A new Baseline for Retail Media: How the market evolves in 2025

Let’s look ahead to retail media in 2025. Not in a cliche way (i.e. here are my predictions), but in a practical way that allows retailers to continue to capture share, and advertisers to continue to want to grow their investments. Retail media can be so much more than a marketing strategy, and it’s time to rethink our focus a little bit. 

Three factors are converging that have the potential to create a temporary stall on retail media investments into 2025:

1. Market Saturation by new Retail Media Networks: more and more commerce companies are entering the space, diluting the overall value proposition and creating complexities for buying, planning and perception of differentiation.

2. Market Saturation by 3rd Party Technology and Activation Companies: fragmentation creates high cognitive load for buyers on what platform or solution to use. Point solutions create biased narratives on ‘what you need’, furthering the confusion.

3. Acceleration in Innovation by the Big Two: Amazon and Walmart continue to leverage their scale to improve ad effectiveness, reach, tactics and ease of use meaning that new, emerging or other Retail Media Networks are falling further behind in terms of their ability to provide a comparable performing offering. 

This ultimately could result in:

1. Slower pace of growth in advertiser investments than anticipated or traditionally seen.

2. Reduced spending on technologies and solutions OR consolidation of investments into more purpose-built solutions.

3. Continued consolidation of media investments into the Big Two.

To combat this, one might jump to finding new leaders, new demand partners, new (and often repurposed) tactics, standardization, or one of the many shiny objects out there today. One might be wrong in that approach.

In this week’s Retail Media Leapfrog newsletter, we’re going to hypothesize a new baseline expectation that many advertisers will rightfully have of their retail partners moving forward (note I’m not saying ‘standardization’ - because I believe standards are a lot harder to achieve). The underlying reality is that retailers need to continue to make it easier and more desirable to buy, and retailers who do not focus on that risk falling into a stall. 

Comment, share, debate. It helps frame the argument!

First, a caveat. Shifting budgets - from ‘shopper’ to ‘retail media’ - will continue to have a big role to play in what will be perceived as growth for most retailers. This shift will not necessarily introduce net-new dollars into an individual retailer, but the repurposing of these dollars will be activated and accounted for differently, and therefore look new to those retailers.

But it’s becoming increasingly clear that this shift is no longer a given. Meaning that if retailers aren’t evolving their shopper marketing solutions into retail media in a more sophisticated way, they risk losing investments that have been historically pre-allocated to their business.

Therefore, a new baseline in retail media is a bare minimum requirement retailers need to successfully maintain AND grow supplier investments in your business. This baseline in retail media serves to allow the retailer to: 

• Capture net-new dollars

• Maintain and shift existing shopper dollars

For an advertiser, a baseline expectation can be simplified to a desire to:

1. Reach the right audience

2. In the right place

3. For the right price

4. In an easy-to-buy way

5. With measurable outcomes

Easy right? Too often advertisers (suppliers) are met with frankensteined technology stacks, lack of measurement, expectation to invest with little return, fragmented media buying, and so on. From a retailer perspective, we’re building on the fly, so it makes sense that it might be a little messy, but as the space continues to evolve it becomes harder to justify that messiness. 

RMN growth in the future will come from a baseline level of sophistication and offering + some type of differentiating factor.

1. Baseline level of sophistication and offering + unique differentiation (i.e. tool, tactic, service, audience)

2. Baseline level of sophistication and offering + ease of buying (i.e. simplified tools, access via an SSP)

3. Baseline level of sophistication and offering + effective leverage of scale (either as a single entity empowered by merchants OR a combined consortium of retailers empowered by merchants)

Unique differentiation, ease of buying, or effective leverage are relatively self explanatory - you need to create additive value over an alternative - but a baseline level of sophistication and offering is a bit more complex. But let’s try to define it.

The below are new minimum requirements for retail media strategy, operations, tactics and measurement. There is a significant focus on the ‘new’ in this space - especially for the larger and more established players. But as data from Andrew Lipsman's ANA Presentation suggests, we are still in an earlier stage of evolution, focused on increasing investments in onsite, social commerce and other digital activations. 

Retail Media Networks need to offer the following tactics as a baseline:

• On-Site Search

• On-Site Display

• On-Site Video

• Offsite Display

This sounds rudimentary but a lot of emerging RMNs are building one tactic at a time, missing important components of reaching consumers in on-site and off-site environments. Stores, as Andrew notes, are the next frontier for retail media networks, but the complexity of operations make stores a secondary focus for me. 

Retail Media Networks must operate in a unified fashion with the core retail business:

• Clear roles and responsibilities between merchandising, marketing, retail media, eCommerce and store operations as it relates to supplier relationships

• Clearly defined roles and incentives for supplier investments across trade, shopper and brand + joint accountability for growing the total pie

• Internal scorecards, strong cross-functional communication and challenge resolution

This helps drive accountability to their advertising partners that ultimately differentiates retail media investments from more standard marketing strategies.

Retail Media Networks need to offer the following pricing mechanisms as a baseline:

• Second-price auction for search

• Dynamic CPMs based on demand

• Programmatic guaranteed (without a huge premium)

• Sponsorships or flat-rate (without a huge premium)

Efficient pricing mechanisms can ultimately lead to better ROI vs. premium flat-rate pricing across all assets. 

Retail Media Networks need to offer the following ways to buy as as baseline:

• White-labeled self-serve

• 3rd Party self-serve

• Managed service (for top-tier advertisers)

• Data augmentation

As an advertiser, you need to be able to buy the way you are accustomed to.

Retail Media Networks need to have a CDP or Data Collaboration Platform that allows for data ingestion and collection as a baseline:

• Online and offline customer-level purchase data to online and open-web behaviors

• Identify resolution partner or loyalty play that can connect these datasets

• Match-rates above 30% (to reduce need for extrapolation)

If data is the real differentiating value of retail media, we need to prioritize the tools that allow us to best utilize that data.

Retail Media Networks need to offer sophistication in audience targeting as a baseline:

• Predictive (associated rule learning, not just because you bought toothpaste, you will likely buy toothpaste again)

• Cross-device or cross-platform

• By previous purchase and segmented by time

• Lookalike (based on online behaviors correlated with with predictive analytics in purchase data)

Retail Media Networks need to offer the following measurement capabilities as a baseline:

• Online to online and offline purchase connections

• Unique audience insights

• ROAS (aligned to IAB standards if possible)

• iROAS (if possible)

Standardization in retail measurement is difficult because of variability in purchase behaviors and access to data. To that, unique audience insights creates additional perceived value for advertisers (i.e. tell me something I don’t know).

Retail Media Networks need to operate efficiently and effectively as a baseline:

• Unified architecture (so teams can effectively coordinate activities)

• Unified data layer (so data can seamlessly pass between systems and tools for a unified view of the customer and the business)

• Unified visibility (multiple teams within a retail organization can have relevant visibility from merchandising to finance to marketing)

At the end of the day, retail media is a business. Too often we see emerging players translating decades’ old processes of planning and executing media off spreadsheets. Retailers need to seek out tools that allow for more efficient operating models internally, which can ultimately translate to better performance and ease of buying for their advertisers.

Don’t fret! Most retailers have not reached that baseline level of sophistication and offering today because frankly, it’s hard. Those of us from the inside of this space can attest to that. Those of us that support this ecosystem have experienced how painfully slow the space seems to move inside a retailer. 

This evolution requires a new level of sophistication, experience and connective tissue that, from a talent and architecture standpoint, only exists in a few places today. 

In addition, no one retailer, technology or service provider as been able to provide this baseline level of sophistication and offering themselves because:

• Different advertisers use different tools that best suit their needs

• Legacy architecture within retail requires frankensteined integrations

• These components have been built separately over many years meaning individual components are highly advanced

To me, that leaves an exciting opening. 

• One architecture.

• Unified data model. 

• Many integrations. 

In essence, what retailers really need now is:

• A single platform to flow information between systems, tools and people 

• Bespoke, low-code or no-code workflow and dataflow

• Pipes to best-in-class tools

And all of this focused not just from a campaign lens, but from a business point of view. Afterall, retail media is a business, not just a marketing strategy - and the retailers that treat it that way continue to see growth.