Retail Media's Massive Growth is Forcing Critical Reckonings

Brands and retailers have challenging organizational decisions ahead

In advertising, retail media has been the rocket ship growth engine of 2024.

But there is a lot of work to do for the category to reach its vast potential:

• For brands to get the most out of their retail media budgets, they may need to blow up their operations

• And for retail media networks to thrive, they may need more tech, and a stronger social strategy.

Those were two of the big takeaways from my podcast interview with Zachary Ricchiuti, head of Retail Media at Kepler, who I caught up with right in the middle of Cyber Monday craziness.

For a category that is predicted to grow at a 24% clip over the next several years, you might think there are few real problems to worry about. However, now that the quote unquote easy money has been made (as many brands essentially moved their shopper marketing dollars to the web), now comes the hard part.

Marketers have to squeeze different factions together, bring together budgets, and then manage and run those budgets as one thing. That’s not easy.

“I think retail media has broken the organizational structure of most traditional brands,” said Ricchiuti. “And the best brands are shifting and operating in a different way now than they were even two years ago or a year ago.”

Not only does that introduce a lot of political headaches (these are my budgets…I have my own KPIs…I drive real revenue you don’t), but there are philosophical differences between brands’ retail media teams and brand groups. For instance, shopper marketing teams don’t necessarily think about reach, frequency, purchase intent or ‘telling stories’ that resonate over time. Yet per Ricchiuti, they’ve got to move past all that.

“Oftentimes when we start talking to brands, they are [operating in] separate worlds, but pretty quickly we try and bring them together. There is an incredibly strong intrinsic link between brand generation and lower funnel performance,” he said.

“It's impossible to operate successfully as a brand if you're viewing those two things in separate lenses.”

As Ricchiuti noted, big retail media spending advertisers need to think about inventory, pricing, advertising, product, etc. - and increasingly all of these strategies need to be tied to ‘upper funnel’ goals

This kind of thinking has not been common among many born-on-Amazon or Instagram brands, but it has to be, according to Ricchiuti.

“Brands are realizing that you need to have a strong differentiated brand in order to drive lower funnel success,” he said. “If your brand doesn't stand for anything and it doesn't have meaning and value inherent in it, you're just gonna chase discounts over and over again to convert.”

Which is why Amazon has been shifting its story, talking much more about customer journeys and funnels.

Meanwhile, on the sell side, the retail media giants and would be giants are going to need to emulate Amazon’s push into other broader channels.

“We’re seeing the first signs of brands building fully-integrated teams across trade, shopper, and brand,” said Ben Foulkes, commercial director at Epsilon (see full interview below). “This forces retailers to adapt, too, because if they’re still structured in silos, it’s going to be hard for them to align with brands.”

“I don't know if Amazon would publicly say this, but I'm sure they feel like they've been a little bit tapped out as far as, if you sell on Amazon, you've probably been advertising on the site already,” added Ricchiuti.

Which would lead to Amazon and others retail media companies to look to drive up advertising ‘off platform,’ which is the '“next frontier” in retail, as Instacart’s Ali Miller told me in a recent TV Rev report on the category. “Reaching high intent consumers everywhere…as all the platforms become more shoppable themselves,” she said. “That has moved the industry.”

That would theoretically be good news for the open web. But alas, “I think the bigger opportunity that we see is in social media, frankly,” said Ricchiuti. “The connection and the pipes, if you think about where retail media is right now, it’s all there.”

Retail Media’s Intercontinental Allies

This interview is part of a multi-part series with my sponsor Epsilon. Today I’m talking with Ben Foulkes, commercial director at Epsilon’s London office, on the differences between the Retail Media markets in the US and Europe.

Next in Media: When you speak with people in Retail Media in the U.S., there's a lot of excitement and growth, but also some frustration with how brands are organized, how budgets come together, and whether it’s realistic for brands to merge groups and budgets. Are you seeing similar dynamics in Europe?

Foulkes: Yeah, 100%. One of the big challenges in Europe is the fragmentation of retailers. In the U.S., you have economies of scale with big players like Walmart, which gives brands multiple touchpoints with customers. In Europe, each market has its own main retailer, which complicates things for brands. For example, should I work with a supermarket in Poland or a different vendor in Hungary? We’ve created a joint venture to help solve some of that fragmentation. There’s also frustration about budgets, but people understand that structures take time to evolve.

Next in Media: That makes sense. Are you seeing brands create integrated teams that bridge trade, shopper, and brand?

Foulkes: Big global brands like Unilever and P&G are looking for ease and scale, which Amazon can provide across multiple markets with a single storefront. But in Europe, creating that ease of access for brands is more challenging.

Next in Media: What about the idea of creating a unified platform for retail media? Some retailers are asking, “Why would I merge my business with others when I’m already making money?” Is unification of these platforms even possible?

Ben Foulkes: That’s an interesting area to watch. Right now, there’s enough budget for everyone to succeed, but as the market grows, we’ll need to find ways to create more touchpoints that tap into the budgets Amazon is able to access. Retailers will need to come together to scale, but whether or not they will unify is still to be seen.

Next in Media: Retailers are maxing out their own platforms for ads. Are they looking to take their data off-platform, perhaps into the open web?

Foulkes: Yes, GDPR is a big factor in Europe, and in-store retail media is actually much more developed here compared to the U.S. In Europe, there's a higher percentage of retail media happening in-store. However, post-COVID, we're seeing a shift back toward physical stores and retailers are finding new ways to monetize outside their own platforms.

Next in Media: What about the trend of integrating retail media with TV, like through platforms like Samsung TV or LG?

Foulkes: That’s an exciting trend, especially with broadcasters in the UK and Europe. When you integrate first-party data with TV, it opens up new opportunities. For instance, Victoria’s Secret turned its catwalk show into a shoppable event on Amazon Prime, making the aspirational aspect of the brand more accessible to consumers. We’re also seeing retailers like Tesco in the UK pushing more video content on their own platforms, and consumer electronics retailer Currys is integrating into TV operating systems to become a media owner.

Next in Media: Are we seeing social shopping trends in Europe, similar to what’s happening in China? Do you think U.S. platforms like TikTok or Temo can drive commerce the same way?

Foulkes: Great question. TikTok is a major player in retail media, especially in categories like beauty. It’s a full commerce platform now. In Europe, there’s a distinction between marketplaces and destinations. Marketplaces are focused on product discovery, often with the cheapest option, while destinations are more curated and brand-focused. Social commerce, like TikTok, fits more with marketplaces, while destination sites tend to emphasize brand identity.

Next in Media: What other big trends are you watching in retail media?

Foulkes: There’s a constant tension between giving access to first-party data and protecting it. A lesson from programmatic is that once data is freely given, it’s hard to get it back. In the U.S., data regulation is growing, but it’s still more relaxed compared to Europe. As a result, businesses are focusing more on loyalty and loyalty marketing, which is a huge trend in the U.S. In the UK and Europe, people are less open to sharing their data, and loyalty programs are less common. However, they’re growing in certain regions, and consumers often have multiple loyalty memberships.