The vast majority of advertisers and agencies are already partnering with retailers to reach consumers, with more planning to do so over the next 12 months, according to new research.
Retail media is one of the fastest growing sectors within the digital advertising industry and IAB Europe forecasts retail media ad spend will reach €25bn in Europe by 2026.
To further understand the retail media opportunity, IAB Europe and its member company Xandr, now part of Microsoft, surveyed over 800 buy-side stakeholders on their current use and experience leveraging retail media.
Paul Longo, Global Head of Retail Media Sales, Microsoft Advertising, said: “Our research with IAB Europe shows how third-party cookie deprecation has accelerated the adoption of this channel since it offers the benefits of first-party data with closed loop attribution. However, there are still pain points related to scale and technology that are creating challenges for retailers and brands.”
The study also looked at their strategic focus for the sector over the next 12 months. It made four key findings, listed below:
Retail Media is no longer an emerging channel
The results demonstrate that retail media is a key part of advertising strategies with 92% of advertisers and 74% of agencies already partnering with retailers to reach consumers. Of the small amount that are not engaged with retail media as an advertising channel, 88% of advertisers and 77% of agencies plan to do so in the next 12 months.
First-party data strategy is a key opportunity
Data, in particular first-party data, is a key opportunity within retail media, largely driven by the deprecation of the third-party cookie. More than a third of buyers cite this as one of the key drivers of retail media adoption and the majority are already working on their first-party data strategy. Whilst 91% of buyers have a first-party data strategy in place, 49% are still working towards scaling their first-party data strategy.
Scale and ad tech are the key challenges to overcome
As with any new advertising channel, retail media is not without its challenges. A third of respondents cited ‘scale’ and ‘integration with other advertising technologies’ as their top two barriers. Buyers want to be able to purchase their advertising via one or a few technology partners and the lack of retail media ad tech integration remains a stumbling block.
Daniel Knapp, Chief Economist, IAB Europe, said :“Retail Media in Europe is already an €8bn market and growing double-digit despite economic headwinds. The pandemic-induced rise of e-commerce, paired with retailers’ first party data in a world of signal loss, and the ability to combine ad exposure and conversion into a single platform are key market drivers. We see further potential for off-site retail media to integrate retailer’s role more widely in the upper marketing funnel.”
Amir Rasekh, Director of loyalty programme Nectar360, said: “Retail media presents a real opportunity for brands to reach consumers effectively. We have been building our data-driven Retail Media capability across Sainsbury’s and Argos for many years, with the aim of driving enhanced levels of personalisation for our customers and strong returns for clients.”
IAB Europe has launched a new Retail Media Working Group to enable collaborative conversations, provide education and insights, and create recommendations to shape and define this advertising space.
Laura Badea, Commerce Partner, Wavemaker, commented: “Retail media is no longer seen as bottom-funnel activation; the development of site-serve capabilities and tech solutions which allow advertisers to deploy audience segments built with retailers’ 1st party data across the entire web has enabled the conversation to shift from brand-led to commercial-led outcomes."