Making room for more… Unlocking retail media’s long tail.

19 Oct

The biggest FMCG brands with their giant ad spends are obviously a retailer’s retail media bread and butter (if you’ll pardon that metaphor). But, if you read last issue’s excellent article by our CTO, Keith O’Reily, More than media revenue: How retail media delivers beyond its invoice value, you’ll accept that the value in retail media is more than a figure at the bottom of a media invoice.

Other factors come very much into play. Foremost amongst them must be customer experience and choice. Let’s never forget that retail is a service industry! But there are also key considerations such as category management, new product development and product placement.

What’s also important for retail-side retail media managers is fostering a healthy sense of competition amongst advertisers. As retail media in Ireland, particularly amongst grocery retailers, begins to develop beyond its infancy and into what we might call its refinement phase, it’s therefore important that smaller, more diverse and niche advertisers are able to join the party. They bring all of those benefits: customer choice, enriched categories, innovation and competition.

But what do large FMCG retailers need to do to open this ‘long tail’ of smaller advertisers, make their inventory accessible and ensure those advertisers feel welcome?

The Structural Advantage of Being Big

There is an obvious reason why the biggest brands dominate retail media investment. They have the budgets, but they also have the people. A large FMCG supplier may have shopper marketing specialists, trade marketing teams, media agencies, creative agencies, ecommerce specialists and dedicated people managing relationships with individual retailers.

For a smaller food producer, challenger brand or emerging supplier, ‘the marketing department’ may quite literally be one person. That creates an imbalance which goes well beyond the amount of money available to spend.

If accessing a retailer’s media requires multiple meetings, a complicated media plan, bespoke creative, significant minimum investment and an understanding of an unfamiliar collection of formats and metrics, the smaller advertiser may simply decide it isn’t for them. Even if, commercially, it would benefit them and they are exactly the advertiser the retailer ought to be encouraging.

Retail media therefore needs to be careful not to design itself exclusively around the needs and capabilities of its biggest advertisers. Otherwise, we risk becoming very good at selling more media to the brands that already buy lots of media, while making it unnecessarily difficult for the next generation of advertisers to participate.

Make the Simple Things Simple

Many smaller suppliers simply do not have the in-house expertise to plan and optimise digital retail media campaigns themselves. In some ways, that makes the Irish market’s current reliance on managed-service models an advantage. Retailers still have an opportunity to introduce smaller suppliers to retail media, help them understand what works and build their confidence while there are people involved in guiding the process.

That window may not remain open indefinitely. As retail media matures, we are likely to see more of the self-service and automated buying models already common in larger markets. Those platforms can make retail media more efficient and scalable, but for a smaller supplier without specialist expertise they can also create another barrier to entry. There is therefore a strong argument for bringing those advertisers into the market now, while support and human guidance are still built into the way much of the media is bought.

What matters more is removing unnecessary complexity and creating a clear route into the market, whether that ultimately involves a salesperson, an agency, a managed service or, where appropriate, a more automated buying process.

The objective should be to make the simple things genuinely simple. A supplier should be able to understand what they can buy, what it will cost, what they need to provide and what they can expect to learn afterwards without having to become a retail media expert in the process.

And importantly, they should not have to buy an enormous campaign simply to get started.

A multinational supplier planning across multiple categories may require a sophisticated annual partnership covering in-store, on-site, off-site, data and measurement. A smaller supplier may simply want to support a new listing, improve visibility within a relevant category, participate in a seasonal event or make shoppers aware that its product exists.

That suggests retailers need accessible entry points: sponsored search, category placements, relevant event participation, sampling, social content or tightly defined in-store opportunities which can be understood and bought without constructing a huge campaign around them.

Make it easier to participate. Make it easier to grow.

Use the People Who Already Aggregate Advertisers

There is also another route which retail media owners perhaps need to explore more actively: the media agencies.

Large agency groups may represent hundreds of advertisers. Some will be enormous multinational brands, but many are considerably smaller businesses whose individual media budgets might never justify a retailer approaching them directly.

For an agency planner, however, adding a modest retail media investment to an existing media plan can be relatively straightforward. A small amount of budget might move from paid search, display, social or even broadcast into retail media if there is a strong enough reason to do so.

That changes the economics for the retailer too. Instead of having to identify, educate, brief and service dozens of small advertisers individually, one agency relationship can potentially open the door to many of them. The agency already understands the client’s objectives, controls or influences the media plan and can undertake much of the planning and coordination required.

Retail media owners should therefore be talking not only to shopper and trade marketing teams, but also to the planners and buyers allocating broader media budgets. If we want to bring new money into retail media, we need to be visible to the people deciding where that money goes.

Think in Categories, Not Just Advertisers

Retailers themselves also have an advantage that no outside media owner has: they already know which smaller suppliers they would like to see succeed.

Category managers and commercial teams know where innovation is coming from, which new listings are strategically important, where a category needs greater competition and which suppliers have the potential to grow. Retail media teams should be tapping into that knowledge.

Imagine a category dominated by two enormous suppliers. From a media revenue perspective, that might look perfectly healthy. Both spend heavily, inventory sells and revenue targets are hit. But is that necessarily the healthiest outcome for the category?

Smaller brands can bring premiumisation, new flavours, new formats, different price points and entirely new usage occasions. They can keep established suppliers on their toes and give shoppers more reasons to browse.

If a retailer has taken the commercial decision to list an exciting new product, surely there is some logic in helping shoppers discover that it has arrived. Otherwise, we risk putting innovation on the shelf and leaving it to fend for itself.

Build a Ladder

Smaller advertisers also need to understand whether their investment has worked, but measurement should be proportionate to the campaign and the advertiser.

A brand supporting a new listing may care about immediate sales, but it may also want to know whether the campaign drove trial, recruited new customers or encouraged repeat purchase. It does not necessarily need a hugely sophisticated attribution model; it needs useful evidence that helps it decide what to do next.

Because ideally retail media should create a ladder. An advertiser comes in at an accessible level, sees what works, gains confidence and increases its investment.

That is how today’s small advertiser can become tomorrow’s significant retail media partner.

The practical challenge, then, is not simply finding the long tail. Retailers need to make it commercially viable to serve it: clearer packages, sensible entry points, closer links with category teams and agency relationships capable of aggregating smaller pockets of demand.

None of this means diverting attention away from the largest suppliers. Those relationships will remain enormously important. The opportunity is additive.

A mature retail media network should be able to serve the multinational spending hundreds of thousands of euro a year, and the emerging supplier spending a few thousand without forcing one to behave like the other.

Smaller advertisers also need to understand whether their investment has worked, but measurement should be proportionate to the campaign and the advertiser.

Because ideally retail media should create a ladder. An advertiser comes in at an accessible level, sees what works, gains confidence and increases its investment.

That is how today’s small advertiser can become tomorrow’s significant retail media partner.

None of this means diverting attention away from the largest suppliers. Those relationships will remain enormously important. The opportunity is additive.

And done properly, opening the long tail should create something more valuable than another line of media revenue: more brands competing, more innovation reaching shoppers, more new products being discovered and, ultimately, stronger and more interesting categories.

There is, though, another boundary worth questioning.

If retail media does not have to be the exclusive preserve of a retailer’s biggest suppliers, why should every advertiser necessarily have to be a supplier at all?

That is a subject for next time:

Beyond Endemics: Who Else Should Be Buying Retail Media?

Tim France