By Troy Townsend, CEO of Zitcha
Just like a traveler wouldn’t want to be caught in a downpour without an umbrella, retailers would be wise not to wade into the coming torrent of economic woes without a resilient framework that will allow for continued growth in the face of hardship – especially right before the holidays.
Of course, today’s retailers are no strangers to economic challenges, having only recently weathered the closures caused by the COVID-19 pandemic. However, now is the time for that resilience to be truly tested. Retailers are about to face a one-two punch comprised of an uncertain holiday season – hamstrung by customers feeling the economic squeeze of inflation – and threats of a looming recession waiting just on the other side of the New Year.
If retailers are expecting reduced revenue as a result of this unique combination of unsavory economic conditions, they will need to establish new income streams that can flow past the floodgates that the incoming recession threatens to close. Advertising is typically one of the first areas of spend to be reduced during a recession, but while ad spend will likely decline, projections for retail media remain strong, nearly tripling from its 2020 levels by 2024. Furthermore, McKinsey estimates the space will generate more than $1.3 trillion by 2026. In recent years, retail media has established itself as a red-hot space that is only growing hotter – certainly an appealing source of growth for any retailer that has yet to tap into the power of data, which stands to add up to 15 percent to a company’s EBIT.
At this stage, there are two key considerations to be made by any retailer looking to make greater use of retail media as a driver of growth. First – and arguably most importantly – is to consider what kind of a framework to use. For nearly two decades, third-party cookies have reigned supreme in the retail media space, functioning as proxies for customer profiles using the sledgehammers of attribution and conversion-tracking where perhaps a scalpel of signals and sales would have been more appropriate. With third-party cookies set to be deprecated in the near future, heralded by Apple’s cookie-crushing rollout of iOS 14, there will be a significant increase to cost of acquisition for brands and retailers. Retail media offers a way for retailers to wield first-party data and the clear reporting it unlocks to create more accurate – and lucrative, when shared with brand partners – portraits of their customers. Even more critically, first-party data can be fully controlled and focused through an omnichannel approach, opening up significantly more possibilities for retailers to maximize the power of their hard-earned data.
The other key consideration for retailers – particularly now – is speed. It’s not enough to slowly make plans to invest in retail media; the best time is now, before the holidays hit. By the time December is finished, many retailers may already be feeling the squeeze of unmet expectations. In terms of both cost and speed, many savvy retailers are partnering with vendors that can provide established, proven platforms that can be quickly integrated and immediately utilized, providing immediate protection from today and tomorrow’s economic strife.
However they choose to do it, establishing a fleshed out, functional retail media platform will be key for retailer success in the coming months and years. A new wave is coming, and retailers that aren’t poised to catch it will risk being washed away.