecomm/retail/shopper/trade teams and brand teams. Retail media networks need to be cautious around nickel/diming ad space, or they risk losing sight of the customer experience.
Abi Subramanian from Lowes One Roof Media Network encouraged retail media innovators to continue to use a problem-solving mindset to build capabilities that unlock audiences instead of focusing on building ad products. This will ultimately help build better partnerships with brands and avoid “boxing brands into a caging environment” for the next phase of retail media.
One of the interesting comparisons for the retail media industry is comparing it to the “wild west” in the industry. In retail media, there are complexities around joint business plan (JBP) agreements that are tied to historical structures of retailer organization. The rules of engagement are not defined, like for brand building media, where regulated trade groups ANA and the 4A’s are established to promote cooperative relationships between agencies, manufacturers, and advertisers.
Takeaways for Agencies
Many of the conversations at Adweek’s Commerce Week were led by specialist commerce agencies and brands. However, one of the interesting trends we are seeing is the increased incorporation of creative specialization within commerce services.
Merkle released its Q3 2022 Performance Media report in June, which found that “64% of respondents are prioritizing analytics and creative more this year than last.”
The conversation that happened between DDB, Hershey Company, and Bazaarvoice validated this theme:
“It’s a mistake to think that creative is not a part of commerce strategy, because emotion is a main profit driver and creative drives business.” The marketers from those organizations encouraged brands to start looking at commerce strategy the same way you would for a national brand campaign, and to start aiming for a single-shelf strategy vs only a digital-shelf strategy.
With less time to grab a user’s attention in the connected commerce experience, agencies who adopt creative strategy as part of a best practice for retail media will be able to take advantage of winning those moments with good creative and building a better long-term emotional connection with the brand.
Takeaways for Ad Tech Partners
Ad tech partners have been a crucial part of the evolution of retail media, especially with co-building solutions for retail media networks.
Many of the ad tech partners present at Commerce Week spoke about aiming for partner transparency, which can unlock methods of co-building profitable solutions, whether that’s in-house at brands (such as Jewelry TV’s customer lifetime value financial modeling analysis, powered by Criteo data) or through retail media networks (building offsite targeting capabilities).
Pinterest spoke about taking a deliberate stance on making its platform a safe, positive experience, reiterating that brand safety is their #1 consideration for buyers. They want to ensure the customer experience is inspiring and not damaging to mental health, banning advertisers who focus on weight loss products, for example, to be accountable to loyal users.
The retail media space is changing faster than ever and Merkle is well positioned to lead brands who buy retail media as well as retailers/retail media networks who sell retail media inventory. We see opportunities for each stakeholder to adapt:
- Brands – whether digitally native or those with heritage – need to think holistically about the shopper’s journey and pivot their full funnel tactics accordingly.
- Retailers / RMNs need to have a problem-solving mindset rather than a product-focused one to be able to unlock advertising dollars.
- Agencies have enormous opportunity to unlock creative and analytic capabilities as emotion drives connection and loyalty.
- Ad tech Partners need to be transparent and cognizant of brand safety, tantamount to co-building solutions.
Continuously innovating, testing, and learning will be the keys to success in the ever-evolving retail media landscape.