Retail Media is not the Endgame

I recently calculated how much of my life has been spent solving problems related to Retail Media and I came up with about 20,000 hours. 

In a recent episode of The Kevin Rose Show, Mark Manson quoted Cal Newport:

“You don’t find what you’re passionate about and then get good at it. You find what you’re good at, and then as a side effect, you naturally become passionate in the process of becoming good at it.” ~ Cal Newport. 

I write about Retail Media because it is probably the single-most practiced thing I’ve done in my life next to breathing and sleep, and it excites me - although at one point I did have a much more altruistic view of where I would take my career. 

But as my good friend always reminds me, Retail Media is the catalyst for a much larger and more consequential change in retail - it’s not the endgame.

In this week's Retail Media Leapfrog Series newsletter - articles that serve to help retailers leapfrog incumbents leveraging learnings of the past to build for the future - we’re going to talk about the real intangible value of Retail Media by framing what’s happening to the traditional retail model today. And we’re going to discuss how the current Retail Media gold rush is diluting its longer-term strategic importance to the retailer, its suppliers and its customers. 

To start, let’s look at what’s happening to the traditional retail model today.

Brett Regan wrote a great article on the history of retail from the cow and sheep trade of 9,000 B.C. to mid-stage eCommerce (where interestingly you can still trade cows and sheeps). At its core, he defines retail as "the sale of different goods and services to customers with the intention to make a profit".

It is very likely that retailers will still be selling goods in the future, albeit in a much more personalized, automated, augmented and decentralized way. The evolution of retail in that regard is an obvious and somewhat organic one - retailers will get better at using technology to simplify the shopping journey. 

What I’m more interested in though is the non-obvious retailer progressions driven out of necessity. 

As the sale of goods is more and more commoditized, it becomes difficult for retailers to differentiate or add value to that ecosystem. I love Amanda Mull's point in an article about Amazon and Temu, “Amazon’s tactics and dominance has gone a long way toward making the process of buying totally meaningless.” Couple this with rising customer acquisition costs driven by a fragmented media ecosystem and scarcity of attention, and you can quickly see how the traditional retail model is failing. 

Simply put, it’s becoming more expensive to reach and convert customers, and the value that those customers are driving to retailer bottom lines are diminishing.

The obvious one is Retail Media - hence the gold rush. Retail media is, at its core, a profit center and growth engine designed to offset rising retailer costs.

Or what about data monetization where retailers sell privacy-safe insights or customer targeting capabilities. 

Less obvious might be the retailer as a healthcare provider, or an entertainment company, or an experiences company, or a platform provider. 

What many retailers have come to realize is that there is value in their aggregate customer base beyond the sale of goods, and while no one retailer has the right or capacity to support it all, there is room for creative new business models within retail.

However, getting to that ‘new’ in retail is challenging because it requires a reimagination of what it is to be a retailer, and most enterprises aren’t ready for that kind of transformation.

If we look at just Retail Media, retailers have been selling ads and experiences for a long time. I’ve argued that Retail Media 2.0 looks a lot like trade marketing 1.0. However what is different this time is the sophistication including the expectation of real data utilization, quantifiable outcomes, or the sophisticated ad tech.

Because of this sophistication - because the concept is so foreign to core retailer ways of working - we often silo Retail Media businesses, intentionally operating them independently. And when we operate them separately, it most often serves to conflict with core retail operations, create internal friction and strife, and negatively impact the retailers standing with its suppliers. 

That complexity is true across almost all new business models in retail. 

Alternatively, when a business like this is truly integrated - not just as a top-down push but as part of a new way of working between all relevant stakeholders in the business - is when the thing truly works for all of its beneficiaries (the retailer, the supplier, the customer). 

This integration is a much larger topic - think aligned monetary incentives, new processes, new job descriptions, new tools, ways of thinking, expectations of partners, expectations of internal teams, etc. It takes time and most ‘experts’ in this space have never architected or lived through a complete transformation of this scale. At Walmart it took about 10 years’ to get the model right, and 3 years’ of intense change management to effectively operationalize - but check out their earning reports to get an idea of the results.

Herein lies the point, if properly integrated, Retail Media is a transformation function for the ‘new’ in retail.

Retail media forces retailers to think and behave differently. It forces them to:

• learn a new skill

• play nice in other people’s sandboxes

• partner versus negotiate

• be transparent with data and insights

• implement new technologies

• market differently

• plan differently

And so much more (a topic for another day). 

At its core, a properly integrated Retail Media business is a mindset shift for a retailer that says, ‘there is more out there than selling goods to customers’. The work to get there is complex, but the outcomes are highly visible and immediate which makes Retail Media the perfect catalyst for broader retail transformation. 

Surprisingly, a big part of the eCommerce and omni-channel transformations at Walmart came as a result of the change management efforts in Retail Media, because we had finally figured out how to properly engage with and incentivise different teams. 

And the resulting behaviors of retail teams with sophisticated and integrated Retail Media businesses is that the next big transformation is perceived as possible and even welcomed. 

Retail Media is highly nuanced. It is not a profit-first, demand-first, technology-first, data-first, tactic or innovation-first proposition. This is what we keep getting wrong.

We sacrifice a focus on the highly complex stuff for short-term gain (i.e. immediate demand), which is a fantastic dopamine hit but doesn’t set our businesses up for success in the long run. This is what our parent companies expect of us - hyper growth - and therefore we miss the intangible opportunity for our own business and our broader retail organization. We ultimately need to remind our leaders of this fact.

Tom Goodwin said recently, "business transformation is really the art of understanding people, systems, culture, etiquette, politics, incentives and above all else REALITY".

That's the point. Retail Media is a people-first proposition, and when we put in the work to manage the change necessary to make this a core part of our retail business, we establish a catalyst for future change and innovation unparalleled in the retail industry.

Take a look back at previous articles in the #RetailMedia Leapfrog Series:

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