As we kick of the second half of 2024, we’ve seen some of the amazing things that retail media has in store, but what are some of the challenges that retailers and brands are likely to encounter as they expand and develop their retail media networks?
Fragmentation
Perhaps the biggest challenge facing the retail media ecosystem is fragmentation. Retail media is still relatively nascent and, while it has rapidly developed, it leaves in its wake a bewildering array of networks, channels, inventory, budgets and reports. The ecosystem itself is equally complex, with a varied level of interplay between retailers, agencies, tech providers and brands.
Cutting through this complexity is going to have to be a priority for the sector and is going to require all stakeholders in the ecosystem to work together to find solutions. This means standardisation.
Standardisation
When fragmentation is the biggest challenge in retail media growth, the solution is standardising what is being sold.
To make this possible, retail media needs to be measurable yet right now, fragmentation makes this very hard to do. Each ad on each network is different in terms of size, shape, prominence, position and so on. Measuring between different ad formats on the same site is hard enough
but making comparisons site to site, network
to network, is all but impossible.
However, brands looking to exploit retail media need to be able to fully understand the return on investment (ROI) and the return on ad spend (ROAS) of what they are doing. Similarly, retailers setting up RMNs need to be able to cost out ROI and ROAS to justify doing it in the first place and to be able to price their retail media offerings.
Work is already underway to overcome this. Independent advertising industry body IAB has working groups featuring all the major RMNs, brands, agencies and tech companies working on standardising measurement across retail media. While rapid progress has been made, as new formats are added and new players enter the market, this work needs to be ongoing.
Data privacy and transparency
Retail media runs on consumer data – which is available in abundance. However, while consumers are giving it freely in return for perceived benefits in personalisation and relevance, they have privacy concerns. These are also shared by governments and legislators, who stridently back data privacy with laws such as GDPR.
As these consumer privacy concerns continue to rise, building trust will be crucial for retail media platforms. Transparency will be key, with retailers clearly communicating how user data is collected, used and protected.
Retail media will also need to adhere to evolving data privacy regulations and offer consumers clear opt-out options for data collection and targeted advertising. This will add cost and complexity to running and using RMNs, a consideration that needs to be factored into the overall ROI of such an undertaking.
In-house expertise
For retailers and, to some extent, some brands, there is also a skills shortage around retail media. Retailers are sellers of goods, not sellers of advertising, yet they are having to pivot into
a dual role as they look to create RMNs.
While they can recruit from outside the retail industry, there is a finite pool of skilled people who understand retailer, advertising and retail media. This demand pushes up remuneration, with anecdotal evidence suggesting that retail salaries do not match those in the advertising world from which these ‘experts’ come.
This is leading to a skills shortage in retail media, which is only set to increase as retail media expands. Now is the time to address this skills shortage within the industry, so that retailers in particular are ready for the retail media future.
This list of challenges is part of the extensive RetailX Retail Media 2024 report. Drawing on ConsumerX research, third party data and value-chain testimonials, the report explains the concept of retail media networks, their evolution, how to leverage them from any point within the value-chain and where they go next.
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