Leapfrog Series: The Mistake of Building a Media Company at a Retailer

IIn the early days of eCommerce (circa 2007), retailers began to see how unsustainable their growth model was. The more we shipped to home, the more money we lost relative to in-store purchases. It was around that point that those that had lived in or on the periphery of retail saw an opportunity to reshape age-old shopper marketing for the next generation of retail and help subsidize the growth of this new channel. And they shaped in accordance with the singular most important rule in retail - the customer is #1.

In the third article of my Leapfrog Series on retail media - posts that serve to help new and emerging retailers leapfrog incumbents - I talk about the nuanced mistake that many of us have made since that point. This leapfrog approach counters a relatively new narrative around the need for retailers to act more like media companies.

Relationships Drove the Business

What we didn't anticipate in the early days of digital shopper marketing (now retail media), was just how important a new type of relationship was for the growth of what seemed like a reasonably simple and appealing advertising proposition.

In the advertising world, relationship selling was reasonably clear-cut; you take a client out for dinner or you make them look good, they buy ads from you (I'm oversimplifying).

In retail media, the relationships we needed to foster were not the buyers of the ads, but our own internal teams, and they were not incentivized by kushy dinners.

Retail merchants (or traders or buyers), hold significant sway over the ultimate buyers of advertising (retail suppliers). Retail marketers work directly with brands. Retail product and engineering and user experience teams control how or if ads show up on retailer websites. Accounting controls how money flows into the organization. Legal controls data collection... you get the picture.

The initial aversion within retailers to digital shopper marketing came down to two things:

1. Money: supplier co-op dollars fund much of the retailer marketing, merchandising and innovation activities so retail media looks like cannibalization

2. Something New: the friction caused by introducing change

What the pioneers of this space pushed through to get to this point was years of careful negotiation inside the walls of the retailer. We needed to reengineer ways of working and incentives across the entire organization, sell in the proposition and the why, find ways of identifying monies so as to not cannibalize on that which was already collected, and most importantly, bring people along the journey.

We trained salespeople how to spend upwards of 50% of their time managing change and relationships and even negotiations inside the building. It was consultative selling to the extreme.

While there were many bumps along the way, these efforts became about building a retail media business from within that would work in concert with the core belief of the retailer - the customer is #1. And it's why Walmart Connect has been so successful in this space.

The Alternative: Retailers Acting more like Media Companies

Change is hard. It would be so much easier if we could build retail media businesses in a silo, skirting around the internal behaviors and politics and intricacies of a retail business.

Silo'd media businesses in a retailer fight for standardization inline with how the broader media market looks at advertising metrics. They ignore the intricacies of partnering with their merchandising teams and opt for bigger entertainment budgets. They push for the build of technologies that serve individual client needs versus consider the broader impacts to the retail business and its customers. They establish their own unique cultures against the broader retail organization.

Many of us have tried this approach including myself in my more stubborn years. But what all of us who tried to act like a media company in a retailer independently got to is revenue stagnation in year 2 to 5, followed by a multi-year reset to establish trust anew (because we had damaged it so much). Growth will still happen at the start, but inevitably you'll hit a wall that can only be overcome by a better integration into the core business.

The Leapfrog Approach

In a standard media company, the relationship between buyer and seller is singular. I (brand) pay you (media company) to drive eyeballs to my brand. At a retailer, the relationship is much more complex - that which you likely wouldn't understand unless you entrench yourself in the broader retail ways of working.

There is a symbiosis between the supplier, the retailer and the retail customer that is unique over standard media companies - when we grow, they grow and vice versa. And therefore, retail media can be used for so much more; as a tool for better customer engagement, personalized experiences, and even to improve supplier relationships. Retailers are not media companies and shouldn't try to be.

The good news? We've done this before and as arduous a task as it seems today, there are people out there that can help steer your ship in the right direction. From change management strategies to a toolset for operating this business - trust the people that have effectively managed this scale of change within a retail organization to leapfrog incumbents.