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Writer's pictureColin Lewis

Who is buying lunch? Why retail media will remake the relationship between retailers and suppliers

At the recent Re:Made Conference in Sydney, I started out my keynote with this visual.


This visual is the go-to visual used by everyone to create the context for Retail Media. It points out that retail media is the fastest growing digital channel ever.


Andrew Lipsman of Insider Intelligence points out that Retail Media has achieved in five years what search ads (i.e. mostly Google AdWords) took 14 years to do. Yes, there are lots of qualifications to add to this high-level analysis, but the principle is still the same: adoption has been rapid, the tools are getting more mature and the market is ready.


Few other technologies have scaled so fast from $1bn to $30bn (no, BitCoin and ChatGPT-based growth does not count as these are not retail!)


Another way to communicate the idea to Retail Media sceptics is as follows: imagine its 2006 and someone has come to you and explained what Google Search Ads are and what they deliver based on searches made by people – and how the whole thing is powered by an auction.


I can remember at the time that many brands and retailers shook their heads and said that ‘will never catch on’ and went back to their TV campaigns.


Likewise with social media advertising. Remember when Facebook floated that nobody thought they had a viable business model? Pretty soon they throttled organic reach and made it ‘pay-for-play’ – and spawned new industries – not just new digital advertising channels. Again, many brands and retailers shook their heads and said that ‘will never catch on’ and went back to their TV campaigns.


Will this time be different?


Probably. Here’s why: The much-talked about death of third-party cookies has shifted brands and retailers to focus on first-party data. Historically this data was unavailable or shared on a very limited basis with advertisers, this data is now available to advertisers and underpins everything in Retail Media.


The lure – and power – of first party data and the reduced impact of digital advertising from Google and Facebook – can really only point in one direction.


But this direction means some serious changes in the dynamic between retailers and suppliers.


Changing the dynamic between Suppliers and Retailers.


The rise of Retail Media Networks now has also made it harder for advertisers to tell the difference between sales, shoppers, marketing, and media functions in retailers.


Retailers used to only care about the supply chain – getting product in front of shoppers. Suppliers saw the retailer as the customer and the channel and committed sizable trade and shopper marketing budgets are as part of the requisite cost to compete.


However, if retailers have rich data about shoppers and are developing new means to reach and interact with shoppers through retail media, this changes the balance of power between the buyers and suppliers.


Retailers with Retail Media Networks now have to care about creating demand – and not just deliver on supply. Creating demand for a brand is no longer just the job of the manufacturer's brand team. Now, the brand and the retailer both have to do their part.


How is this? Now that retailers are selling media, the Retail Media Networks are responsible for driving sales volumes and showing a positive return on ad spend (ROAS) that links supplier spend on retail media with sales.


Retailers with Retail Media Networks are not only competing with other RMNs, but also with all the other digital media options that advertisers can use.


So, the relationship between retailers and suppliers becomes a lot more complicated and nuanced. Buyers have turned into sellers, and sellers have turned into buyers. There is now a two-way flow of sales and money.


Indeed, as I argued at the Re:Made Conference, the approach to being a successful purveyor of media is very different than being a successful retailer. For retailers, building retail media networks has meant investing in new talent, skills, technology, and partnerships to create new businesses that act as digital advertising platforms.


Instead of the existing world of buyers and account managers, volume deals and shelf wobblers, the retailers and suppliers will be forced into a completely different type of relationship where it is unclear who is buying and who is selling?


Perhaps the real answer to that question will come when the supplier and retailer go out to lunch, who will pay for it?


Click the link below to download Colin's slides from RE:Made


Look out for more from Colin on the RE:Made website soon.

 

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