Affiliate Marketing and Retail Media Evolution: Opportunities Ahead

November 20, 2024

The landscape of affiliate marketing and retail media has undergone significant transformation over the past decade. With the rise of retail media networks and the increasing importance of first-party data, both retailers and brands are presented with new opportunities to enhance their marketing strategies. This article delves into the evolution of these sectors, the driving forces behind their growth, and the challenges they face, while highlighting the role of Awin in supporting these developments. Retail media has become a crucial component of the digital marketing ecosystem. Since Amazon’s pioneering efforts in 2012, the proliferation of retail media networks has been remarkable. Global retail media ad spending is projected to reach $153 billion by 2027, driven by major retailers like Walmart, Tesco, Boots, and Instacart. This growth is fueled by the strategic placement of advertisements on e-commerce sites, aimed at influencing customers at the point of sale.

The Concept of Retail Media

Retail media involves placing advertisements on a retailer’s e-commerce site to enhance brand visibility and influence customer purchasing decisions. Traditionally, these ads were bought by advertisers already selling products on the retailer’s platform, a practice known as endemic retail media. The primary goal was to boost product sales by targeting customers already engaged in the buying process. This could be seen with sponsored product listings and banner ads promoting products relevant to the customer’s search. With this method, advertisers ensured maximum visibility and relevance, directly enhancing sales prospects.

In recent years, non-endemic retail media has emerged as a significant trend. This approach involves advertisers securing ad placements to target specific consumer segments, regardless of whether they sell products on the retailer’s site. According to research by Merkle, 63% of retailers now have non-endemic advertisers leveraging their retail media networks. These networks provide access to promotional inventory across various channels, utilizing the retailer’s first-party data for precise targeting. As a result, advertisers can leverage these platforms to reach highly selective and niche audiences, expanding their reach beyond traditional channels and engaging with customers in innovative ways.

Growth Drivers of Retail Media

The growth of retail media is driven by several key factors. McKinsey’s research shows that 73% of advertisers plan to increase spending on retail media networks within the next 12 months, with 70% reporting better performance compared to other marketing channels. One major driver is the revenue pressure on retailers. Rising inflation, weak customer demand, and competition from low-margin retailers have pushed retailers to explore new revenue streams. Retail media networks offer profit margins ranging from 70% to 90%, making them especially appealing for retailers operating on slim margins. This approach allows for an augmentation of revenue streams without the necessity of significant changes to existing operations.

Another driver is the cost-effective acquisition for advertisers. The shift to digital, accelerated by the pandemic, has intensified competition within online e-commerce. Advertisers are seeking new avenues to drive sales, and partnering with retailers provides a valuable opportunity. A study by IAB Europe and Microsoft revealed that 92% of advertisers are collaborating with retailers to reach new customers. This collaborative effort is enhanced by the data richness of retail media networks, which allows for precision targeting and heightened customer engagement. Consequently, advertisers find these networks not only effective but also efficient in terms of return on investment and overall marketing impact.

The Impact of Third-Party Data Demise

The decline in the use of third-party cookies for customer targeting has significantly impacted the advertising landscape. As third-party cookies phase out, the importance of first-party data collected by retailers has increased. According to research, 91% of advertisers anticipate that retail media will play a key role in their advertising strategy. Retail giants like Walmart are leveraging endemic retail media to offer targeted approaches to reach in-market audiences throughout the customer journey. This includes strategies such as sponsored search listings and prominent product features to enhance visibility and drive conversions, ensuring that advertisements are seen by highly motivated buyers.

Innovative approaches, like shoppable TV, are also being embraced. A survey found that 57% of marketers anticipate shoppable video content as the next frontier in retail media. Shoppable video content allows consumers to make purchases directly through video advertisements, offering a seamless shopping experience. Non-endemic retail media presents an underexplored landscape, with 58% of advertisers expressing interest in leveraging non-endemic data to target qualified audience segments. This trend indicates a growing acceptance and reliance on retail media networks as a crucial component of digital marketing strategies, fostering an integrative approach to consumer engagement.

Challenges in Retail Media

Despite its growth, retail media faces several challenges. One major issue is the lack of standardization in measurement. The walled garden environments of retail media networks make it difficult for advertisers to increase ad spend. A report by Epsilon indicates that 42% of advertisers do not plan to change their retail media spend through to 2026 due to measurement performance challenges. This lack of transparency and standardized metrics makes evaluating campaign effectiveness difficult, thus impacting decision-making for future investments. Aligning various data points and developing more comprehensive measurement frameworks is essential for overcoming this hurdle.

The affiliate marketing channel can play a vital role in addressing these challenges. Founded on robust and transparent tracking, affiliate marketing provides advertisers and partners with real-time reporting insights. This transparency helps to demystify the performance of retail media networks and encourages increased investment. Given the expansive retail media landscape, advertisers need to choose the right retailer to align with their objectives. Awin offers a curated discovery matrix with key information about each retail media network, aiding advertisers in making informed decisions. By providing detailed insights and comparative data, Awin ensures that brands can select networks that align with their strategic goals and yield the best return on investment.

The Role of Digital Reward Platforms

The expansion of retail media is fueled by multiple key factors. According to McKinsey, 73% of advertisers intend to boost spending on retail media networks over the next year, with 70% noting superior performance compared to other marketing channels. One significant driver is the revenue pressure on retailers. Growing inflation, decreased customer demand, and fierce competition from low-margin retailers have prompted retailers to seek new income sources. Retail media networks, offering profit margins between 70% and 90%, are particularly attractive to retailers working with tight margins. This method increases revenue without requiring major operational changes.

Additionally, retail media provides a cost-efficient way for advertisers to acquire customers. The pandemic-driven shift to digital has heightened competition in online e-commerce. Advertisers looking to boost sales find collaboration with retailers beneficial. A study by IAB Europe and Microsoft found that 92% of advertisers are partnering with retailers to attract new customers. Retail media networks’ rich data enables precise targeting and increased customer engagement. Therefore, advertisers see these networks as both effective and efficient in terms of return on investment and overall marketing impact.

Subscribe to our weekly news digest.

Join now and become a part of our fast-growing community.

Invalid Email Address
Thanks for Subscribing!
We'll be sending you our best soon!
Something went wrong, please try again later