What you need to know:

• WARC has upgraded its forecast for global retail media ad spend in 2024 to US$153.3 billion, and according to a new Retail Media report from RetailX, that figure will hit US$175 billion by 2028.
• Businesses outside the traditional retail cohort are eager to get their piece of the pie, but the gig isn't for everyone. Consolidation, and domination by behemoths like Amazon, will make it hard for those without scale to survive, according to WARC's Gregory Grudzinski.
• The bosses of the retail media units belonging to Australia's supermarket duopoly – Cartology and Coles360 – both have a fair idea of what it takes to get retail media right. But they don't quite agree as to whether under-delivery by a select few would dull the sector's sparkle. 
• For Diageo's new global retail media lead, Roger Dunn, offsite media is the next big thing – using retail data to target audiences on other channels like social and CTV. Cartology is pushing on that front – though its BVOD play is in go slow mode, for now.
• More broadly, the incoming Privacy Act overhaul could have significant implications for retail media's growth trajectory – and loyalty programs that underpin them.

Trolley dash

Retail media is powering globally and locally – and everybody wants in, even banks.

WARC's latest forecast has put global retail media ad spend at US$153.3 billion this year – up 13.7 per cent on last year. That tallies broadly with GroupM's most recent forecast, which suggests retail media will take 15 per cent of a global ad market set to nudge a trillion dollars by the year end.

A new Retail Media report put together by RetailX projects retail media will take US$175 billion by 2028 – if it's right, that suggests a slowdown over the next four years versus WARC's 13.7 per cent 2024 growth rate and GroupM's 17.5 per cent forecast.

For now, Amazon is still growing its ads business around 25 per cent a year. At that run rate, Amazon which posted ad revenue of $47bn in 2023 and will be closer to US$60bn in 2024, will take more than a third of global retail media dollars. Walmart is growing at a similar rate and should easily clear US$4bn this year from its Connect ads unit, up from US$3.4bn in 2023.

While scale is a challenge for many, the opportunity to turn idle assets into ad revenue has mass-appeal beyond the traditional retail players, and in an otherwise fraught economic landscape, the floodgates have been pushed wide open.

According to the RetailX report, 52 per cent of larger retailers globally now have some kind of retail media play – though that suggests a broad definition. But it’s no longer just the retailer’s game.

Retail adjacent businesses, technologies companies, and media owners are now also looking to hop on board the “gravy train”, globally and locally, said Coles360 boss Paul Brooks. The likes of Chase Bank and Revolut are among the big names entering the market in the last couple of months, while the likes of Uber and Lyft are also making some headway.

Brooks said the newcomers are stretching the definition of a retail media network beyond its purest form: “Some form of retailer [with] a number of assets it is looking to monetise to be able to deliver a better experience for its consumers … to give them the right message at the right time, in the right environment, in the right mindset”.

Of course, not every business has what it takes. According WARC's Digital Commerce Lead, Gregory Grudzinski, those without scale (and the accompanying volume of customer purchase data) will “find it harder to persuade brands to add them to the media plan”.

He said that’s particularly true for markets less vast than the US, where even “leading national brands” will struggle to compete with the likes of Amazon.

As Grudzinski sees it, competing won’t get any easier as scaled retail media networks begin to infuse their retail and commerce data “into the broader media ecosystem” to enhance targeting in channels like social media and CTV.

For many, he says the best way around it might be pool inventory via alliances with similar businesses or partnerships with ad tech companies, pooling inventory to “offer brands the audience scale they require”.

It’s a step short of the mass consolidation event that media ecologist Jack Meyers has predicted for the sector. “There’s just too many players,” he told Mi3 back in April.

Myers also noted the steep growth trajectory of retail media channels might open them up to some of the arbitrage accusations thrown at the broader programmatic market. The likes of US-based analytics provider, Adalytics, have already cast that aspersion on Amazon, and it's likely there’ll be more to come as off-site media drives scale in programmatic, increasing the chances that non-retail inventory is bundled into the buy, inadvertently or otherwise.

Buyer beware

As the sector sees it, the less sophisticated operations are the bigger threat to retail media’s reputation.

From the client perspective, Diageo’s newly minted global lead for retail and performance media, Roger Dunn, agrees that the volume and quality of inventory is key, but it’s the data reporting that’s the “secret sauce” of retail media. And scale alone is not the answer.

That’s because selling advertising as a media company, per Dunn, is fundamentally different to “being a buyer of products” as a retailer. Five years into the swing of things at Woolworth's retail media unit, Cartology boss Mike Tyquin suggests it comes down to three key factors.

“Firstly, you have to have a fantastic customer franchise that you deeply understand, and the best way to understand it is by having a loyalty program. If you don't have a loyalty program, it's really hard to understand who your customers are. They're just transactions, and that's actually not a very rich form of data,” Tyquin told Mi3.

The second is “context: the environment that your customers come in and shop has to be a rich environment in which you can engage them through media channels and formats”.

The third, an “endemic relationship with suppliers”. “I think the test if you're a retailer and you want to come into the space, is, can I really do a great job for the supplier brands I work with?”

Coles360's Brooks is largely on the same page as his retail rival. He flags “scale and structure”, first party data, buy-in from the board, investment, and the ability to attract and retain the right talent as his non-negotiables for prospective retail media businesses. “I think if you haven't got all of those components, then you are at risk of not delivering or fulfilling the proposition and the promise.”

While Morgan Stanley has estimated Australia's retail media market will this year nudge represent $1.6bn, it's still relatively early days for the local market. Brooks thinks opportunists looking at the rapid rise of retail media and aiming to jump on the “gravy train” could “tarnish” the sector. He says the “hyper growth” has already become cause for “frustrations and friction” in more mature markets like the US, a point underlined by BCG's latest poll of marketers which found they are becoming "more outspoken about their frustration with retail media’s failure to live up to its promise".

Tyquin, however, is confident that those that under-deliver won't last long. “I welcome people coming in, more voices in the retail media space. But ultimately everyone will be job will be judged on the job that they can do. If they can do a great job, fantastic."

Offsite opportunity

Dunn says that it’s the scale of opportunity in off-site or off network media that’s the most exciting trend – and where the money is headed.

“The onsite data is unique, but if you’re using the retailer’s data on offsite screens and going into CTV [connected TV], it’s going to become a way of working with all of your channels where it’s end-to-end.”

It’s already kicked off in the US, where off-site is driving the next stage of growth by expanding reach beyond a retailer’s owned assets, whilst also unlocking outcomes higher up the marketing funnel.

According to US market research firm Emarketer, 46 per cent of advertisers are activating off site when working with a retailer, with display, online video, and CTV being the top formats. US retail media spend on CTV alone is expected to jump 335.5 per cent year-on-year in 2024 to hit US$3.64 billion – and it will double again by 2028.

The trend is on the way in the local market as well, and Cartology is leading the charge.

The network’s retail out of home unit – built on the $150 million acquisition of Shopper Media in 2022 – will soon exceed 5,000 screens, thanks to a new exclusivity deal with shopping centre operator Vicinity. And that rollout is near completion, per Tyquin.

BVOD will be the next avenue for the retail media network, in what Tyquin hinted earlier this year would come part of deals with major publishers – though he says there’s no update yet on that front.

As Tyquin has said before, it’s not just a boon for retailers. He thinks the potential upside of those deals for traditional media owners could offset some of the declines experienced by traditional media. “It's not as binary as retail media wins and other people lose.”

On the retailer side, Tyquin suggests getting clear on where those revenue streams sit will be key to getting an accurate picture of the sector’s scale and growth.

“There’s an open question about how we categorise the revenue... I know that some retailers include certain things in their revenues that we don't include, and vice versa. So, there's a little bit of taxonomy and definitional work that still needs to be done, but I think the overall story is good prospects for growth.”

Offsite aside, Tyquin is also keen to point to the continued upside Cartology is seeing in its “owned and operated channels”, having just launched its first on-site video ad unit to customers late last month.

Meanwhile, Coles360 is also eyeing off the offsite opportunity, though it’s got some ways to go in closing the gap on Cartology’s three-year head start.

It’s been a slow and steady start to ensure the business is delivering for its existing clients before it goes after new revenue, said Brooks. “You need to make sure that your house is not built on sand.”

But with Coles360 set to turn two in October – and growing at a pace of 30.5 per cent per Q3 2024 results – Brooks said the retail media unit now has the foundations to “really start to accelerate” and follow through on plans to land advertising briefs in 2024. He says they’ll start proactively pitching agencies at the back end of this year, slinging a newly bolstered addressable audience courtesy of the Flybuys data unit that became one with Coles360 this week. The offering will also be backed by the new 360Impact measurement platform rolled out with Circana earlier this year.

Privacy pinch

“Hyper growth” in the retail media space is happening against the background of a global crackdown on data privacy – and the Australian advertising industry will be in the hot seat when new privacy legislation is handed down in August.

Such regulatory changes, paired with the deprecation of third-party cookies, per Tyquin, have played a mega role in the “explosion” of offsite retail media, as advertisers look to link with publisher and retailer audiences to solve for signal loss.

But retailers, as with other media owners, could soon be in a world of pain if proposed “fair and reasonable” requirements limit what they can do with customer data – particularly if they rely on an adjacent loyalty scheme.

Trading of loyalty scheme data, the stuff that powers retail media and a vast targeting-attribution industry, will require companies to prove they have lawful consent to do so. If the proposals are passed, they won’t be able to deny services to those that say no, which, combined with the 'fair and reasonable' requirements, is a challenge for loyalty scheme economics with some, such as Woolworths, seeking an exemption.

“Data privacy regulation is an evolving picture, and it is likely that retail media networks will need to adjust their approaches as requirements change,” said WARC’s Grudzinski. And he warns that data clean rooms won’t be an “infallible ‘silver bullet’”. “Both retailers and brands will need to keep a close eye on any changes to that ecosystem to remain one step ahead.”

At Coles360, Brooks played down the impacts, deferring to the full picture of revamped regulatory environment that we’ll get in a few months’ time.

“We’ll see how far-reaching the regulation will go in terms of regards to privacy,” says Brooks, noting that local retailers have already “got line of sight around what those potential implications will be” from the roll out of GDPR data protections in the EU. 

Australia's Privacy Commissioner has actually stated clear intent to go further than GDPR, but Brooks suggested Coles is prepared to adapt to whatever lawmakers decide to do.

“Fortunately, we're a big business that is heavily governed, making sure that we've got the right sort of checks and balances, from a privacy perspective, to be able to target in a responsible manner. So we’re prepared for the challenges and we’ll see what the implications are on the broader business moving forward.”

For Cartology, Tyquin hinted the privacy overhaul has led to a more cautious approach as the network progresses its offsite expansion into BVOD, originally expected to be up and running by now.

“We're very mindful of the privacy and regulatory environment, and there’s a lot of work still going into establishing how we activate, how we use our audiences in a very thoughtful but privacy compliant way. There's a lot of appetite for what we've got in our audiences, but clearly, we have to be mindful of the of the trust from our customers in Woolworths.”

Whatever the regulatory environment looks like under the new legislation, there’s no doubt they’ll be hoping that their gains from broader signal loss will not now be offset.