How retail center owners can ride the $100 billion third wave of digital.
Industry experts are calling retail media networks the ‘third wave’ of digital. A number of large retailers have already earned more than $1 billion with their retail media networks. This source of high margin annual revenue also has the potential to impact retail center owners.
How is Retail Media the Third Wave of Digital?
Each wave of change since the world has leaned more toward digital marketing has brought both disruption and opportunity. The first big wave of digital was search, which led to the rise of Google. The second wave was social media, led by Facebook.
The third wave — retail media — is upon us, and analysts predict it will be the biggest we’ve seen yet. An opportunity for retail center owners and their tenants to leverage retail media networks exists as a new way to advertise and market to customers who are on-site at retail properties.
By combining the location data provided by cellphones with proprietary AI software, innovative new systems are providing some key benefits to retail center property owners and tenants:
- Profit from the ability to deliver valuable information and highly targeted promotions that improve the experience for on-site customers.
- A new channel for retail center property tenants to increase awareness of their presence on-site and better connect with their audience and customers.
- The ability for retail center property owners to gain new insights into traffic and dwell time in addition to profits via a new channel of communication with retail shoppers.
The use of retail media networks by advertisers has skyrocketed for several reasons.
The global advertising agencies that work with large brands are shifting budgets to retail media networks because they are finding these networks to be top-performing areas to place targeted advertisements, that provide superior attribution and offer captive audiences in a buying mindset.
Targeted advertising is available because retailers have access to vast amounts of customer data. This customer data allows advertisers to see how their ads influence sales and customer behavior, in many cases providing very precise closed loop attribution for advertisers. Finally, the closed ecosystem nature of retail media network advertisements served to cellphones inside a mall or at a lifestyle center provides an opportunity to deliver ads in a brand-safe environment to a captive audience of shoppers who are in a buying mindset.
Who will lead the third wave?
Big retailers are already racing toward a $100 billion high-margin annual revenue prize in retail media. For companies already implementing brick-and-mortar retail media network programs, retail media can be a high-profit extension of their current efforts. The most profitable brick-and-mortar based retail media networks in 2022 are:
- Walmart Connect, $2.7 billion
- Target Roundel, $1 billion
- Best Buy, $0.9 billion
- The Home Depot, $0.9 billion
- Dollar General, $0.3 billion
- Macy’s, $0.2 billion
- CVS, $0.6 billion
- Walgreens, $0.6 billion
- Kroger Precision Network, $0.8 billion
- Albertsons, $0.5 billion
When a retailer adds direct-to-consumer marketing inside and around retail centers as a channel option even more omnichannel opportunities will emerge.
Even before the inception of the retail media network, retailers have been vying to reach customers digitally. However, despite this being the most promising path to utilizing the high volume and frequency of shopper traffic, retail media hasn’t been fully tapped.
Building a retail media network business is a heavy lift, especially in terms of data, technology, and skills. To build the necessary retail media network audience scale to attract advertiser attention, retail centers need a standard platform to consolidate audiences.
When advertisers decide which retail media networks to invest in, the key considerations are:
• Audience
• Engagement
• Geographic location
• Ad inventory & formats
Some major retail media networks have built audiences of more than 80 million unique users including Walmart and Target. Several others are investing to establish and grow their networks.
The Retail Center Media Network Opportunity
Until now, an online retail media network and a retail center media network were two distinct advertising and marketing channels.
Before the new retail media network activation systems were certified and released in June 2023, retail center owners were limited to digital out-of-home (DOOH) ads such as signage, shelf talkers, and display screens to capture this value.
Now, direct-to-consumer (DTC) cell phone ads and messaging are possible.
The leading brick-and-mortar retail media networks have benefited from high-volume foot traffic across their portfolio of properties. The top retail media networks correspond closely with the most trafficked retailers.
What is at stake:
The digitization of the physical store will play one of the most critical roles in the evolution of retail media networks.
The retailers that get the strategy and execution right will quickly become market leaders that drive value for the brands they support. Adding a retail center media network as a channel option will provide brands with even more omnichannel opportunities.
New capabilities delivered by the new retail media network activation systems:
- 5G retail media network: Unique ability to deliver targeted ads to the cellphones of shoppers via retail center media network.
- IaaS: The system is able to capture and decode insights as a service including traffic heat maps and dwell times. The system uses AI to predict how decisions will impact retail center traffic and dwell times.
The opportunity for high-quality Retail Center owners and their tenants.
According to the recent ICSC Consumer Engagement Survey, American consumers log 1.5 billion visits to shopping centers every month. If retail center media networks could aggregate just 2 percent of store traffic, the audience size and reach would surpass all others — including Amazon.
Part of the reason shopping centers are so integral to our social fabric is simply the amount of time Americans spend at them. Additionally, there are shopping centers in every designated metropolitan area (DMA) nationwide and many regional and super-regional malls around the country. Americans visit both types of shopping centers frequently. According to recent ICSC consumer engagement surveys, about 56 percent of U.S. adults report visiting a mall within the previous 30 days, while about 51 percent report visiting an open-air shopping center within the previous seven days. The average time spent in a mall is 135 minutes, ICSC found.
The good news for retail center owners is that experts expect the market still has room for retailers with broad audience appeal and can serve target media markets in segments such as apparel, consumer electronics, health and beauty, and specialty. Because of the operative dynamics, the top three or so mall/lifestyle owners and operators will dominate, while others will find themselves largely shut out. Time is short for those that want to play.
Where is this solution being used today?
In June 2023, the system enabling retail centers to deliver retail media networks was certified as the first in-venue private voice and data network installation of its type to carry commercial cellphone traffic outside of a lab environment.
The system has been successfully installed or is being tested at multiple sites, including a large mixed-use retail area in New York City.
— Michael Weaver, RMN
This piece originally appeared in the December 2023 issue of Shopping Center Business magazine.