The Supply Side: Shaping Digital Marketing of Retail Media Networks

In the highly competitive world of retail, the rise of media networking platforms such as Walmart Connect or Target’s Roundel continues to grow amid ever-changing consumer needs.

Researchers at the Sam M. Walton College of Business at the University of Arkansas recently studied the rise of retail media networks (RMN). They published a white paper on their findings. The group spoke at the recent Plug & Play Supply Chain Expo in Bentonville on the mutual benefits for retailers and suppliers who partner with RMN Advertising.

RMN involves enabling retailers to use their assets to reach consumers and ultimately market to personalized solutions that best suit their needs, said Brent Williams, UA’s associate dean of strategy and one of the project’s researchers.

Primarily, RMN may provide opportunities to market products to customers through the retailer’s offline and online platforms using information held by the retailer and shared with suppliers. The researchers found that about 600 retailers now offer media networks to vendors, including Walmart Connect, Walgreens Ad Network, Target’s Roundel, Lowe’s One Roof Media and Sam’s MAP.

The researchers found that small retailers can benefit from partnering with third-party companies and traditional agencies. The researchers said RMN could provide opportunities for brands looking to improve their relationships with consumers.

The RMN market is expected to exceed $50 billion in global revenue next year. According to a 2022 report by Boston Consulting Group, the market is predicted to grow by 25 percent to $100 billion over the next five years.

Retailers will benefit from RMN as they provide additional revenue streams that can offset the compressed margins currently plaguing the industry. UA researchers also found that RMN can further enhance customer relationships and enable brands and retailers to focus on customers in a strategic and personalized way, regardless of where and how they shop. The Boston Consulting Group says that customer expectations and actions have never been more difficult, and that the first and second movers in the space will reap significant rewards.

Walmart relaunched Walmart Connect in January 2021 and plans to become a top 10 US advertising platform within the next five years. Walmart Connect CEO Rich Lehrfeld recently said his company’s US digital ad revenue growth will outpace Google, Meta and Amazon this year.

“Do you know about crawling, walking, running? Now we’ve reached the walk/run phase where our platform is maturing,” he said at a recent eMarketer Virtual Summit.

Lehrfeld said Walmart Connect will make improvements in mid-2022 to improve search relevance and move to a second-price auction model where the highest bidder wins but pays 1 cent more than the second-highest bidder. Walmart reported that the improvements led to a 41% increase in Connect business in the fourth quarter of 2022 and helped push ad revenue to $2.7 billion last year. According to Lehrfeld, the retailer grew its US advertiser base by 136 percent year-over-year.

When more players are on the platform, the customer sees more options. So discovery will rise, and hopefully, inspiration will rise. And your relevance increases because there are more players in that second-rate auction and more people are bidding on those keywords,” Lehrfeld said.

Walmart has partnered with TikTok, Snapchat and Roku to build multiple media relationships. Lehrfeld Marketers are looking for more options to reach customers wherever they are on the Internet. But Walmart uses its 4,700 U.S. store locations for in-store shopping because the majority of sales are still in brick-and-mortar.

Walmart is building new experiences like displays, events, in-store displays and other interactive ways to connect with consumers, but doing so in a customer-centric way. He also said that retail media is brand safe, and vendors don’t need to worry about where the ad is placed or how the data is collected.

While the case for retailers is clear, UA researchers say there are benefits for suppliers as well. The UA report outlines three themes around the benefits of their research: building deeper partnerships with retailers, laying the groundwork for future relationships, and leveraging closed loops like information sharing to enhance the shopping experience and ultimately increase sales. . Research shows that RMN’s investments in brands provide a direct return on investment with increased and targeted sales. The report states that the aggregate data held by retailers and suppliers will continue to strengthen consumer search, shopping behavior and purchase-based marketing.

UA supply chain professor and researcher Rod Thomas says Facebook and Google know what consumers want, but they don’t always know what to buy. Retailers have that information. He said the information is micro-targeted and gives better understanding to the buyer.

It is SKU or item-specific, person-specific and location-specific, down to the store level. I think this has tremendous supply chain implications,” Thomas said at the recent Plug & Play event.

RMN’s full capabilities give suppliers the ability to dial in and cut sales based on inventory or supply chain constraints, Thomas said.

When combining metrics, he says, brands have a powerful demand curve tool that can be used to rebalance supply and demand. Brands typically export the product and flood the media about the promotion, he said. Using retail sales data down to the store level and inventory data, it’s easy to pull off promotional marketing.

That allows brands to increase their investment in areas with sufficient inventory to drive more sales and save money on stores with lower inventory levels.

Thomas said more brands are getting good at forecasting demand for certain items, especially consumer goods, and motivating customers to repurchase or reorder. Buyers’ views are mixed on whether they’ll be chased, followed or pushed to buy again, but the younger generation seems to like it, Thomas said.

The UA study found that there are still occasional problems when a 27-year-old consumer sees ads for retirement or when minors see alcohol ads. RMN may provide some additional lift for retailers and brands, but he said there are still some kinks to work out before RMN’s full promises can be realized for brands and consumers.

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