REmade: Why retail media is the trojan horse of marketing
Welcome to the latest edition of the REmade newsletter, sister publication to our REmade conference, where the retail media community comes together.
It’s never to early to hold the date, so please save Tuesday October 1 in your calendar now for the third edition of REmade.
In this edition, IPG Mediabrands’ head of commerce Hope Williams on AI-powered shoppers, and Colin Lewis on why agencies need to beware the Trojan horse of retail media. Plus ARN Media sinks on the Unmade Index after Southern Cross Austereo (gently) rebuffs its advances.
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How e-commerce is reshaping marketing
In his regular column for REmade, global retail media consultant Colin Lewis reveals the implications for agencies of the new massive direct-to-consumer commerce platforms.
Retail media gets a lot of the limelight, but the role of digital commerce is the driver that underpins a lot of the bigger changes to the traditional view of a customer journey from customer interest to purchase.
Amazon, and more recently, the astronomical spending of Temu and Shein are making an impact that extends far beyond retail media. Indeed, their approach is reshaping every facet of marketing including branding, product development, distribution, fulfilment, customer relationship management, search, social media, analytics, influencer marketing, and media buying.
For example, Temu only launched in the US in September 2022, and did a digital marketing blitz to acquire new customers. It grew sales to $9.67 billion, an increase of 94% year on year. How did it grow these sales? By placing ads on TikTok, Instagram, Google, and nearly every other online channel where people shop.
76% of Temu’s ad spend went to social media, and 13% on digital display ads. Goldman Sachs analysts estimate Temu spent about $1.2 billion on Meta in 2023 alone.
In Australia, Temu became the biggest e-commerce destination in May, and remained that way for seven of the next eight months.
In a November earnings call, Etsy’s CEO declared that Temu and Shein were “almost single-handedly having an impact on the cost of advertising,” on digital channels.
What about Amazon? As Gabrielle Novacek of Boston Consulting Group points out: “Amazon’s entire system—from supply chain through marketing —is designed to sell a lot of the leading brands in any given category. They want to get a bigger and bigger share of the household budget for everything. Amazon is a lot less concerned with whether a product or brand is a category leader so long as it is a sales leader on Amazon. Moreover, Amazon is not particularly worried about its margins for any individual item. The company looks at things from the perspective of total household spending—in other words, the profit that it draws from each family as a share of that family’s total spending in the marketplace.”
The way to think of this is a flywheel.
Digital commerce can be seen as a sort of flywheel: we can start with retail media, which will trigger traffic on an eCommerce store (whether on or off-site retail media). If the eRetailer adds a marketplace capability (which Amazon and Temu already have), the merchandisers spend more to gain position, which creates more shopper data, giving more insights from analytics that influence the whole process, all enabled by AI and machine learning.
These individual components of this marketing flywheel are all enabled by technology and a particular type of technology, one that is ‘Internet Scale’
What is ‘Internet Scale’? It is both a technical topic and a business opportunity. ‘Internet Scale’ from a business perspective means:
A global opportunity – anyone with a smartphone and 5G connection could be your market
A direct relationship to customers
Huge amounts of data that can be used to create, to iterate, and improve
The ability to scale rapidly using cheap tools – cloud-based computing, marketing technologies, Stripe for payment etc
Operating at ‘Internet Scale’ from a technical perspective means:
Massive transaction volumes – thousands or more transactions per second
Global distribution – reaching a global customer base to anyone with a smartphone and 4G connection
Huge amounts of data that can be used for analytics, insight or predictive models
The ability to scale rapidly on demand; think of the ability to cope with Black Friday or Alibaba’s 11:11
Guess who has ‘Internet Scale’? The likes of Temu, Shein – where you can click on a Facebook ad, connect to a supplier in China and get the product delivered to anywhere.
Impact on agencies
The implications for agencies are huge – and we have an example of this already in the last few months with Omnicom’s $835m acquisition of Flywheel Digital from Ascential.
With the transaction, the group is at once establishing itself as a major market player with expertise in marketplaces and retail media.
London media legend Nick Manning pointed out in his column in The Media Leader that “we are witnessing the full-scale emergence of a new way to drive business and new marketing models, and this will have a profound influence on the marketing services industry and thus the agency world.”
Manning pointed out that Omnicom paid a handsome price, as the holding company recognised that “the skill-sets within Flywheel are not available within their existing operating units and building an equivalent resource would take a long time and be very costly.”
Secondly, it has created an entirely new entity to sit horizontally within an organisation that has usually been structured vertically.”The traditional TV-led marketing model is losing ground to the more dynamic digital commerce model. In this new environment, brand-building plays a less dominant role, with marketplaces like Amazon, TikTok, Shein, and Temu becoming brands in their own right.”
Retail Media is the Trojan Horse
Marketers have short-term pressures around performance and TV advertising is not up to the challenge in its current linear format. It needs to prove its effectiveness in driving the flywheel more efficiently than digital alternatives.
The fact that retail media is not (yet) really embraced by many agencies indicates they’re unclear on how to adapt to this hybrid world. Even more, as digital commerce changes the customer journey, the future roles of creative and media agencies are becoming less clear. The top brands that are exploiting retail media to the full often have internal staff – and do not use agencies.
It’s the Trojan Horse for a complete change in the world of marketing.
Q&A: Hope Williams on why retail media is not a tool but a weapon
In each REmade newsletter, we feature a Q&A with a key player in the retail media space. Our guest today is Hope Williams, head of commerce for IPG Mediabrands.
What do you see as being the next focus area for retail media?
The retail media landscape is shifting at a breakneck pace. In this economic climate, brands need to double down on their relationships with consumers. It’s not just about selling products anymore; it’s about selling experiences and building brand equity at the point of sale.
Retail media isn’t just a tool; it’s a weapon for brands to build loyalty and drive growth. In a very competitive landscape, offering truly personalised and relevant ad experiences will be key for capturing consumer attention, and driving conversions.
In Australia, few retailers are truly seizing the opportunity that retail media (especially digital) can offer their businesses, especially with giants like Amazon and Temu entering the market and growing rapidly. I think this will become a focus as retailers course correct to embrace new innovative revenue models and strategic partnerships.
How do you see AI impacting retail media?
I’m a big fan of AI and embracing the advancements it will bring across various areas.
AI will be a major driver for retailers and brands, enabling cost savings and operational efficiencies in various ways, such as demand forecasting, inventory management, product development and theft detection.
Shein, the fashion retailer, is a great example of AI’s potential in product development. By analysing user data, AI can identify trends and tendencies, anticipating customers’ desires to develop new products. It then orders small quantities of fabrics to produce and if the item gains traction, AI will increase quantities for production.
This data-driven approach allows Shein to quickly respond to customer preferences and minimize inventory risk. It’s a prime example of how AI can enhance the creative process and drive business success.
The key is to leverage AI as a tool to augment human capabilities, not replace them. It’s about finding the right balance between automation and human touch.
What recent work accomplishment are you most proud of? And what are you most excited about in the near future?
Since stepping into the Head of Commerce role in August, the past seven months have been a wild ride, and I’m immensely proud of how my team has navigated the change and rapid growth. IPG is doubling down on commerce this year, and I’m super excited about what’s on the horizon both globally and locally.
At IPG, we view Commerce not as merely a tactic, but as a disruptor, shaking up multiple industries. My role is to guide our brand manufacturers, retailers, and service clients to seize this disruption and turn it into an opportunity. We’re developing innovative solutions and strategies to future-proof our brands, ensuring they not only survive but thrive in this new landscape.
What are your expectations for the challenges and opportunities that lie ahead?
Younger generations, our future consumers, are rejecting interruptive ads and opting for user-funded media like Netflix and Spotify. They engage with brands differently, using marketplaces and social media as their network television. Ratings and peer reviews matter to them compared to previous generations.
We just have to look to the US, where Amazon is the most important search engine for product discovery, with over 60% of product searches starting there. 80% of these searches contain no brand names, so there’s a huge opportunity for disruption.
Digitally native brands have a level playing field within marketplaces and social environments, threatening traditional brands’ market share.
However, this creates a big opportunity for our brands to engage with consumers in meaningful ways within these emerging media ecosystems (Uber, Amazon, TikTok, Temu…). The key is to be where the consumers are, leveraging these platforms to drive sales and build brand equity.
It’s about being present in the moments that matter to consumers, and finding innovative ways to engage them without interrupting their experience.
What recent book has changed the way you see the world?
I recently read (listened to the Audiobook on Spotify) ‘The Algebra of Happiness’ by Scott Galloway – for anyone unfamiliar, Scott is an entrepreneur and Professor of Brand Strategy at the New York Stern School of Business.
It’s an unconventional book of wisdom and life advice that was written based on the final lectures he would give to his students at NYU after being asked consistently for life advice.
I’m normally a reader of historical fiction, but as far as self-help books go this was incredibly pragmatic and applicable. He has a great self-deprecating sense of humour and is surprisingly sensitive at times bringing me close to tears with his life lessons and stories. I highly recommend it!
Cat McGinn is beginning the content curation process for ANZ’s only dedicated retail media conference REmade 2024, which takes place on October 1 in Sydney.
Send her your big ideas and revolutionary retail media case studies now.
SCA price grows as board pushes for better ARN offer
Tim Burrowes writes:
A twist in the ARN Media – Southern Cross Austereo takeover saga barely troubled the investment market yesterday with a rebuff being widely interpreted as no more than a price negotiation tactic.
As Southern Cross Austereo had telegraphed at the time of its half year results announcement a week ago, SCA argued that ARN Media and Anchorage Capital Partners should pay more if they wanted to do the deal.
In the update, the SCA board said that it accepted the strategic merits of the offer, including the opportunity to get out of the rapidly declining regional TV market, and to hold a stake in a digital streaming operation. But it argued that growing debt and declining profits at ARN meant its shareholders would need a bigger slice of the company.
ARN shares dipped by 2.41% whuile SCA shares rose by 1.55%.
Meanwhile, Nine’s share price improved by 1.52% while Seven West Media stayed flat, with its market capitalisation hovering just over $300m.
Time to leave you to your Friday. I’ll be back tomorrow with Best of the Week after a quick trip into Sydney to attend the Future of TV Advertising conference. I’m not sure I’ve been to an event quite like it. More on that tomorrow.
Hvae a great day.
Toodlepip…
Tim Burrowes
Publisher – Unmade
tim@unmade.media
