What happens when brands overinvest in retail media
As part of The Drum’s Retail focus, Dom Burch, who helped roll out modern retail media in the UK, urges brands not to go all-in on the medium.
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As the digital revolution reshapes the retail sector, brands are increasingly diverting their advertising spend from more upper-funnel, brand-centric marketing activities like linear TV to more lower-funnel activities with quantifiable outcomes in retail media networks (RMNs).
This strategic pivot is driven by declining audiences in traditional marketing channels, coupled with the promise of precise targeting to buyers that are closer to direct purchase. However, this transition risks diminishing the value of marketing overall.
The migration of advertising budgets towards RMNs hinges on their ability to position products directly in front of consumers at the point of purchase and prove a return on that investment. “Retail media networks offer unparalleled proximity to the consumer, providing a direct line from advertising to buying,” explains Drew Cashmore, a renowned future-of-commerce expert.
Global brands are reallocating significant portions of their budgets to retail media platforms such as Amazon and Walmart, and while effective at driving return on investment, this reallocation can lead to a loss in brand awareness, which historically has been maintained through television and other mass awareness marketing vehicles. That broad awareness has the capacity to amplify more lower-funnel activities, and without it, the outcomes might not be as effective.
One of the greatest hurdles that brands face today in this transition to more measurable outcomes is grappling with the perpetual need to prove return. Drew explains, “There is an art and science to marketing, some of which we can definitively measure, and some of which serves to enhance those things we can measure. Put bluntly, if I’ve never heard of your brand, it’s far less likely that a retailer ad will get me to convert.”
Until recently, brands had very little visibility of transactional data, so they were forced to use reach and frequency metrics to identify their success. With the measurement capabilities of RMNs, marketing conversations have become more linked to bottom-line contributions.
As marketing becomes much more transactional, retail experts worry the sector risks devaluing the more emotive reasoning behind purchase decisions. "Human behavior is not always predictable, and why we buy something is determined by a myriad of factors,” says Cashmore. “The more we shift the conversation to focus on an immediate outcome, the less longevity we create in our brands.”
Cashmore argues we are diluting our overall marketing efforts and eroding profit margins in the long run.
In addition, the impact of retail media is not uniform across all markets. Variations in consumer behavior, digital infrastructure, and the retail ecosystem mean that strategies effective in one country may not work in another. Brands will leverage retail media differently in the US than in a less digital-savvy market where traditional retail still dominates. Crafting a global retail media strategy requires adapting to local nuances and considering how consumers are uniquely influenced in that market.
As the landscape evolves, brands will need to explore innovative approaches to enhance their RMN strategies. Advanced analytics, artificial intelligence, and machine learning are increasingly going to be used to fine-tune targeting and optimize spending.
Some brands are beginning to employ sophisticated data analytics to tailor their advertising campaigns across RMNs, ensuring that each advertising dollar is spent where it has the highest potential to convert to sales. But this should not be at the expense of continuing to build broader awareness for an individual brand, outside of retail environments.
"Influencing consumers has become much more complicated, and the expectation of quantifiable outcomes has increased. We need to constantly remind brands that it’s not an either-or,” says Cashmore. Brands that succeed in the future will be omnipresent, media agnostic, and perpetually adapt to shifting behaviors.”
Retail media networks offer extraordinary opportunities as they continue to grow. The key lies in balancing the new and old, leveraging cutting-edge technology and data to make informed strategic decisions while remaining flexible in the face of rapid market changes. The evolution of retail media is more than a shift in advertising spend; it’s a complete transformation in how brands interact with consumers.
In an environment increasingly dominated by lower-funnel marketing tactics promising immediate ROI, there is a real risk that shifting away from broad awareness campaigns could erode the brand trust and long-term loyalty that global giants like Procter & Gamble, Coca-Cola, and Apple have spent decades cultivating through consistent, aspirational marketing.
Although retail media networks offer a valuable and quantifiable return, brands must resist the urge to focus solely on performance metrics. Instead, they must recognize that meaningful awareness and trust-building remain fundamental for enduring success in today’s complex marketing landscape.