Exclusive: UK retailers should copy TfL or they miss out on advertising cash, argues City bigwig
Are UK retailers missing a valuable opportunity to earn money from advertising?
A City insider thinks most big brands do, as he urges the High Street’s biggest names to look at TfL and copy their model by rolling out a retail media network.
So-called retail media networks are one of the hottest emerging trends in the sector at the moment, but why aren’t the big retailers embracing them?
City A.M. sat down with Paul Frampton, European President at CvE, part of the Goodway Group, who firmly believes it’s not too late to start.
Shift to online
As shoppers once again settle into the pleasure of in-store browsing, the time is right for big brands to maximise their experience, he argues, and that’s where so-called Retail Media Networks (RMNs) come in.
“If you’re not familiar with the term, it’s probably helpful to first define what a media network is in traditional advertising; a connected group of locations where people can see advertising,” explained Frampton.
“In the physical world, perhaps the best example is that of Transport for London – TFL. They own all the advertising space on the city’s rail stations, tubes and buses.”Paul Frampton
“This is an incredibly lucrative source of income for the business as it has both high footfall and excellent data on who is likely to be passing an advert in any given time or place – making its locations attractive to advertisers,” he added.
Frampton pointed out this is where the opportunity lies for multi-goods retailers; they have an incentive to promote others’ brands to their customers, they have high footfall, whether that’s in store or online, and good data about who is visiting the stores.
The pandemic has accelerated the shift towards online sales, which means retailers have been weathering tough times with squeezed margins and increased pressure on their physical stores to perform.
Couple this with the boom in Amazon’s advertising business, at $31bn last year, and “it won’t come as a surprise that retailers are becoming increasingly focused on generating incremental revenue from advertising,” Frampton explains.
“Mike Ashley’s Frasers Group – for example – are not going to be in a position to compete with this overnight, but do have the footfall and scale to start to make a dent,” he added.
On the other side, advertisers are adjusting to fragmenting audiences, declining TV ratings and the demise of so-called third-party cookies, technology that supports personalised online advertising – so it makes sense that RMNs are generating a lot of interest right now, Frampton argued.
“Some partnerships may be old and tough to break into, but RMNs open new entry points,” he continued.
“Retailers can enrich their offering with shopper insights, both e-commerce and in store, co-branding options, and more personalised communications and offers to consumers.”Paul Frampton
Retail media offers a compelling advertising opportunity with proximity to transaction, both digital and physical sales, offering the promise of not only better targeting, but better performance and closed loop measurement, he noted.
“It’s also worth an opportunity that is not just for FMCGs but also other categories,” states Frampton.
But is the shift really something new or just a move from marketing budgets that retailers already benefit from?
“Amazon leads the way, but the majority of advertisers plan to spend on other RMNs because they know that’s the way they’ll get access to highly-targeted audiences at a reasonable cost,” he continued.
E-Marketer calls this the third wave of digital advertising after two consecutive years of 50 per cent growth in the US.
US vs UK market
While Walmart blazes a trail in the US, retail media has taken longer to catch fire in the UK but now Boots, Asda, Tesco and Ocado are all jumping into the space.
“But they’re not just a substitute for shopper marketing; if brands are really going to justify advertisers’ investments, they need to offer robust end-to-end campaigns,” explained Frampton.
“Building a RMN starting with on-site is pretty straightforward and most big retailers have some form of offering, but real reach comes when it’s combined with an off-site element and data connections,” he stressed.
“Retailers need to build sufficient profiles to match first party data and then scale their network from there,” Frampton noted.
First party data plays a huge role because it offers the opportunity to finely target people who have a genuine propensity to buy your brand.
But when we dive deeper into the data the picture becomes more complicated.
Going from millions of customer IDs to a matched audience that can be physically targeted through scalable adtech requires a lot of smarts around clean rooms, privacy and data fusion.
“Then you need to assess how to genuinely use a variety of different data sets (retailer and manufacturer as well as second and third party) to enrich and create scalable reach that enables fine targeting,” said Frampton.
“Running a retail business and running a media business are very different propositions.
“Retail brands that wish to grasp the opportunity must build sophisticated media networks that can be scaled – but this can be a challenge as it requires experts in adtech, programmatic, identity resolution and first party data on hand. In our experience, most retailers will not have access to all of the engineering, data and digital talent to bring the whole thing together successfully, but the opportunity is there,” Frampton concluded.