Latest / Retail Media Breakfast Club / Brands demand retail media standards. Retailers say it's too hard. Do they kind of have a point?
Transcript
- Retail Media Bolognese === [00:00:00] Introduction: The Perfect Bolognese and Retail Media --- Everyone has their own definition of the perfect bolognese sauce to parents of young children. It's a way to sneak in an extra serve of veggies. Some people play with a ratio of pork to beef. Italian purists demand a splash of milk at the end. Decisions around what goes into your bolognese sauce and how it's prepared may depend on your family history. Flavor preferences or even type, or even what type of equipment you have with all of these variables, everyone seems to make their bologna a little bit different, and that's kind of what's happening in retail media networks today. All these retailers offer. Retail media, yet the flavor profile and the nutritional value are wildly different with measurement standards as varied as those home cooked meals. Brands say they want retail media standards. Retailers say it's too hard. Do the retailers kind of have a [00:01:00] point Upcoming Webinar Announcement --- Before we jump into today's episode, I wanna share that this is a little sneak peek of some. Topics of discussion on a fantastic webinar that's coming up on May 21st at 2:00 PM with me, Sarah Ayala, the AVP of E-Commerce at the wonderful company, and Bradley Keefer, the Chief Revenue Officer of Keen Decision Systems. This webinar is brought to you by Future Commerce and we're talking about the retail media halo effect, how to break down silos. And create a full funnel omnichannel strategy. So if you enjoy this episode today, you're going to love that webinar and I recommend that you tune in on May the 21st. I'll link up to the event page in the show notes here. Without further ado, let's dive in. So Diverse Retail Media Networks --- let's talk about the different recipes and why it retail media networks operate [00:02:00] differently. Just as every home cook has their own bolognese recipe. Every retail media network has developed its own approach to advertising, measurement, and reporting. This isn't by design. It stems from fundamental differences in their business models, history, technology, infrastructure, and position in the market. Kiri: For many smaller retail media networks. Their tech stack resembles off the shelf ingredients, assembling the Kirkland brand of meat with a bottle of Prego sauce. It's technology that gets the job done, but for their regular customers, they offer a special order. Boies, the direct ad buys made exactly how these big spenders want it. These direct media buyers might generate enough revenue. And align pretty cleanly with the retailer's core business by actually selling stuff that it means there's little incentive to [00:03:00] pony up the big bucks on infrastructure to significantly improve their standard public recipe. Technical differences are bound as well. A new report from Penta Leap, which comes out tomorrow. On Thursday, May 15th shows significant variation in how effectively retailers can serve sponsored ads for complex search queries. Basically, as searches get longer and more specific and thus more valuable to brands targeting niche customers, some platforms maintain high ad coverage. While others drop off dramatically. Challenges in Standardization --- Kiri: The Diners Dilemma brands face the difficult task of navigating a fragmented retail media landscape. As retail media. Spending growth is expected to decelerate. Performance gaps will be even more under the microscope. Brands are already voting with their wallets. On average, they only advertise on five to six retail media networks, despite dozens being [00:04:00] available in each product category. The call for standardization from brands is born out of two major issues, frustration around transparency and a desire to compare apples to apples and ensure their media dollars are spent on the most performant channel. On the issue of transparency, a couple of months ago, Jordan Whitmer, the managing director of retail media at Nectar First shared how one major retail media network. Responded when advertisers started to identify and opt out of poor performing placements based on low viewability metrics. Instead of improving these placements, the retailer simply removed advertisers ability to select specific placements, forcing them to buy bundled packages. That obscured the poor performers. And on the issue of comparing apples to apples a few weeks ago, I wrote about a Path to Purchase [00:05:00] Institute and TransUnion study, which revealed just how wide the perceived differences between RMNs have become. The data shows a stark divide between the two big industry leaders, Amazon and Walmart. And the rest of the pack and just how dimly brands feel about being able to compare apples to apples. Right now, I'm not gonna read out the results of that study because it's really difficult to follow along with audio, but Amazon and Walmart get excellent to very good ratings across all of the core metrics and. They are rated as strong on data transparency, and if we compare that with some of the lower tier of retail media networks, some of them get absolutely beaten up. Um, when it comes to the question of measurement. Some of these retailers like HEB Dollar General, BJ's, Albertsons, and Ahold Delhaize get fair or [00:06:00] poor on the measurement data sharing or ROI metrics from the advertisers in the study. Retailers' Perspective on Standardization --- Kiri: What about the chefs? What about the retailers? And why are they finding standardization so difficult? Although brands want to compare apples to apples, some retailers are pushing back on the premise of broad standardization in general. Melanie Babcock of Home Depot pointed out in an interview that I did with her for Forbes that brands might have completely different strategic objectives across different retail partners, especially when it comes to. Specialty retailers, she said, for example, a faucet manufacturer might have 200 skews at Home Depot and only 10 at a mass retailer. If the brand is testing a new product line or color trend in one retail environment, their return on ad spend might naturally be lower than in a channel where they're only promoting proven best [00:07:00] sellers. So that's one inherent challenge of comparing a specialty retailer to mass category killers like Amazon and Walmart. But there are some other legitimate challenges in standardizing approaches for retailers. The obstacles aren't just stubbornness or profit seeking. They're rooted in technical limitations, organizational structures, and business realities. Just to summarize a few of them, I go into a little bit more detail in the blog posts that accompanies this podcast, but a lot of these retail media networks were built on legacy systems. They were kind of sprung up internally. As some skunkworks project, as a way to monetize some aspect of their website or even offsite in some cases. And as such, it's evolved separately from the core retail business. Another issue is the economic reality check and the fact that with [00:08:00] some of these retailers, they're just never going to be at a size where. A big focus on technology and infrastructure and getting up to date with standard is gonna make a lot of sense. I heard recently of a regional grocer making single digit millions in revenue from monetizing their customer data. That is not enough of an incentive to invest capital expenses. In upgrading their core systems. And then thirdly, the audience seems to want different dishes. And this was a, a, a thoughtful comment that came from one of the leaders of these RMNs. Sean Ransenberg from HEB and he posted a thoughtful comment on one of my recent articles on this topic. He said, it's going to be extremely difficult for retailers to provide standardization when CPGs aren't in agreement on how they want to measure retail media internally. Various PG teams [00:09:00] have differing preferences on measurement methodologies, so he's saying the sales team wants pre and post-analysis. Shopper marketing team wants a closed loop and match market analysis, and the brand team wants a marketing mix model. The whole table seems to want bolognas, but one wants gluten-free pasta. Another wants the pasta well-cooked, and everyone else wants it aldente and the child at the table needs it to be served lukewarm. The ingredients might be the same, but it needs to be customized to each person's palette. Historical Context and Lessons --- Kiri: What does history say about where we're at in retail media right now? The kitchen, like what Sean is saying, says that the diners are too picky and demanding. And it may indeed be unfair to expect a nutritional label for the meal coming outta the kitchen. But the call for standardization has been born from experiences where brands have been told, [00:10:00] just trust me, and had their fingers burned as retail industry analyst, Andrew Lipman says, dollars follow measurement. We've seen this movie before. Only when Facebook moved to a performance medium circa 2012, did the ad dollars really surge. And between 2006 and 2012, search engines handle their measurement standards differently. Sparking a similar standards debate to what we're having now, ultimately being adopted. Google like ad mechanics. Advertisers crave transparency. And we're all too happy to shift ad spend even when that resulted in a near monopoly. Could outcome first thinking, discard the need for standards while up, while preparing for this upcoming webinar with future commerce, I heard an interesting perspective from Bradley at Keen Decision Systems. It kind of challenged the whole notion. Of [00:11:00] standardization. He argued that we should flip the lens and aim for an outcome first. Econometrics driven measurement approach rather than agonizing over the definitions of impressions or views. Start with the business outcomes, incremental sales, household penetration, basket size, brand lift spend, where marginal dollars create the most incremental sales, regardless of how the metrics are calculated internally. And that kind of shifts the conversations with retail media networks from, is your pixel MRC accredited to prove you beat my next best dollar on incremental lift. Conclusion: Embracing Variety in Retail Media --- Kiri: In conclusion, embracing the variety, the retail media landscape indicates that parties on both sides are still developing. They're culinary identities for brands. The industry will undoubtedly move towards greater standardization over time. [00:12:00] Just as other digital advertising channels have, but the unique characteristics of retail mean that some degree of difference will always remain, and perhaps that's not entirely a bad thing. After all, if every bolognese tasted exactly the same, we'd miss out on discovering new flavors and techniques. The same might be true for retail media.