By 2028, the value of worldwide advertising revenue from retailer-owned e-commerce sites is expected to surpass television revenue due to the medium’s rapid growth.

The largest media buyer in the world, GroupM, predicted that advertising revenue from retail media channels will increase by 9.9% to reach $125.7 billion in 2023 and surpass that of television in 2028, when it will account for 15.4% of all ad revenue.

Retail media is the third fastest expanding advertising channel this year, behind linked TV and digital out-of-home (OOH) screens, according to the 2023 Global Mid-Year Forecast study from WPP-owned GroupM. These two channels, though, only make up a small portion of the retail media market.

The analysis, which was released on Monday, confirms a previous prediction made by market research company eMarketer.

Retailers are competing fiercely to draw major advertisers to their websites, from supermarkets like Carrefour, Ahold Delhaize, Tesco, and Sainsbury’s to online retailers like Amazon, Walmart, and Target.

Retailers benefit from every product sold as well as the money generated by the advertisement when consumer brands that sell products through their websites pay for advertising.

Profit margins for retailers from retail media can be as high as 90%, reflecting the premium that major consumer goods companies are willing to pay for prominent positioning on retailers’ websites. This is vital income when returns from their primary business line have been impacted by the rising cost of living.

Retail media became more appealing to the companies due to the pandemic’s increased usage of digital channels by consumers.

Additionally, it offers advertisers the chance to expand their ad budgets outside Alphabet’s Google and Facebook-owned Meta Platforms, the two biggest digital ad distributors and collectively referred to as the “duopoly” in the market. The General Data Protection Regulation (GDPR) of the European Union, which forced big online players to restrict the collecting of personal data, has changed the game in terms of digital privacy, though.

As a result, the value of so-called first-party data, which shops independently collect and can use to target brand advertising and carefully assess its efficacy, has increased.

Amazon is the industry leader in retail media, reporting $11.6 billion in revenue from its advertising business in the fourth quarter. Walmart Connect, the company’s retail media division, has had tremendous growth, with sales increasing by almost 30% to $2.7 billion in the fiscal year that concluded on January 31.

European retailers are recognising the possibilities, whilst American players have spearheaded the establishment of retail media networks.

According to CEO Frans Muller, the Dutch grocery chain Ahold Delhaize has achieved “roughly half” of its target to increase revenue from sources other than food stores to 1 billion euros by 2025. The work was centred on monetizing consumer data insights and selling advertisements on the websites of its supermarkets.

The second-largest grocery chain in Britain, Sainsbury’s, has developed Nectar360, which integrates its loyalty programme with marketing services. It already works with 700 brands, and by 2026, it intends to make an additional profit of more than 90 million pounds ($113 million).

“More and more brands are using Nectar360, to improve their return on ad spend and grow their business,” Mark Given, Sainsbury’s chief marketing officer told Reuters, highlighting the “significant opportunity”.

Retail media networks in the UK grocery industry alone, according to consultants McKinsey, have the potential to create 1 billion pounds in profit in around two years. (Adapted from RetailGazette.co.uk)

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