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10 minutes of expert insights every weekday. Your morning ritual for staying ahead in retail media.
Brands demand retail media standards. Retailers say it's too hard. Do they kind of have a point?
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[00:00:00] Kiri Masters: Everyone has their own definition of the perfect bolognese sauce to parents of young children. It's a way to sneak in an extra serve of veggies. Some people play with the ratio of pork to beef. Italian [00:00:15] purists demand a splash of milk to be added at the end. Decisions around what goes into your bolognese sauce and how it is prepared may depend on your family history, flavor preferences, or even what type of kitchen equipment you have.
[00:00:29] With [00:00:30] all of these variables, everyone seems to make their bolognese sauce a little bit differently. That's kind of what's happening in retail media networks today. All these retailers offer retail media, yet But the flavor [00:00:45] profile and nutritional value are wildly different with measurement standards as varied as those home cooked meals.
[00:00:53] Brands say they want standards in retail media. Retailers say [00:01:00] it's too hard. Do they kind of have a point? Let's jump in.
[00:01:04]
[00:01:05] Kiri Masters: Every retail media network has developed its own approach to advertising, measurement, and reporting. This isn't necessarily by [00:01:15] design. It stems from fundamental differences in these retailers', business models, their history, the technology that they have on hand. And their position in the market. For many smaller RMNs, the tech stack [00:01:30] resembles off the shelf ingredients assembling the Kirkland brand of meat with a bottle of Prego sauce.
[00:01:38] It's technology that gets the job done, but for their regular customers. They might offer [00:01:45] special order bolognese in the form of direct ad buys, made exactly how those big spenders want it. Those direct buys might generate enough revenue and align pretty cleanly with the retailer's core business of actually [00:02:00] selling stuff such that there's little incentive to pony up the big bucks on infrastructure to significantly improve their standard public recipe.
[00:02:10] Brands then face the difficult task of navigating a [00:02:15] fragmented retail media network landscape. As retail media spending growth is expected to decelerate past brisk pace performance gaps are under even more of a microscope. [00:02:30] Brands are already voting with their wallets. On average, they only advertise on six to eight retail media networks, despite dozens being available in each category.
[00:02:40] The call for standardization from brands is born out of two major issues, [00:02:45] frustrations around transparency, and a desire to compare apples to apples and ensure their media dollars are spent in the most performant. Channel.
[00:02:55] But although brands want to compare apples to apples, some retailers are [00:03:00] pushing back on the very premise. Of broad standardization. A year ago I spoke with Melanie Babcock, who was formerly the head of Home Depot's, orange Apron Media Network, and she noted that brands might have different [00:03:15] strategic objectives across different retail partners, especially specialty retailers like the Home Depot.
[00:03:21] She said. For example, a faucet manufacturer might have 200 SKUs at the Home Depot and only 10 at a mass retailer. [00:03:30] If the brand is testing a new product line or color trend in one retail environment. Their return on ad spend might naturally be lower than in a channel where they're only promoting those proven best sellers.
[00:03:43] So that's one [00:03:45] reason why retailers push against standardization is that their value prop as a retailer is different, to, let's say the elephants in the room, Amazon and Walmart. But beyond that retailer [00:04:00] positioning rationale, there are other more practical reasons why retailers face legitimate challenges in standardizing their approaches.
[00:04:09] It's not just about stubbornness or profit seeking. There are technical [00:04:15] limitations. Organizational structures and business realities to contend with.
[00:04:20] So number one, legacy systems weren't built for advertising, or they were built for advertising, but they weren't built for retail. They were built for [00:04:30] traditional publishing. And so this, this technology that retailers might have acquired and integrated years and years ago is not really fit for purpose.
[00:04:42] It was built for a different purpose and [00:04:45] then retrofitted for the retail media environment. Often this technology, it takes so long to integrate or, and rip out that retailers are left with something that they're not necessarily, they wouldn't [00:05:00] necessarily choose to integrate again.
[00:05:02] So that's one challenge. Second challenge is an economic reality check. The reality is retailers are at different stages because their retail media businesses are more or less significant to the core [00:05:15] business in a in dollar value terms. Last year I heard of a regional growth of making single digit millions in revenue from selling their data.
[00:05:26] Now is that enough incentive to invest significant capital in [00:05:30] upgrading their core systems? It might be tough to justify someone to oversee that and the capital expense required to bring in new technology to make it better. Meanwhile, hiring another retail media salesperson for direct media buyers [00:05:45] could be more palatable.
[00:05:46] So we end up with these stop gaps. Did you know that leading retail media networks drive 85% of [00:06:00] their ads through mid and long tail advertisers?
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[00:06:34] A third issue is that the audience wants different dishes. And this was, uh, I included this initially for some pushback from, uh, [00:06:45] he's retail media head, Sean Randberg, who commented on my original post last year, on this
[00:06:51] where he said it's going to be extremely difficult for retailers to provide standardization when CPGs aren't in agreement on how they [00:07:00] want to measure retail media internally. Various CPG teams have differing preferences on measurement methodologies, and that's also the sentiment. That the I'S Head of Commerce Media.
[00:07:13] Colin Colburn [00:07:15] echoed in a speech at the I'S Commerce Media event where he said brands have contributed to these challenges because they'll ask for custom metrics, custom reports, attribution windows from retailers. [00:07:30] These requests perpetuate the very problems everyone claims they want to solve. I really sat up in my chair when he said that
[00:07:38] and another piece of color that I got from Via Anand, who is the senior Director of Data Science at Dollar General [00:07:45] Media Collective. He said that traditional CPG marketers are deeply familiar with marketing mixed models, but they struggle with incrementality concepts. So even when Dollar General implements gold [00:08:00] standard testing on incrementality, they still have to spend a lot of time justifying their approach to marketers instead of proving value.
[00:08:09] The point here is brands say that they want comparability while [00:08:15] undermining it by pushing for bespoke reporting.
[00:08:18] All the while the surveys that we see from brand marketers around retail media, point to measurement being a top three [00:08:30] priority. The most recent survey I saw of brand marketers was the sky, uh, state of retail media study. Um, which ask brands what would accelerate their retail media investment.
[00:08:44] The top three [00:08:45] answers were more sales or revenue with 70% of respondents agreeing, um, putting that in their top three, improved overall profitability at 54% of respondents and better measurement. At [00:09:00] 52% of respondents standardization across retailers came in at just 15%.
[00:09:08] And that gap tells us something interesting that brands care more about proof that it [00:09:15] works more, perhaps more than they care that everyone is measuring the same way the retail media landscape shows us that. Parties on both sides are still figuring it out. And will be for a while. For brands, the Path [00:09:30] Forward probably looks like focusing on the RMNs that deliver consistent value for their specific objectives, judging networks by business outcomes rather than getting lost in the weeds of inconsistent metrics and adapting strategies to [00:09:45] each platform's strengths, rather than trying to force identical campaigns across every network.
[00:09:51] For more on this, I did an episode recently talking about how brands are building their own operating systems for retail media rather than waiting [00:10:00] for retailers to bring fully consistent approaches to the table. Now, for retailers, it means investing in measurement capabilities and transparency.
[00:10:10] Even if perfect standardization isn't the [00:10:15] ultimate goal. Being honest about what makes your offering genuinely different is important for that trust and transparency.
[00:10:23] Well, this was a pretty quick summary of a much longer accompanying piece. If you want to read the full article, check [00:10:30] out my blog at retail media breakfast club.com. Thanks for listening, and I'll catch you tomorrow.
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