December 5, 2022

3 minute read

 

Retail media has a branding problem.

 

It should drop “retail” from the name, leaving just media.

 

This would help marketers evaluate the opportunity from a neutral starting place, rather than the common approach of coming at it from a retail-first position.

Many CPG brands classify ANY retail media spend as trade spend.

 

According to BCG, shifting trade spend is the second largest contributor behind organic digital growth when it comes to funding future retail media.

 

Why?

  • The retailer is selling the media
  • The media can be attributed to sales at the retailer
  • It’s part of negotiations between retailers and brands
  • The sales team originally brought the retail media ask to the organization
  • Retailers approach brands with media the same way they ask for other funds

 

Retail media sounds like trade spend, which is defined as “money that brands spend to promote their products at retail locations”.

 

It often goes something like this for brands…"If we're spending funds with Amazon Advertising, then that means we're trying to grow sales at Amazon. That's trade spend."

While these are all potential justifications, we know intuitively it can’t be (entirely) right.

 

Consider the fact that there’s no buybox for a Geico insurance policy featured on Amazon’s homepage. 

 

We also know Mercedes hasn’t sold a single EQS on Amazon. But it’s still doing a commercial on Thursday Night Football, which is hosted by…Amazon.

Cricket's not selling any phones on Amazon either.

 

The reverse also makes the point - no one ever accounted for Google search spend as trade funds.

 

Retail media doesn’t exactly fit the trade spend definition. It’s more like “money that brands spend to promote their brands or products on retailers’ site or powered by retailers’ first-party data.”

The problem with classifying all retail media as trade spend is that it artificially limits the amount of budget that flows to it.

 

It’s not that performance is the limiter, but organizational rigidity.

 

It’s not that retail media can’t help a Brand Manager achieve her goals, it’s that it heightens the internal tension with Sales.

 

It’s not that retail media can’t help a national account manager, it’s that she has no incentive to spend on brand initiatives if her compensation is tied to short-term sales goals.

 

The media portrays it this way too.

 

Walmart Connect is always pitted against Amazon Advertising when both are competing less against each other and more against linear TV or under-performing programmatic.

This is changing through hiring & measurement changes.

 

Brands are hiring retail media specialists to dig in and help their organizations integrate retail media into their broader media strategy. These roles are bridging the gap between sales leaders and brand managers and helping educate the organization on the opportunity with retail media.

 

Measurement is changing too. Instead of myopically looking at, for instance, search campaigns in an isolated fashion, tools like Amazon Marketing Cloud are helping brands understand how ad units across the funnel impact the success of search.

It’s not going away - brands must figure this out.

 

It’s not just Amazon moving up funnel. You see this with programmatic efforts from Kroger, Walmart and Target, all of which want to leverage their data across the open web and are increasingly willing to provide P&L credit to marketers that use their data.

 

But if brands treat retail-data driven programmatic as trade spend, they’ll be unlikely to shift dollars out of less impactful (or at least less measurable) programmatic spend currently funded with other monies. Instead, they’ll shift from search budgets, even if search is performing.

 

In addition, Amazon, through its omnichannel panel, is working to measure the impact their ads have on rivals’ sites and stores. Ultimately, this will help illuminate the full influence its ads have. The problem is that it will completely blur the lines!

 

Think about it - if some percentage of ad spend on Amazon can be attributed with reasonable precision to sales inside a Walmart store, then which trade budget does that come out of – Amazon’s or Walmart’s?

 

This is a head scratcher because retail media doesn’t fit neatly into the status quo. It’s a combination of media formats with a bad name that is grating against siloed organizations.