How retail media networks facilitate consumer connection

NRF 2023: Albertsons and Nordstrom share learnings about ‘contextually relevant’ advertising
Peter Johnston
NRF Contributor

What changes are retailers making to adapt to their ever-changing advertising and marketing needs? Some answers to this question were provided by a panel discussion at NRF 2023: Retail’s Big Show moderated by Andrew Lipsman, principal analyst, retail and ecommerce for Insider Intelligence. Kristi Argyilan, senior vice president for retail media at Albertsons, and Aaron Dunford, senior director of digital merchandising and marketing at Nordstrom, joined the conversation.

Lipsman began by noting that store involvement in media networks represents a third wave in retail digital advertising. “The first was search, which was led by Google in the 2000s. This was followed by social, led by Meta, in the 2010s. Retail media — led by Amazon — will power retail digital advertising in the 2020s.”

That will be the largest of the three, he said. “It took search 14 years to go from $1 billion to $30 billion in digital ad spend. It took social 11 years. It took retail media five years. We now expect U.S. retail media marketing to grow 20% or more in 2023, reaching $45 billion. The market will continue to grow by $10 billion a year for the next few years.”

NRF 2023

Did you miss us in NYC? Take a look at our NRF 2023: Retail's Big Show event recap.

New retail advertising networks come online “practically every week,” Lipsman said. “They run the gamut from digital marketplaces and platforms like Amazon and Shopify to multicategory networks like Walmart and Macy’s to category specialists like Best Buy and Home Depot. Commerce intermediaries like Instacart and commerce verticals like Marriott are also in the mix.”

Retail media’s power comes from the fact that it’s “based on delivering contextually relevant ads when people are shopping, based on first-party shopper data that provides closed-loop measurement and a clear sightline into return on ad spend,” he said.

It is also benefiting from three major marketing disruptions. First, there has been a widespread decline in TV ratings, which makes it harder for brands to efficiently reach consumers. Secondly, third-party identifiers like cookies and mobile IDs have disrupted mobile advertising, making it harder to target and measure ads. And finally, the digitization of the store gives brands a new way to reach consumers. “I see this as one of the biggest mega-trends on the horizon,” Lipsman said.

As noted, the high-growth period of all this is just beginning. Nordstrom launched sponsored advertising via the Nordstrom Media Network in 2019. “We’re really excited about the growth of brand advertising in retail media networks,” Dunford said. “Retail is really competitive, so how do you stand out? We want to make an emotional connection with the customer, and you can’t do that through direct response ads.”

Albertsons, meanwhile, is working on a streaming television project with Omnicom. “It gives you a way to make TV accountable and prove it helped drive a sale,” Argyilan said. “We’re just dipping our toe into it. It’s an agency leaning into a different type of audience, applied to television and with measurement attached. TV, the best — and least-measured — medium, is all of a sudden becoming measurable.”

Kristi Argyilan SVP, Retail Media Albertsons Media Collective
Kristi Argyilan of Albertsons Media Collective

There are numerous challenges to deal with. About 50% of Nordstrom customers, for example, begin an in-store purchase online. They might use both and when searching for a product. “Consolidating data and delivering an experience is really difficult,” Dunford said. “We’ve built an internal platform that aggregates data and lets us see it all in one space.”

And for all the demand, there is not enough room for everyone to succeed and scale an ad business. “Amazon dominates U.S. retail media markets with 77% market share,” Lipsman said. “We don’t expect it to concede much market share over the next couple of years, even as Walmart, eBay, et al. carve out meaningful positions.”

On the other hand, many not yet in the field are expected to try it — and for good reason. “Even 1% of this market,” Lipsman said, “would represent $450 million in very high-margin revenue.”

The panel agreed that virtual reality can be — and is growing to be — both global and local. As noted, the Tommy Hilfiger spring show offered “augmented reality” — avatars the size of buildings in the middle of Manhattan. It also offered reverse-reality shopping: The live Hilfiger show was streamed back into the metaverse, offering avatars the opportunity to buy new clothes for their owners. For the Mexican festival Día de los Muertos, Tommy Hilfiger opened a pop-up store in Mexico City and mimicked it in Roblox. “We were able to launch a limited item really targeted at that cultural moment,” Takkenberg said.

Fierro said Shiseido was one of the first to bring an avatar makeup look to Roblox, created by its global artistic director. The activity is not divorced from the company’s overall needs and strategy: A “virtual worldwide campaign” launched around an island theme was accompanied by a virtual resort wardrobe for avatars that brought in $19.6 million in limited goods sales.

“It makes a case that virtual goods present a very compelling opportunity for real-world brands in the near future,” she said.

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