brands and retailers should know about RMNs

Retail Media Networks (RMNs). is in a unique position to be both the next and current big thing in advertising.

• Current. Walmart Connect’s RMN is responsible for 12% profit at the company. According to Forrester, A quarter of retailers generate more than $100 millions in revenue through their media networks. Retail profit margins are usually low – between 3% and 4%. According to BCG , the margin on advertising sales is typically 70% to 90%.
• Next. BCG predicts that ad spending on RMNs will grow at a rate of 25% per annum to reach $100 billion in the next five year period. By 2026 this amount will represent over 25% for all digital media. This revenue will also be 60% to 70% net new spend, compared with historical trade dollars.

Despite the fact that RMNs have only just begun, there are still many challenges to be overcome by brands and retailers. We spoke to Michael Greene about the current state of the RMN eco-system and what changes are needed.

Q. What do you see as you look out over the RMN landscape.

A: Two things that appear contradictory, but are nevertheless true. This is the hottest trend in advertising today. It is a very young market. We have almost any retailer who sells third-party brand products participating. You have a wide range of companies, from Amazon, who has been doing this for many years and built it into their business strategy to those just entering the market. Brands are also immature. The brands are also immature. They have invested based on the location of early entrants, but this may not be where their customers are searching to purchase their products. All around the ecosystem I believe we are still in early stages and have a lot to mature.

Q. When you say that the RMN eco-system isn’t mature, do you mean brands don’t look for all the metrics to determine ROI?

A :Yes. I would say that these are the main buckets. But it can also come down to ease of access. Brands and their agencies face a major challenge: they no longer have to budget to purchase across a few RMNs, but instead want to do so across dozens if not even hundreds of retailers worldwide. This is a major operational challenge. In those cases, brands look at how to get more standardization in technology, easier self-service, and better tools that allow them to execute across all of the places they care about on a more efficient level.

This is where my company and other players in the technology space can help. We spend a lot time on trying to simplify and ease this access. Money can now flow more freely from brands to retailers because fragmentation is the biggest obstacle in the way of market growth. The programmatic marketplace is not available to all RMNs.

Discover how a small retail chain has made a big impact with its own media network

Walmart is a separate ecosystem, at least within the US. In other markets, it’s different. Amazon is a giant walled-garden, right? If you travel to East Asia, you will find a completely different retail landscape, both in terms of traditional retailers and the marketplaces, where Amazon is not the dominant player. The Japanese or Indonesian markets have their own technologies and ways of working. This is very different from how Amazon or Walmart operate. Complexity is high right now.

Q: Are they all technical challenges? Do they want different formats and different layouts? Has there been any standardization?

A :That is a part of it. Ads are the primary revenue source for retail media compared to traditional publishing. When you’re thinking about the user experience and the viewer experience, ads are always in your mind. In the early days, digital publishers were able make the case that standardizing their site around the core ad format driven by the IAB would bring greater interoperability to how brands and agencies wanted.

Retailers are faced with a more complex set of competing goals. Retail media is important to retailers, but their main source of income is from selling products. There’s a delicate balance that every retailer must strike between creating an ad that complements their actual business, which is selling products. But at the same time it has to be in line with standards and simple enough to purchase that brands do not have to reinvent creative each time they want something to run on my website.

As an industry, I don’t think we have the right balance yet. We’re spending a lot of time thinking of how to leave retailers the freedom to create their own experience while still having the right level of standardization and scaleability. Brands can buy from 100 different retailers, without having to reinvent themselves every time.

Q. What happens next?

A : Over the next two or three years, I believe we will see significant progress in this area. In the last six to twelve months, retailers have woken up to what they must do. If they are going to move beyond the trade budgets and beyond the shopper’s budgets and tap into incremental funds, they will need to have a certain level of standardization. Just make sure it works with their main goal, which is to please shoppers.

What should marketers be thinking or looking at to help them?

A : It sounds so simple. It sounds so simple. What are their preferred placements? What kind of design do they want? They’ll reply, “Well, I wonder what my site experience team wants? What am I looking for as a team in charge of monetization? What am I expecting brands to do?

They haven’t asked brands what they want. What are they looking for? What do they buy elsewhere? What are they buying? You don’t need to follow it 100%, but at least let it influence your decisions. I don’t believe that this conversation is being carried out widely enough.

The first post What retailers and brands need to know about RMNs was published on MarTech.