I once calculated how much of my life has been spent solving problems related to retail media, and I came up with about 20,000 hours. In a recent episode of The Kevin Rose Show, Mark Manson quoted Cal Newport:

You don't find what you're passionate about and then get good at it. You find what you're good at, and as a side effect you naturally become passionate in the process of becoming good at it. — Cal Newport

I write about retail media because it is probably the single-most practiced thing I've done in my life next to breathing and sleep, and it excites me — although at one point I did believe I'd do something more impactful than 'selling ads.'

But as my good friend always reminds me, retail media is the catalyst for a much larger and more consequential change in retail — it's not the endgame.

In this week's Retail Media Leapfrog Series — articles that serve to help retailers leapfrog incumbents leveraging learnings of the past to build for the future — we're going to talk about the real intangible value of retail media by framing what's happening to the traditional retail model today, and how the current gold rush is diluting its longer-term strategic importance to the retailer, its suppliers, and its customers. To start, let's look at what's happening to the traditional retail model.

Part No. 01The challenges facing the traditional retail model.

Brett Regan wrote a great article on the history of retail — from the cow and sheep trade of 9,000 B.C. to mid-stage eCommerce (you can now trade cows and sheep online). At its core, he defines retail as "the sale of different goods and services to customers with the intention to make a profit."

It is very likely that retailers will still be selling goods in the future, albeit in a much more personalized, automated, augmented, and decentralized way. That evolution is obvious and somewhat organic — retailers will get better at using technology to simplify the shopping journey. What I'm more interested in are the non-obvious retailer progressions driven out of necessity.

As the sale of goods is more and more commoditized, it becomes difficult for retailers to differentiate or add value. I love Amanda Mull's point in an article about Amazon and Temu:

Amazon's tactics and dominance has gone a long way toward making the process of buying totally meaningless. — Amanda Mull

Couple this with rising customer acquisition costs driven by a fragmented media ecosystem, plus the scarcity of attention, and you can quickly see how the traditional retail model is failing. Simply put, it's becoming more expensive to reach and convert customers, and the value those customers drive to retailer bottom lines is diminishing.

Part No. 02How do retailers make money in the future?

An obvious progression is retail media — hence the gold rush. Retail media is born out of a reimagination of the trade and shopper marketing construct, which was ultimately a mechanism to co-fund a retailer's growth.

Less obvious might be the retailer as a healthcare provider, a data provider, an entertainment company, an experiences company, or a platform provider. Beyond that, who knows — but there will be more.

Many retailers have come to realize that there is value in their customer base beyond the sale of goods. And while no one retailer has the right or capacity to support it all, there is room for creative new business models within retail. But getting to that 'new' is challenging, because it requires a reimagination of what it is to be a retailer — and most enterprises aren't ready for that kind of transformation.

Part No. 03The 'new' needs to be part of the model.

If we look at just retail media, retailers have been selling ads and experiences for a long time. I've argued that retail media 2.0 looks a lot like trade marketing 1.0. What's different this time is the sophistication — the expectation of real data utilization, quantifiable outcomes, ad tech, and a competitive set that expands well beyond the sale of goods.

Because of this sophistication — because the concept is so foreign to core retailer ways of working — we often silo retail media businesses, intentionally operating them independently. And when we operate them separately, it most often serves to conflict with core retail operations, create internal friction and strife, and negatively impact the retailer's standing with its suppliers. That complexity is true across almost all new business models in retail.

When a business like this is truly integrated — not just as a top-down push, but as a new way of working between all relevant stakeholders — is when the thing truly works for all of its beneficiaries: the retailer, the supplier, the customer.

This integration is a much larger topic — think aligned monetary incentives, new processes, new job descriptions, new tools, new ways of thinking, expectations of partners and internal teams. It takes time, and most 'experts' in this space have never architected or lived through a complete transformation of this scale.

What it actually took at Walmart
About 10 years to get the model right, and 3 years of intense change management to effectively operationalize it — but check the earnings reports for an idea of the results. If properly integrated, retail media is a transformation function for the 'new' in retail.

Part No. 04The real intangible value of retail media.

Retail media forces retailers to think and behave differently. It forces them to:

And so much more. At its core, a properly integrated retail media business is a mindset shift for a retailer that says, 'there is more out there than selling goods to customers.' The work to get there is complex, but the outcomes are highly visible and immediate — which makes retail media the perfect catalyst for broader retail transformation.

A big part of the eCommerce and omni-channel transformations at Walmart came as a result of the change-management efforts in retail media — because we'd finally figured out how to properly engage with and incentivize different teams.

The resulting behavior of retail teams with sophisticated, integrated retail media businesses is that the next big transformation is perceived as possible — and even welcomed.

Reminding ourselves of the intangibles.

Retail media is highly nuanced. It is not a profit-first, demand-first, technology-first, data-first, tactic- or innovation-first proposition. This is what we keep getting wrong.

We sacrifice a focus on the highly complex stuff for short-term gain (i.e. immediate demand) — a fantastic dopamine hit that doesn't set our businesses up for success in the long run. It's what our parent companies expect of us — hyper growth — and so we miss the intangible opportunity for our own business and our broader retail organization. We need to remind our leaders of this fact.

Business transformation is really the art of understanding people, systems, culture, etiquette, politics, incentives and above all else REALITY. — Tom Goodwin

That's the point. Retail media is a people-first proposition, and when we put in the work to manage the change necessary to make it a core part of our retail business, we establish a catalyst for future change and innovation unparalleled in the retail industry.

This is where the Leapfrog Series begins. Subscribe to follow the argument as it builds, week by week.