Drew Cashmore takes a look at how retailers can protect their retail media investments as Amazon continues to dominate the market in perpetuity
Over the next four years, the retail media industry will grow 88% to a $98bn TAM by 2028 – so it’s still an incredibly important area of focus for the media, advertising and retail industries.
But what fascinates me is the projected percentage of the pie that Amazon maintained through 2028. That pie does not change: while retail media will see an influx of $46bn over the next four years, Amazon will always own approximately 77% of the pie. This 77% is a serious problem for almost every other retailer.
Amazon will capture approximately 77% of retail media spend in perpetuity
What Amazon can do with these monies – invest in innovation, drive more traffic, reduce the cost of goods for customers, improve experiences, reduce operating costs, grow sales – dwarfs that of any other retailer. It has a compounding effect over time, a classic ‘flywheel’.
And it doesn’t just impact ad investments. It impacts trade investments as well, because continued growth creates a better negotiating lever for Amazon.
A lack of serious, competitive participation in retail media from other retailers simply fuels this flywheel for Amazon, shifting more-and-more supplier trade and advertising budgets to the behemoth.
The [multifaceted] retail media flywheel
There are a bunch of different versions of the retail media flywheel but mine is by far the most unnecessarily complicated (it’s how I roll!).
The multifaceted retail media flywheel considers the interconnectedness of retail media to total business growth
Retail Media has always been ingrained as a core tenet of the overall retail proposition (as was shopper and trade marketing before it). Retail Media 2.0 Looks a Lot Like Trade Marketing 1.0 suppliers co-funding the growth of the places they sell.
If your flywheel starts with ‘Retail Media Investments’, those investments can have substantial benefits for a retailer’s overall business:
Working media drives traffic (online and offline)
Working media drives sales (online and offline)
Higher margin ad spaces create operating income that can then be reinvested in things like innovation.
More importantly, growth in the business creates increased perceived value of an individual retailer and improves that retailers’ ability to negotiate on trade investments.
Greater share of the pie leads to increased reasons to invest which into leads to more trade investments.
More trade investments allow a retailer to reduce costs for the customer which generates more sales and further perpetuates the flywheel.
Growth on all sides.
Amazon knows this and it’s why it has a disproportionate share of overall trade and retail media investments.
The opposite of growth
The opposite is also true, but not in an obvious way for most retailers – yet.
If the flywheel is perpetuating itself at another retailer – in this case mostly Amazon – then Amazon can continue to significantly outpace the market in overall growth.
We see this in earnings reports for the industry, with many retailers seeing declining sales in spite of growth in overall retail sales (however slightly), and growth in Amazon’s retail business.
Yes, there are a myriad of factors influencing this, but I argue that the retail media flywheel that Amazon has created for itself – its own competitive moat – is having a much more significant impact on other retailer’s declining sales than they can quantify today.
Simply put, competing retailers can no longer provide the same value to customers. EDLP and EDLC, as two core levers of growth for many retailers, now includes retail media.
A lack of growth relative to the market or worse, declining sales, has the compounding effect of either limiting growth of trade and retail media investments or reducing those investments overall. Those dollars ultimately end up in the hands of retailers that have competitive retail media offerings.
What many retailers still perceive as internal competition for trade versus shopper or retail media dollars is false in that your real competition is with retailers with scaled retail media offerings.
With trade investments alone representing an estimated 30-50% of the overall operating income of many major grocery and big box retailers today, declining investments can have a detrimental impact on these retailer’s ability to operate in the future.
Said differently, the retailers that are not investing significantly in their retail media businesses today are at risk of no longer being able to operate.
Creating a competitive moat with retail media
There is a lot more to this than a single post can cover, but I propose three baseline ways that a retailer can establish a competitive moat in their retail media business. These are really important to do together:
Make it easy and appealing for advertisers to buy: unified buying platform, buy how you want (self-serve direct, managed service, 3rd party bidder), second price auction, quality measurement, etc.
Make it easy for the retailer to operate: retail media operating system in one tool, workflow automation, reduced number of tools, media supply chain efficiencies, etc.
Make it competitive: pricing, tactical proposition, differentiation, B2B marketing, measurable outcomes, etc.
Done together, these baselines allow for differentiation that can drive net-new dollars into most retailer’s retail media businesses.
But to get there requires a leap-of-faith at an executive level. For that, we need to look at:
Real investments in the business (not as a small percentage of retail media revenues but as a significant strategic investment from the retailer P&L overall – to support investments in technology, resources and marketing)
Coordinated go-to-market between merchandising and retail media such that trade, retail media, COGS and retail sales buckets are looked at holistically.
Specialized talent and executive leadership that establishes retail media as a core tenant of the overall retail strategy, not a side project.
Strategic effort to find the right technologies, tools, partners and business models that will allow individual retailers to own the key relationships with their advertising partners (their suppliers), and drive mutually beneficial growth over time.
Even in a nascent state, retailers still have the space to create competitive moats out of their retail media businesses, but they don’t have a lot of time to do that. The horizon for viable participation on this space at scale dwindles with every quarter.
It’s time to take your retail media business very seriously.
Author
Drew Cashmore is the Chief Strategy Officer of Vantage. He was an original architect of and former executive at Walmart Connect in the US and Canada, helping to scale the business to $2BN and beyond. Drew was a founding member of Walmart’s eCommerce and digital marketing platforms and the CMO of a SoftBank-backed Live Shopping platform called Firework. Drew is also the Co-Founder of a new retail innovation platform called Adaptive Retail Group.
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You are in: Home » Retail Media » GUEST COMMENT How to create a competitive moat with retail media
GUEST COMMENT How to create a competitive moat with retail media
Colin Lewis
Drew Cashmore takes a look at how retailers can protect their retail media investments as Amazon continues to dominate the market in perpetuity
Over the next four years, the retail media industry will grow 88% to a $98bn TAM by 2028 – so it’s still an incredibly important area of focus for the media, advertising and retail industries.
But what fascinates me is the projected percentage of the pie that Amazon maintained through 2028. That pie does not change: while retail media will see an influx of $46bn over the next four years, Amazon will always own approximately 77% of the pie. This 77% is a serious problem for almost every other retailer.
Amazon will capture approximately 77% of retail media spend in perpetuity
What Amazon can do with these monies – invest in innovation, drive more traffic, reduce the cost of goods for customers, improve experiences, reduce operating costs, grow sales – dwarfs that of any other retailer. It has a compounding effect over time, a classic ‘flywheel’.
And it doesn’t just impact ad investments. It impacts trade investments as well, because continued growth creates a better negotiating lever for Amazon.
A lack of serious, competitive participation in retail media from other retailers simply fuels this flywheel for Amazon, shifting more-and-more supplier trade and advertising budgets to the behemoth.
The [multifaceted] retail media flywheel
There are a bunch of different versions of the retail media flywheel but mine is by far the most unnecessarily complicated (it’s how I roll!).
The multifaceted retail media flywheel considers the interconnectedness of retail media to total business growth
Retail Media has always been ingrained as a core tenet of the overall retail proposition (as was shopper and trade marketing before it). Retail Media 2.0 Looks a Lot Like Trade Marketing 1.0 suppliers co-funding the growth of the places they sell.
If your flywheel starts with ‘Retail Media Investments’, those investments can have substantial benefits for a retailer’s overall business:
More importantly, growth in the business creates increased perceived value of an individual retailer and improves that retailers’ ability to negotiate on trade investments.
Greater share of the pie leads to increased reasons to invest which into leads to more trade investments.
More trade investments allow a retailer to reduce costs for the customer which generates more sales and further perpetuates the flywheel.
Growth on all sides.
Amazon knows this and it’s why it has a disproportionate share of overall trade and retail media investments.
The opposite of growth
The opposite is also true, but not in an obvious way for most retailers – yet.
If the flywheel is perpetuating itself at another retailer – in this case mostly Amazon – then Amazon can continue to significantly outpace the market in overall growth.
We see this in earnings reports for the industry, with many retailers seeing declining sales in spite of growth in overall retail sales (however slightly), and growth in Amazon’s retail business.
Yes, there are a myriad of factors influencing this, but I argue that the retail media flywheel that Amazon has created for itself – its own competitive moat – is having a much more significant impact on other retailer’s declining sales than they can quantify today.
Simply put, competing retailers can no longer provide the same value to customers. EDLP and EDLC, as two core levers of growth for many retailers, now includes retail media.
It’s not just Amazon, several other retailers including Orange Apron Media by The Home Depot, Walmart Connect, Sam’s Club Member Access Platform (MAP), CVS Media Exchange (CMX), H-E-B and Best Buy Ads (+some well-established RMNs in Europe like Asda and Morrisons), have established strong foundations that allow them to compete.
A lack of growth relative to the market or worse, declining sales, has the compounding effect of either limiting growth of trade and retail media investments or reducing those investments overall. Those dollars ultimately end up in the hands of retailers that have competitive retail media offerings.
What many retailers still perceive as internal competition for trade versus shopper or retail media dollars is false in that your real competition is with retailers with scaled retail media offerings.
With trade investments alone representing an estimated 30-50% of the overall operating income of many major grocery and big box retailers today, declining investments can have a detrimental impact on these retailer’s ability to operate in the future.
Said differently, the retailers that are not investing significantly in their retail media businesses today are at risk of no longer being able to operate.
Creating a competitive moat with retail media
There is a lot more to this than a single post can cover, but I propose three baseline ways that a retailer can establish a competitive moat in their retail media business. These are really important to do together:
Done together, these baselines allow for differentiation that can drive net-new dollars into most retailer’s retail media businesses.
But to get there requires a leap-of-faith at an executive level. For that, we need to look at:
Even in a nascent state, retailers still have the space to create competitive moats out of their retail media businesses, but they don’t have a lot of time to do that. The horizon for viable participation on this space at scale dwindles with every quarter.
It’s time to take your retail media business very seriously.
Author
Drew Cashmore is the Chief Strategy Officer of Vantage. He was an original architect of and former executive at Walmart Connect in the US and Canada, helping to scale the business to $2BN and beyond. Drew was a founding member of Walmart’s eCommerce and digital marketing platforms and the CMO of a SoftBank-backed Live Shopping platform called Firework. Drew is also the Co-Founder of a new retail innovation platform called Adaptive Retail Group.
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