Creating a retail media flywheel
Most Unmade readers will be familiar with the ‘Amazon Flywheel’. The logic of the Amazon Flywheel can be translated to retail media – and retailers like Walmart are doing exactly that – and perhaps Aussie retail media networks can follow in these footsteps.
The commercial realities for retailers this year are dominated by margin squeeze: Retailer margins have always been small, but they are shrinking more due to inflation and rising labour and logistics costs (e.g online pick-up orders, eCommerce).
However, retailers do have some assets in hand:
Customers want omnichannel: services such as eCommerce, pickup and delivery, ship-from-store. And retailers have stored - in many cases, lots of them.
B2B Assets: Retailers have assets that can scale - your eCommerce store and your first-party data. Scaling the catalogue of products available online provides traffic to monetise these eyeballs and first-party data is much better than cookie data. The latter is being undermined as a targeting mechanism.
Tech change: new tech is now available that did not exist even 5 years ago - marketplace software to create a marketplace to onboard lots of new suppliers, activate retail media and use new technology to share data with suppliers in a privacy-first way.
Retailers now have a 'flow' of strategies to solve the margin problem:
Create a marketplace with technology from the likes of Mirakl or build one like Walmart.
Layer this over an existing eCommerce business to build the flywheel of traffic and data.
Create exponential amounts of insight by having a good loyalty programme.
Leverage these B2B assets into a retail media revenue programme that can target the long tail of suppliers.
Create a self-serve option for the long tail of small suppliers and new marketplace suppliers.
Work with one of the newer video/OTT/ TV set-ups like Roku to layer retail data with CPG data to build out better creative, better targeting and better tracking of results.
Walmart use this approach in their analyst presentations: ‘leveraging our assets for B2B opportunities’ and saying that Walmart Connect is a monetization ‘layer’ over existing Walmart eCommerce assets. Even their CEO says
“Selling advertising is another important piece of the flywheel because it helps suppliers and Marketplace providers sell more while creating a new profit opportunity for us. Our ecosystem is made up of omni-channel capabilities, stores, service offerings, eCommerce and marketplaces as well as our supply chain combined with 2.3 million associates. Together, we believe these elements produce a flywheel effect which creates relationships where customers view Walmart as their primary destination. This flywheel is coming to life across markets in a way that generates a different business model that will change the company in the long term. "
Walmart are hinting at some of the changes that are going to happen to retailers across the globe: where Walmart lead, others will follow.
At the RE:Made conference, we saw hints of ‘Flywheel’ thinking from Mike Tyquin, Managing Director, Cartology. During his chat with CMO ANZ, PepsiCo, Vandita Pandey. Mike talked about how with Woolworths,
"...we’ve got all these wonderful capabilities in data and data advanced analytics, eCommerce and digital and ecommerce. During the pandemic, we hyper-scaled our e-commerce, digital transformation, cut the corner on three years and delivered lots of new capability coming into our business. What became incredibly clear was this ecosystem that was built had the customer at the centre".
Back to Amazon: their flywheel is also helped by their loyalty programme, Prime. Andrew Lipsman describes Amazon’s New Flywheel as made up of Media, Advertising and Commerce. He believes that for consumers, Prime Day may be just a big sale—but for Amazon, it’s a
“...massive, coordinated jolt that propels its new flywheel forward.”
The increase in high-value traffic and sales from Amazon’s loyal Prime member audience generates incremental product exposure, which can lead to new customers and additional sales, growth in reviews and increased organic positioning. Amazon Advertising just accelerates the flywheel.
Perhaps this is the next phase of growth for Retail Media in Australia: adoption of integrated thinking around loyalty, eCommerce, marketplaces and all other B2B assets that are already in place.
“The increase in high-value traffic and sales, particularly from Amazon’s loyal Prime member audience, generates incremental product exposure, which can lead to net new customers and additional sales and, in turn, potential growth in reviews and increased organic positioning,”