In the early days of eCommerce — circa 2007 — retailers began to see how unsustainable their growth model was. The more we shipped to home, the more money we lost relative to in-store purchases. It was around that point that those who had lived in, or on the periphery of, retail saw an opportunity to reshape age-old shopper marketing for the next generation of retail, and to help subsidize the growth of this new channel. And they shaped it in accordance with the singular most important rule in retail: the customer is #1.
In the third article of my Leapfrog Series on retail media — posts that serve to help new and emerging retailers leapfrog incumbents — I talk about the nuanced mistake that many of us have made since that point. This leapfrog approach counters a relatively new narrative around the need for retailers to act more like media companies.
The Real WorkRelationships drove the business.
What we didn't anticipate in the early days of digital shopper marketing — now retail media — was just how important a new type of relationship was to the growth of what seemed like a reasonably simple and appealing advertising proposition.
In the advertising world, relationship selling was reasonably clear-cut: you take a client out for dinner, or you make them look good, and they buy ads from you. (I'm oversimplifying.) In retail media, the relationships we needed to foster were not the buyers of the ads — but our own internal teams. And they weren't incentivized by kushy dinners.
Retail merchants (or traders, or buyers) hold significant sway over the ultimate buyers of advertising — the retail suppliers. Retail marketers work directly with brands. Product, engineering, and user experience teams control how, or if, ads show up on retailer websites. Accounting controls how money flows into the organization. Legal controls data collection. You get the picture.
The initial aversion within retailers to digital shopper marketing came down to two things:
- Money. Supplier co-op dollars fund much of a retailer's marketing, merchandising, and innovation activities — so retail media looks like cannibalization.
- Something new. The friction caused by introducing change.
What the pioneers of this space pushed through to get to this point was years of careful negotiation inside the walls of the retailer. We needed to reengineer ways of working and incentives across the entire organization, sell in the proposition and the why, find ways of identifying monies so as not to cannibalize what was already collected — and, most importantly, bring people along the journey.
While there were many bumps along the way, these efforts became about building a retail media business from within — one that would work in concert with the core belief of the retailer: the customer is #1. And it's why Walmart Connect has been so successful in this space.
The AlternativeRetailers acting more like media companies.
Change is hard. It would be so much easier if we could build retail media businesses in a silo, skirting around the internal behaviors, politics, and intricacies of a retail business.
Silo'd media businesses inside a retailer fight for standardization in line with how the broader media market looks at advertising metrics. They ignore the intricacies of partnering with their merchandising teams and opt for bigger entertainment budgets. They push to build technologies that serve individual client needs versus considering the broader impacts to the retail business and its customers. They establish their own unique cultures against the broader retail organization.
Many of us have tried this approach — including myself, in my more stubborn years. But what all of us who tried to act like a media company inside a retailer independently got to was revenue stagnation in years 2 to 5, followed by a multi-year reset to establish trust anew, because we'd damaged it so much. Growth will still happen at the start, but inevitably you'll hit a wall that can only be overcome by a better integration into the core business.
The Leapfrog ApproachA symbiosis you won't find at a media company.
In a standard media company, the relationship between buyer and seller is singular: I (the brand) pay you (the media company) to drive eyeballs to my brand. At a retailer, the relationship is much more complex — something you likely wouldn't understand unless you entrench yourself in the broader retail ways of working.
There is a symbiosis between the supplier, the retailer, and the retail customer that is unique versus standard media companies: when we grow, they grow, and vice versa. And therefore retail media can be used for so much more — as a tool for better customer engagement, personalized experiences, and even to improve supplier relationships.
The good news? We've done this before. As arduous a task as it seems today, there are people out there who can help steer your ship in the right direction — from change management strategies to a toolset for operating this business. Trust the people who have effectively managed this scale of change within a retail organization to leapfrog incumbents.
If you're wrestling with how to build retail media from within — without breaking the trust you'll need to scale — follow me on LinkedIn and shoot me a note.