Leapfrog Series: How to avoid flying on a plane that was built while in the air

If you've heard a talk on retail media in the last few years, you have undoubtedly heard the phrase, 'we're building the plane while flying it'. The cliche is meant to highlight that it's all moving so quickly and we're figuring it out as we go. But, given how long we've truly been at this, if you're hearing this phrase, you should be weary about getting on that plane. We need move with speed, but we shouldn't be winging it at this point and just as importantly, we shouldn't be stuck at a surface-level. We need to take retail media seriously and it needs to be much more than a 'strategy'.

The Big Picture

The narratives around standardization and unified tech stacks and growth to $100BN+ would make you think we're in a highly mature market. Don't fret, we are not. The first 15-ish years of this thing were spent convincing people to take it seriously and painstakingly figuring out how to effectively integrate this into legacy retail in such a way that it could scale. And therein lies the message that almost everyone is missing - until retailers effectively manage change within our organizations, it is next to impossible to scale monetization.

In my second post in my Leapfrog Series on retail media - posts that serve to help new and emerging retailers leapfrog incumbents - I'm touching just the surface of how retailers and service providers can more effectively think about playing in retail media (based on my real-world experience building it for Walmart among others). And read my previous post on how today's retail media businesses are not so dissimilar from what was created in the 1990s here.

The Eerily Consistent Challenges Across all of Retail

Over the last several months I've met with many retailers, analysts, service providers and brands in the retail media ecosystem. And once you break through the standard perceived challenges, the meat of the issue within every retailer - big and small and across the globe - is resoundingly consistent:

1. Merchandising: my merchants often work against me, have different incentives, don't understand my business.

2. Marketing: my marketing team is running a parallel path with brands.

3. Product: my product and engineering teams won't prioritize implementation of ads.

4. User Experience: my UX team thinks ads have a detrimental impact on conversion and require perpetual testing or arbitrary removal of placements.

5. Sr. Leadership: my leaders are pushing hard for monetization without giving me the internal support I need to be successful (top-down rarely works). They often believe that current talent in the company should suffice in building out this completely new skillset within the organization.

6. Margin Pressures & Investments in Growth: investments in growth are typically expected to come out of the margin of the business, but the margin of the business is expected to remain strong. Therefore, limited investments are made to help the business grow.

Until retailers effectively manage change within our organizations, it is next to impossible to scale monetization

What's more intriguing is that, not only is almost every retailer struggling with the exact same challenges related to retail media, but we're all independently developing our own strategies to address them - ultimately ending up in the same place.

All of these challenges seem to center around one core reality in retail, 'we want the money, but we don't have the right people and plan to get there.'

Fair enough and to that I say, it doesn't have to be that difficult.

Cautiously Leaping into the Space

Some key callouts that I warn any retailer who is newly approaching or looking to scale in this space. If you're selling this proposition internally and you agree with the below, feel free to quote me on it. Heck I'll even send you a short (likely animated) video to send to your leadership team.

• No retailer is created equal: be weary of people who tell you they have the exact-right playbook for your business without understanding your customer or internal workings. The challenges are consistent but the approach needs to be catered to a specific retailer. That being said, your uniqueness should not create friction in buying advertising from you - if you're completely different in your approach, nobody will have the capacity to work with you.

• Be honest with yourself: the first reason why any retailer explores retail media is because they've heard of this high-margin money that could allow them to invest in other areas. That's okay, but if you're truly just in it for the money, your time in the space is limited. Rather, these monies need to be looked at as a way to truly improve the joint efforts and relationship between suppliers and retailers - a new retail flywheel if you will. And to make this truly successful, it needs to better support the customer relationship and flywheel.

• Invest in the intangibles: not just in areas where you can directly attribute revenues. You can absolutely build a retail media business from the get go that is self-sustaining, but your competitors are investing in things like better analytics, strategic change management, technologies that allow ads to display in-store. Most of these are hard to directly attribute revenue to but they will be your differentiators.

• Treat this as a new skillset: B2B marketing is very different than your current B2C marketing skillet. Merchants have a very different negotiating capacity to someone who sells ads for a living. Store operations can not effectively flight ads - this is a real example. Just because you have people that do broadly similar things to this proposition, doesn't mean they can compete in what has become a hyper specialized environment.

• Ask a LOT of questions: you should consult with people who have built this before, but know that not many people have built this before - and even fewer have built it from the inside which adds a whole other level of complexity. Ask dumb questions. Ask about the how. Ask for specifics. Questions like, 'how does this effectively work in concert with merchandising or marketing'?, 'how do you ensure incrementality and not just dollar shifts from trade'? To make this thing truly successful and scalable, your experts need to be able to go three to four levels deep and understand many of the core fundamentals of retail (not just media).

• Take this business seriously: this is not a side project or a 'we'll see how it goes'. If you are choosing to enter the space, either you are all-in or you should focus your efforts elsewhere. A 'half-in' approach risks damaging your relationships with your internal teams, your suppliers and your customers. Just as important is a well-thought out plan - one that you can action in the immediate-term (note: I differentiate 'plan' from 'strategy' in that a plan to me is more actionable). A real revenue model, a measurement plan, a product roadmap, an operating model, a go-to-market and sales strategy, an organizational structure that allows for effective delivery, etc., as well as a clearly articulated view of the business such that you can hold its leaders accountable.

A Note from the Editor (that's me!)

The good news is that though truly experienced talent in retail media space is hard to come by (people whom have actually built and scaled this thing effectively), they/we are out there, and we've slogged through years of incredibly painful trialing and learning and change so that you don't have to.

We're willing to help you put the plane together and make it soar. It's time to take this business seriously. Let's get to work!