The incredible success of retail media means it is here to stay and will continue to radically reshape the industry, and consumers’ expectations, as it matures. Forrester anticipates the retail media market will reach $85 billion by 2026. By 2027, it will be bigger than connected TV, digital audio and traditional television advertising combined.
However, despite the undeniable value of retail media, some retailers are encountering frustrating challenges that are impeding their growth. An Interactive Advertising Bureau survey found that only 41% of retailers believe the current process of selling and buying retail media is efficient.
Here are the five main challenges hindering retail media’s success:
1. Internal politics and change management.
Like any new initiative, there are often stakeholders who want to proceed with caution. Unfortunately, for many retailers, retail media has yet to convince stakeholders that it deserves time and money, nor has it demonstrated that it is worth experimenting and taking risks.
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Additionally, with retail media buying in general, there are many approvals required from stakeholders — and a single “no” is all it takes to force things to revert back to square one. To overcome these internal politics, those pushing retail media strategies must determine which stakeholders are at the early stages, find common goals and address their concerns.
2. Leveraging data and overcoming attribution.
Many businesses understand that data is the key to growth and that they should differentiate their retail media offering from competitors. Nevertheless, many struggle to effectively aggregate and apply this data to drive insights, plan campaigns and measure efforts.
The decline of third-party data and the increasing demand for first-party data to plan, deliver and measure retail media campaigns further exacerbates this challenge. At the same time, current practices have resulted in the duplication of attribution across multiple platforms, causing issues when attempting to optimize the customer journey.
As such, retailers should consider establishing control over their first-party data, housing it securely within their cloud-based environments. This will reduce their reliance on third parties for customer targeting and insights. Likewise, they need to weave together customer-level exposure data across multiple channels.
3. Scaling effectively.
Retailers aren’t growing as quickly as they’d like. But they don’t want to increase headcount drastically to boost revenues. The following can help with scaling:
- Automation: Retailers can leverage intelligent automation to streamline tedious processes, customize user journeys and enable self-service features;
- Alternatives to revenue share: Current models are unappealing to retailers that don’t want to scale revenue without causing costs to scale simultaneously;
- People and skills: Sometimes an inability to scale comes from not having the right people with the proper skill sets. Retailers should prioritize hiring with scaling in mind; and
- Implement a single way of working: For some retailers, crafting a common strategy can be complex, as they are part of international organizations where business parts are at various stages of maturity and using different technology platforms. To scale at pace, retailers must standardize working methods. It will also help to aggregate data and collaborate with other retailers.
4. Unlocking brand and agency budgets.
To scale revenues, retailers must focus on unlocking brand and agency budgets. Retailers can achieve this in several ways, such as reinforcing retail media’s cost-effectiveness and ability to deliver a favorable return on ad spend. They also can build a legitimate full-funnel proposition for in-store and on/offsite. Additionally, retailers must ensure that advertisements are implemented as booked and performance reporting is accurate, well-timed and standardized with other media.
5. Technology.
The last (and likely most complicated) retail media challenge is technology, which, coincidentally, is essential to scaling and can be a significant barrier if not implemented correctly. Each campaign touches many different teams that have their own diverse platforms and ways of operating. Deciding which legacy platform to migrate to can become a headache.
Invariably, the question becomes whether to buy, build or deploy a composable hybrid solution. Retailers must determine if they possess the time and resources to build such a solution from scratch or if they need to buy something off the shelf. Perhaps they can design the foundational infrastructure but buy additional elements. Retailers will need to weigh the benefits of each option, considering their unique requirements and goals.
Time is of the Essence
There is no doubt that retail media will play a crucial role in increasing brand awareness while acting as a high-margin revenue stream. Nevertheless, these five challenges represent serious barriers to achieving such outcomes. Moreover, the speed at which retailers tackle and surmount these challenges is important as the major players continue to swallow market share. To be a leader in this space, it is vital that retailers address each challenge accordingly and swiftly.
Diana Abebrese is a Principal of Business Consulting at EPAM Systems. With more than 10 years of experience in retail media, she delivers cross-functional strategy and support to EPAM’s global retail clients, providing them with strategic technology solutions accompanied by practical frameworks and implementation plans. Her background includes senior commercial and operational roles in large multi-national corporate environments and for smaller independent businesses, establishing and nurturing high-performing teams of all sizes. Liz Salway is a Principal of Business Consulting at EPAM Systems. With more than 20 years of experience in digital media, she brings a unique perspective to industry challenges, having worked closely on the media owner side, in advertising technology and for global media agencies including WPP and Publicis. More recently, she has helped drive digital transformational change at Nestlé. Her ambition is to better connect data opportunities for brands across marketing, technology and media to drive organizational, operational and financial efficiencies and effectiveness.
