The supply side: retail media networks are reshaping digital marketing

In the highly competitive retail world, media network platforms like Walmart Connect or Target’s Roundel continue to rise in the face of ever-changing consumer expectations.

Researchers at the University of Arkansas’ Sam M. Walton College of Business recently examined the rise of Retail Media Networks (RMN). They published a white paper on their findings. The group also spoke recently at the Plug & Play Supply Chain Expo in Bentonville about the mutual benefits for retailers and suppliers collaborating on RMN promotion.

According to Brent Williams, associate dean of strategy at UA and one of the project researchers, RMN is about retailers using their assets to reach the consumer and ultimately be able to market personalized solutions that meet their needs.

At its core, RMN can provide ways to market products to customers across a retailer’s offline and online platforms, using data owned by the retailer and shared with suppliers. The researchers found that about 600 retailers now offer media networks for suppliers, including Walmart Connect, Walgreens Ad Network, Target’s Roundel, Lowe’s One Roof Media and Sam’s MAP.

The researchers found that smaller retailers could benefit from working with third-party companies and traditional agencies. Researchers said RMN could offer opportunities for brands looking to streamline relationships with brands and consumers.

The RMN market is expected to exceed $50 billion in revenue worldwide over the next year. According to a 2022 report by the Boston Consulting Group, forecasters predict the market will grow 25% per year over the next five years to $100 billion, which will account for 25% of total digital marketing spend by 2026.

Retailers benefit from RMN because they provide additional revenue streams that can offset the compressed margins the industry is currently suffering. UA researchers also found that RMN can deepen customer loyalty, allowing brands and retailers to strategically and personalizedly target the same customers, regardless of where or how they shop. The Boston Consulting Group said capturing client expectations and actions has never been more difficult, adding that the space’s first and second movers will reap the most value.

Walmart relaunched Walmart Connect in January 2021 and plans to become one of the top ten advertising platforms in the US over the next five years. Insider intelligence data suggested that Walmart’s digital advertising sales growth in the U.S. this year would outperform Google, Meta, and even Amazon.

“Are you familiar with crawling, walking and running? We are now entering the walk/run phase where our platform has matured,” said Rich Lehrfed, general manager at Walmart Connect, at a recent virtual eMarketer Summit.

Lehrfeld said Walmart Connect was upgraded in mid-2022 to improve search relevancy and switched to a second-price auction model, where the highest bidder wins but pays just 1 cent more than the second-highest bidder. Walmart reports that the updates drove its Connect business to grow 41% in the fourth quarter of 2022 and helped boost ad revenue to $2.7 billion last year. The retailer also grew its U.S. advertiser base by 136% year over year, according to Lehrfeld.

“When there are more players on the platform, the customer is presented with more options. So discovery will increase, and hopefully inspiration will increase as well. And your relevancy will increase because more players participate in this second-price auction and more people bid on keywords,” Lehrfeld said.

Walmart has built diverse media connectivity through partnerships with TikTok, Snapchat, and Roku. Lehrfeld said marketers want more ways to reach customers anywhere on the web. However, Walmart also uses its 4,700 stores in the USA for in-store marketing, since the majority of sales are still made in brick-and-mortar stores.

He said Walmart is building new experiences, like demos, events, in-store screens and other interactive ways to engage with consumers, but in a customer-centric way. He also said retail media is brand safe and suppliers don’t have to worry about the environment in which the ad will run or how the data will be collected.

While the case for retailers is clear, according to the UA researchers, there are also benefits for suppliers. The UA report outlined three themes surrounding the benefits found in their study: building deeper partnerships with retailers, laying the groundwork for future relevance, and leveraging closed metrics like sharing data to improve the shopping experience and ultimately more sales to achieve . The research found that RMN investments offer brands a direct return on investment with increased and targeted sales. The report states that granular data from retailers and suppliers would further improve targeted marketing based on consumer search, shopping behavior and purchases.

Rod Thomas, UA supply chain professor and researcher, said Facebook and Google know what consumers are looking for, but don’t know what is always being bought. Retailers have this data. He said the data is micro-targeted and allows for a better understanding of the buyer.

“It’s SKU or item specific, person specific and location specific down to the store level. I think it’s having a huge impact on the supply chain,” Thomas said during the recent Plug & Play event.

Thomas said the full potential of RMN offers suppliers the opportunity to increase or decrease sales based on inventory levels or supply chain constraints.

He said that by combining metrics, brands have a powerful demand shaping tool that could be used to rebalance supply and demand. He said brands would usually ship the product and flood the media with ads. It’s easy to turn off promotional marketing using sales data from retailers down to the store level and inventory data.

This allows brands to focus their investments on areas with sufficient inventory to drive additional sales and save money on stores with low inventory.

Thomas said more and more brands are getting better at predicting demand for specific items, especially consumables, and getting customers to repurchase or reorder. Thomas said buyers’ attitudes still vary when it comes to being followed, stalked or asked to repurchase, but younger generations seem to like it.

The UA investigation found that mishaps still occasionally occur, such as when a 27-year-old consumer sees ads for retirement or when underage people see ads for alcohol. RMN can provide upside gains for retailers and some additional lift for brands, but the researchers said there are still issues to be resolved before RMN’s full promises to brands and consumers are delivered.