Despite being overshadowed by industry giants like Amazon and Walmart, smaller retail media networks (RMNs) are working hard to carve out their share in the rapidly evolving $140 billion global industry. While Amazon and Walmart command 85% of the ad spend, the remaining 15% offers a challenging yet potentially profitable opportunity for smaller RMN players.
Battling for Ad Spend
Dominance of Giants
The retail media landscape is dominated by heavyweights Amazon and Walmart, significantly influencing advertiser loyalty due to their extensive reach and scale. These industry leaders currently command a staggering 85% of total ad spending within the sector. This leaves smaller RMNs with a limited share of the pie, compelling them to develop creative strategies to attract advertisers. In 2023, smaller networks like Best Buy Ads and DoorDash intensified efforts to boost their presence in the market by offering unique value propositions and innovative campaign opportunities. Despite their ambition and creativity, these smaller players continue to grapple with the challenge of competing against well-established giants.
Leveraging Unique Data
A crucial strategy for smaller RMNs to differentiate themselves from Amazon and Walmart is by leveraging their unique data capabilities. Cindy Meltzer, Vice President of research and analytics at ad agency Dagger, emphasizes the importance of proficient data management and specialization in niche markets. By focusing on the careful analysis and application of data, smaller networks have the potential to craft highly targeted and effective advertising campaigns. Meltzer suggests that niche markets, though limited in scope, can sometimes be more profitable than attempting to appeal to a broader audience. This approach enables smaller RMNs to stand out by offering advertisers precise insights and personalized ad placements that larger networks may not provide.
Innovative Strategies
Initiatives and Programs
Smaller RMNs are launching innovative initiatives to lure advertisers by showcasing their unique capabilities. For instance, Best Buy Ads introduced Social+, an initiative allowing brand and agency partners to target audiences through social campaigns on platforms like Facebook and Instagram. This effort aims to connect brands with consumers on widely used platforms, providing an appealing addition to their marketing toolbox. Similarly, Shell’s Volta Media network launched a “No Risk, All Reward” program, guaranteeing incremental returns on ad spend for advertisers. These strategies reflect an industry where smaller players must continuously adapt and innovate to attract ad budgets typically reserved for larger networks.
Enhancing Ad Formats
Another example of the inventive strategies employed by smaller RMNs is DoorDash’s introduction of new ad formats, including banners and improved functionalities for sponsored products. These enhancements are designed to deliver more engaging and effective advertising experiences for both brands and consumers. Concurrently, Instacart partnered with the supermarket chain Hy-Vee, allowing brand partners to extend their ads to Hy-Vee.com, thereby expanding their reach and maximizing ad impact. Such collaborative efforts represent smaller RMNs’ commitment to diversification and enhancing their service offerings. By continuously evolving their ad capabilities, they aim to attract more significant ad spend and compete more effectively with industry giants.
Market Dynamics
Cautious Approach
Media buyers and agencies remain cautious as they navigate the evolving retail media landscape, chiefly influenced by the dominant presence of Amazon and Walmart. Despite the growing momentum among smaller RMNs, the majority of advertiser budgets still gravitate towards these industry behemoths. Kevin Amos, partner and chief media and data officer at Brunner, highlights the strategic recommendation to allocate budgets for testing and learning on smaller RMNs while channeling most ad spend towards larger platforms for guaranteed growth. This pragmatic approach underscores the hesitance among advertisers to fully commit to smaller networks, despite the potential opportunities they present.
Potential for Specialization
Despite the challenges, smaller RMNs have the opportunity to harness targeted and data-driven ad campaigns by focusing on niche audiences. Grocery chains such as Target and Kroger, known for their robust loyalty programs, collect valuable purchase data that presents an enticing opportunity for specialized and profitable advertising strategies. By leveraging detailed consumer insights, these RMNs can offer advertisers data-driven solutions with a higher chance of capturing the attention of dedicated audience segments. This specialized focus not only helps bridge the gap with larger networks but also highlights the potential profitability within niche markets, which often remain untapped by industry giants.
Strategic Partnerships
Leveraging Third-Party Platforms
To bolster their positions and compete more effectively, smaller RMNs are forming strategic partnerships with third-party platforms. For instance, Instacart’s collaborations with Hy-Vee and Albertsons Media Collective’s partnership with TransUnion illustrate efforts to extend their reach and enrich offerings beyond traditional channels. By leveraging these external platforms, smaller RMNs can provide advertisers with enhanced tools and data to measure and optimize their ad campaigns’ effectiveness. These partnerships are crucial in creating a more dynamic and competitive landscape, enabling smaller networks to improve their market presence while offering advertisers innovative solutions.
Enhancing Capabilities
Collaborative efforts like Best Buy’s partnership with Roku last year set a precedent for the benefits of teaming up with third-party platforms. This collaboration enabled more precise targeting and enhanced audience engagement, demonstrating the value of combining strengths to deliver impactful advertising solutions. Furthermore, DoorDash’s integration with The Trade Desk focuses on elevating programmatic advertising capabilities, reflecting a broader trend towards improved measurement of return on investment (ROI). These developments highlight how smaller RMNs are leveraging partnerships to enhance their capabilities, offering advertisers diversified and advanced options to reach their target audiences more effectively.
Agility and Innovation
Custom Solutions
The individuality and agility of smaller RMNs allow them to offer custom solutions tailored to their partners’ specific needs. Ashley Karim-Kincey, Senior Vice President of media at Dagger, points out that this inherent flexibility enables these networks to create and implement innovative approaches that can appeal to advertisers looking to diversify their retail media investments. This adaptability provides smaller RMNs with a competitive edge, allowing them to address clients’ unique challenges and preferences swiftly. By focusing on customized solutions and maintaining a nimble approach, smaller networks can attract ad spend that might otherwise be directed toward the traditional offerings of larger competitors.
Challenging Conventional Systems
Though often overshadowed by industry giants like Amazon and Walmart, smaller retail media networks (RMNs) are striving diligently to secure their niche in the fast-paced $140 billion global market. Amazon and Walmart alone account for a staggering 85% of the total ad spend in this space, demonstrating their dominant influence. Nevertheless, the remaining 15% of the market, while presenting significant challenges, also holds considerable potential for profitability for smaller RMNs willing to put in the effort. These smaller networks must navigate a competitive landscape, but their persistence could indeed reward them with a valuable share of the market. By focusing on innovative strategies, forming strong partnerships, and leveraging unique attributes, smaller RMNs can effectively compete and thrive alongside much larger players. The smaller networks might not have the same resources as the big names, but their agility and customized approaches allow them to offer something distinct, carving out a rewarding position in the market.
