Not so long ago, retailers were merely the advertisers. Now, in the world of ecommerce, they have become the ad network, too.

That is why more and more ecommerce operators are transforming into ad destinations.

In this video interview with Beet.TV, Jess Huang, Partner, McKinsey & Co., explains the trend could soon turn into a $100 billion opportunity.

Retailer as platform

Over the last year or two, Target, Walmart and CVS have all launched their own media networks.

In the UK, too, health retailer Boots has turned its Boots.com, as well as its physical stores, into inventory for its product partners, flanked by its own in-house agency.

For McKinsey’s Huang, it’s a big change – a retailer can join the dots between ad exposure and actual purchase in the same environment.

Closing the loop

“That’s what we call closing the loop,” Huang says.

“That is the primary reason retail media networks work so well. For retailers, it’s a completely new, very profitable revenue stream that can also bolster their core e-commerce business.

“For brands … it’s a way that they can actually see the effectiveness of their advertising.

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Booming networks

Consulting firms think retail media networks are going to be big business.

“This is a real opportunity,” says McKinsey’s Huang. We think it could be over $100 billion in the next few years. We’ve already seen a huge influx of retail media networks pop up over the last couple of years.

“In fact, it’s no longer just the Amazons or the Walmarts of the world. We’re seeing other big-box stores, grocery stores, department stores all start to get in the mix, too.

“And for good reason. We actually hear from advertisers that over 50% of them are planning to spend more on retail media in the next year.”

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Triple win

“It actually can be a win, win, win situation here,” Huang predicts.

  • “Retailers have this opportunity to create a new, very profitable revenue stream.
  • “In order to win here, there needs to be the opportunity to tap into the first party data, to really target the right customer with the right product at the right time.
  • “Retailers also need to make sure they’re able to play back the performance and measurement to their brand partners who are advertising with them.”

She urges agencies eyeing retail media networks to select the networks carefully, quickly recycling insights to optimize their performance marketing.

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