From shelves to screens: How Retail Media transformed marketing for CPGs

From shelves to screens: How Retail Media transformed marketing for CPGs
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As the consumer packaged goods (CPG) landscape evolves, one thing has become abundantly clear: Retail Media is no longer just a choice, but a necessity for CPG players looking to thrive.

Retail media refers to a range of advertising assets found on a retailer's (i.e., Tesco or Walmart) website or app or, using retailers' customer data to target customers on websites outside of the retailers' owned spaces. Retail media is intricately linked to contemporary ecommerce, playing a pivotal role in the digital marketing landscape.

In this first article in our series covering ecommerce's impact on the CPG industry, we'll explore why establishing a robust online presence – using retail media - is no longer an option but a strategic imperative for CPG players, as online is not only where shopping happens but where it all begins.

Retail Media impact: New rules, new opportunities

The rapid growth of ecommerce over the past decade has profoundly altered consumer shopping habits and retail dynamics. Even though majority of CPG purchases still occur within brick-and-mortar stores, three quarters of shopping trips begin online. It is therefore essential for brands to capture market share at the beginning of the customer shopping journey.

CPG brands are facing a new challenge in the digital world. The traditional rules that determine success in physical stores no longer apply here. In a physical store, brands compete for limited shelf space, but online shoppers have access to a vast array of products, and your brand's visibility often relies on retail media.

Retail media's growth is unprecedented and extraordinary. It took five years for retail media to achieve a size in spending ($30B) that took social media eleven years and search fourteen.

According to Group M analysis, the CPG sector in the USA saw 30% growth in retail media spend in 2022, and the channel commanded 16% share of total media spend. Further, over 60% of CPG companies surveyed in 2022 planned to increase their retail media spending. Every relevant large retailer seems to have or recently launched their own retail media network.

What is driving the rise of Retail Media for CPG players?

The rise of retail media for CPG players can be attributed to its ability to leverage first-party data for precise targeting, high ROAS versus other channels, and its role as a strategic tool for brand building. Let’s take a closer look at the three key benefits we've observed in our collaboration with clients.

Accurate targeting using first party data

In the realm of accurate targeting, retailers hold a distinct advantage due to their access to valuable first-party data, particularly now, when third-party cookies are about to be phased out. This advantage arises from customers directly transacting and engaging on their platforms, for example when purchasing groceries. Conversely, CPG companies often lack direct access to first-party data, as their products reach customers indirectly through retailers. Retail Media has emerged as a crucial platform for CPG companies to effectively target customers, enabling accurate targeting based on retailers' 1st party data (e.g., past purchase behavior). This extends to off-platform touchpoints as well; for instance, targeting consumers on TikTok based on what they purchase on Walmart. This measurement spans from an ad impression to the final sale, providing comprehensive insights into the performance of ad investments.

An intriguing facet of Retail Media is "off-site" Retail Media, leveraging retailers' first-party data to target or retarget audiences on third-party platforms like Instagram, PrimeVideo, sports channels (ESPN, NFL), or news sites (New York Times, BBC). Examples include Amazon enabling CPG players to connect with consumers on Twitch and Prime Video, and Walmart's retail media network providing access to customers via platforms like Roku, TikTok, and Snapchat. Noteworthy collaborations, such as Dollar General's partnership with Meta, extend retail media's reach to rural Americans, traditionally offline shoppers, using Instagram ads to drive in-store Dollar General sales of CPG brands. This expanded reach proves invaluable for CPG brands by accessing new customers or engaging existing ones through novel touchpoints.

Furthermore, CPG brands find a unique opportunity to target customers precisely when they are in shopping mode or actively considering a purchase, such as encountering an ad for yogurt while shopping for cereal. In this context, Retail Media surpasses social media, particularly when consumers are not necessarily in a shopping mindset. The alignment of context and intent within retail media ensures that brand messaging resonates more effectively with the audience, increasing the likelihood of converting browsers into buyers.

Retail Media: Key brand building lever

Retail Media is also a key tool for widening target audience and building a brand's equity. Approximately 30% of CPG players' Retail Media spending is dedicated to brand building, underscoring the fact that Retail Media goes beyond being merely a performance marketing tool.

Maintaining a consistent brand narrative across the omnichannel consumer journey is a complex challenge, but Retail Media proves instrumental for CPG brands in achieving this cohesion. From top-of-funnel display ads, both on-site and off-site, to lower-funnel activities such as search, product recommendations, retargeting, and abandoned cart campaigns, retail media empowers brands to synchronize messaging and visuals throughout the customer journey. This consistency reinforces brand identity, showcases core values, and positions a brand prominently amidst its competitors.

In today's digital marketplace, trust is built on credibility. Being featured on a reputable retail platform provides an immediate boost in credibility and trust among consumers. In an online environment where reviews and endorsements are pivotal, retail media offers an ideal setting to cultivate trust, particularly beneficial for new or digitally native brands like Athletic Greens.

Closed loop measurement

In the context of Retail Media, closed-loop measurement refers to the process of tracking and analyzing the performance of advertising campaigns from initial exposure to the final sale, enabling a thorough understanding of how advertising efforts drive actual sales. This holistic approach goes beyond traditional metrics like click-through rates (CTRs) and impressions, providing a deeper understanding of how advertising efforts drive actual sales. By connecting ad exposure to actual purchase data, retailers can identify which campaigns and creative elements are most effective in converting impressions into purchases.

For example, Walmart’s proprietary omnichannel intelligence, Walmart Connect, correlates a brand's onsite and offsite campaigns with sales on their digital properties and their physical stores. This integrated approach allows advertisers to measure the impact of their marketing efforts across various channels by using the omnichannel sales conversion and sales data from Walmart's loyalty card holders. When a customer sees an ad online and makes a related purchase at Walmart, the closed-loop measurement identifies and tracks it, providing valuable insights into the effectiveness of advertising campaigns and customer purchasing behavior.

Closed-loop measurement empowers retailers to optimize their advertising strategies, allocate budgets more effectively, and ultimately achieve their revenue and customer acquisition goals. By closing the loop on campaign performance, retailers gain valuable insights into the true impact of their advertising efforts, enabling them to make data-driven decisions that drive business success.

Higher ROAS than other channels

Many data points highlight the efficacy of retail media investments versus other channels. A 2022 survey, showed nearly 70% of advertisers reporting superior performance of retail media compared to other advertising channels. Another report showed 43% of ad spend yields an incremental return on investment (iROI) of 6 times or more, rivalling other highly efficient media platforms.

What makes retail media even more compelling are the potentially underreported returns, often due to the so-called halo effects. These effects describe the positive interaction between an online presence and sales occurring in other channels, both offline and within other online stores.

Maren Seitz, Senior Director, Head of DACH, Analytic Partners, said: “Amazon is showing that there is a huge omnichannel impact in retail media. On average, 45% of the sales volume that Amazon Display drives is on non-Amazon sales ... If advertising is placed on Amazon, then sales are also happening on other sales channels due to the halo effect.

In this context, retail media not only effectively boosts online sales but also uplifts offline sales, offering a bridge from online inspiration, searches, and planning to actual in-store purchases.

NAVIGATING CHALLENGES FOR CPG SUCCESS – WHAT’S NEXT?

Despite the compelling arguments in favour of adoption retail media and the recent and expected growth of retail media networks, challenges persist for organizations seeking to effectively implement these strategies. Failing to invest in retail media now would mean leaving substantial value on the table and require deeper future investments in the future to close the gap in lost market share.

In the next article of this series, we will explore how CPG companies can navigate these challenges and effectively implement Retail Media strategies, from how to size the budget right to educate and align on the role of Retail Media across the various siloes of the organization. Stay tuned!

Steven Koolen
Sector Lead Consumer Goods, Industrial Goods & Services, Energy

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