Retail media networks are a new and attractive option for advertisers. They’ve been on the 2023 digital trends watchlist for good reason. They can close gaps from the impending end of third-party cookies by enabling access to first-party data. In turn, they can reach a more targeted audience. This buzz has experts projecting that the category will hit $106 billion by 2027.

These networks offer advantages for advertisers, but are they a good fit for local?

What Are Retail Media Networks?

Retail media networks are platforms owned by retailers that allow them to sell ad space on their digital channels to third-party brands. These include their e-commerce websites and apps and other inventory owned by third-party media companies that work with that retailer. It also encompasses out-of-home (OOH) digital signage in physical stores. Consider it the 21st-century equivalent of in-store advertising, where brands pay more for high-profile positioning.

Targeting and First-Party Data Collection Drive More Investment

These sponsored ads show up on retail-owned inventory, and targeting is based on first-party data collected by the retailer. It can include demographics and shopping preferences. As a result, advertisers can reach customers who are more likely to need their products.

The framework looks like a win for all parties — retailers add another revenue stream, brands improve conversions, and customers are served more relevant ads. As networks collect more data in this ecosystem, targeting becomes more precise.

Brands are putting more budget dollars into these tactics, with the leading reason being a better ROAS (return on ad spend). As a result, 73% of surveyed advertisers said they planned to invest more in these ads. The greatest increases are in beauty, specialty apparel and footwear, general retail, CPG (consumer packaged goods) household, and CPG grocery.

However, there is some pushback on this relationship. Eighty-five percent of brands said they feel pressure to support these networks. This type of ad buy could become a standard for doing business with retailers.

Which Companies Have Retail Media Networks?

The largest ones are the giants of retail — Amazon, Target and Walmart. Specialty retailers, including Ulta, Lowe’s, Home Depot, CVS, Walgreens, Best Buy, Dollar General and Dollar Tree, have also created them. Upscale brands like Nordstrom have launched them as well.

How Do Retail Media Networks Work?

The mechanics of these networks are fairly simple. Brands buy advertising across websites and apps either directly from the retailer or through a DSP (demand-side platform). Shoppers then see promoted products when they search on the site or choose a category. Meta also has a tool, Managed Partner Ads Lite, which extends networks for retailers with retail media inventory. The company advised that it piloted the program with Walgreens and Dollar General.

The landscape of these platforms is different from those for programmatic display. It’s fractured, with advertisers using five to nine different ones. It’s often easier to manage by working with a DSP with breadth and quality inventory to launch these.

Now that you know the basics and benefits, when would recommending retail media networks make sense for local advertising?

Retail Media Networks and Local Advertising

Is a retail media network a good fit for locals? In most cases, local advertisers would get much greater value from other tactics. These ad types are most beneficial to companies that sell physical items online through distributors. There typically isn’t much localization here, but it’s a possibility.

Some local businesses could consider it, such as local grocery stores placing ads on Instacart’s network or restaurants doing so on DoorDash or other food delivery apps.

It’s probably not something you’d add to a digital campaign, but it’s always good to understand digital advertising trends!

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