Five Innovative Strategies Retailers Will Use in 2023 to Grow Ad Revenue

By Yoav Izhar-Prato

CEO & Co-Founder, Skai

Now the third largest digital advertising channel, just behind paid search and social advertising, retail media is forecasted to reach $160 billion by 2027—representing 18% of global digital advertising and 11% of total advertising.

Before retail media, brands could only address 99% of the digital path to purchase with existing channels. It was that last 1%—the essential part of the customer journey at the very bottom of the funnel within online stores—where marketing exposure ended. But now, with retail media, marketers can influence shoppers within the online store and closer to the point of purchase.

While retail media has been a game-changer for brands, the impact on retailers may be more significant. This burgeoning channel represents a new, high-margin revenue stream that is helping them offset the loss of sales from the highly competitive and fragmented online shopping landscape.

Skai’s 30+ retailer advertising partners include Amazon, Walmart, Target, and Instacart and I am in the fortunate position of hearing directly about how they plan to fuel growth.

The following are five innovative strategies that retailers will be exploring in 2023 to strengthen their market position:

While retail media has been a game-changer for brands, the impact on retailers may be more significant. The retail media channel is young, but its growth is off the charts, and it’s changing the face of ecommerce.

Retail media growth must go beyond search listings

The bulk of the first era of retail media has been keyword-triggered listings in the retailer search engine results pages. To grow ad revenue, retailers will support the adoption of display, video, and CTV, which can help brands reach consumers up the funnel.

And the treasure trove of first-party shopper data is no longer restricted to ads within the retailer’s website. Marketers can leverage the retailer’s rich browser/buyer targeting data across the web to drive them back to retailer product pages. This will not just be limited to online ads, but also extend to OOH (out-of-home ad formats) within physical stores.

Tapping into new market segments such as non-endemic advertisers

Retailers are actively reaching out to brands that don’t even sell products. Endemic retail media are ads that drive users to product pages within those online stores. Non-endemic retail media are ads that drive users to destinations away from the online store. An example of a non-endemic retail media campaign would be an Italian restaurant that advertises a dinner promotion to someone searching a retailer for spaghetti sauce.

Omnichannel retailers take measurement to the next level

Within retail media publishers, there are those which are primarily digital such as Amazon or Instacart and ones that are “omnichannel” such as Walmart or Target that have both large online and offline footprints. These omnichannel retailers offer brands the opportunity for closed-loop measurement. For CPGs, a better understanding of the online/offline relationship is absolutely necessary to unlock the next era of their growth.

Data as added value

Every penny will come under scrutiny in 2023 as brands strive for profitability. Retailers will be under pressure to make more data available so that their advertiser clients are equipped with the insights they need to optimize their programs. Today, advertisers rely on third-party scraping platforms such as Profitero and Analytic Index for digital shelf analytics like category share. Some retailers are exploring clean rooms—such as Amazon’s has with its Amazon’s Marketing Cloud—as a way for brands to safely co-mingle their proprietary back-end data with highly granular Amazon insights.

Becoming more programmatic to reduce market friction

Globally, there are over a hundred of retailers either offering advertising directly or through technology aggregators. This complexity has resulted in most of the spend being concentrated into a small group of major players. For the channel to truly grow, it will need to become more programmatic and easier to buy across platforms. This is especially true for the retailers outside of the market leaders—it will be difficult for them to accelerate budgets if they don’t make it easier for marketers to work with them.

The retail media channel is young, but its growth is off the charts, and it’s changing the face of ecommerce.

But, of course, an increase in investments is also bringing on an increase in competition. To truly become advertising publishers, retailers will have to spread their wings and innovate in 2023.

The State of the Retail Industry 2023

JAN 2023