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Retail media in the age of privacy

Christie Zhang
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June 6, 2022

As privacy regulations tighten around the world and further limit the use of third-party data, brands and vendors are looking to e-commerce marketplaces and retailers for a lifeline: evolving their advertising strategy using first-party data on those sites and apps.

Retail media networks, essentially e-commerce sites — think Amazon, Target, — allow businesses to advertise directly to consumers as they shop online. These networks create a win-win situation:

  • Hyper-relevant ads help consumers discover products they didn’t know they needed, enhancing shopping experience within that specific site and increasing overall satisfaction.

  • E-commerce platform owners see higher gross merchandise values (GMV) and shopper lifetime value (LTV). Plus, they can use retail media to strengthen relationships with not only their consumers, but also their brand, merchants, and vendor partners.

  • The merchants and vendors who sell on e-commerce platforms gain the opportunity to make their products discoverable by their target consumers, at just the right times, which drives conversions and returns on ad spend (ROAS). Moreover, attribution is easy as retail media provides a closed loop ecosystem. 

Retail media is growing faster than ever

Retail media has established its reputation as the hot new advertising channel (eMarketer predicts that 2022 “the year of retail media networks”). The evidence is clear: in the US alone, retail media ad spend jumped 53.4% from 2020 to 2021, and continues to rise. This year, advertising directly on retail sites and apps is set to increase another 31.4%, bringing $41.37 billion in sales.

US Digital Retail Media Ad Spending, 2019-2023

The time is now for brands, merchants, and vendors to leverage e-commerce for advertising. And there’s still a lot of digital ad spend up for grabs.

Drivers powering the growth

  • Targeting at the right time in the shopping journey
    Retail media enables vendors to target consumers who are already actively shopping, and thus, most open and likely to make purchases through relevant ads.
  • Continuing growth of online shopping
    Consumers are increasingly shopping online for products across categories, and this habit won’t change anytime soon. In the US alone, consumers are expected to spend $1 trillion online in 2022, up 17% from 2021. According to Adobe research, online grocery sales exploded during the pandemic, and it will continue its upward trajectory.
  • Shopping innovations
    We’ve seen a steady drumbeat of innovation in shopping and data privacy. Recently, Target rolled out a new tool for its biggest advertisers to track user conversion by volume. Walmart Connect and Lowe’s One Roof Media Network offer similar functionalities. Further, performance advertising solutions like Moloco Retail Media Platform enable retailers and marketplaces to set up their own programmatic advertising businesses.

But the biggest emerging driver in the next phase is privacy.

What privacy means for e-commerce

Consumers are demanding privacy protection in all the technologies they use, making it difficult to target effectively. Brands and their media agencies need privacy-sensitive — and furthermore, privacy-adaptive — alternatives to reach their audiences.

A key benefit of retail media networks is that advertisers can tap into the platform owner’s unique first-party data. This data contains key insights on shoppers, including purchase history, brand and product preferences, basket mix, and propensity to try new products, and are collected over months, years, and decades. This means ads based on first-party data can be personalized to each shopper, leading to higher conversion rates.

Machine learning and product discovery

Consumers want privacy, but they also want to be introduced to products they didn’t know they wanted. This is where machine learning takes product discovery to another level. Let’s say a shopper is looking at swimsuits. Chances are high that the consumer is planning a vacation, so through ads for other holiday-oriented items, such as tour guides, platform owners will increase GMV and ROAS for their advertisers. Machine learning excels at the kind of smart product pairing that delights and retains shoppers.

About Moloco
Moloco aims to empower e-commerce companies to unlock the value of their first-party data. That’s why we introduced Moloco Retail Media Platform for marketplaces and retailers to drive sales and new revenue, improve platform stickiness, and grow shopper lifetime value. Learn more here.

Christie Zhang

Product Marketing Manager

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