The future of retail media: exciting ad formats power stellar growth

retail media

Cavai’s Rogier Lammers, VP of Sales Central Europe, tells us why the future of retail media is so promising, and how new digital ad formats will turbo-charge the industry’s value to $130bn across Europe and in the US by 2026. 

There’s no doubt the numbers are pretty spectacular, and with analysts predicting retail media will grow 25% a year for the next four years in the US alone (pushing its value to a significant $100 billion stateside), retail media is going to be an increasingly important source of revenue for many retailers, in the near future. 

Back to basics

Regardless of industry or sector, retail media allows brands to advertise ​​around the virtual shelves of web stores online. The format offers brands scale, data and relevance, and a prominent position in the places where consumers search, research and (ultimately) make their purchases. These are spaces and opportunities that advertisers live for.

With near-limitless shelf space, one of the key benefits of online shopping is that the range of products available to buy is often much larger than in store, and this is one of the reasons why retail media advertising is on such a charge. The real challenge for any brand in such a busy space is to attract customers to their products.

Currently, retail media generates the most revenue from search ads, also known as sponsored products. Brands are keen to ensure their products appear at the top of consumer search results and are linked to relevant keywords, and sponsored products do just that. The second most profitable ad format are display ads, and in the US 66% of CPG brands say they use these units on retail media networks to boost brand awareness and encourage conversions.

Premium ads on trend

In such a competitive market, retailers and brands are always on the lookout for new, engaging, impactful ad formats that gain them attention while also serving consumer needs. A number of trends are emerging to service this requirement, including video, conversational and augmented reality advertising (AR). Let’s take a look at these exciting new formats. 

Video ads

It won’t be breaking news to anyone that video ads have greater impact than any equivalent static format, such as a banner ad. Research shows consumers are much more likely to remember a video ad’s message, and they can also be used to help consumers understand a product to a greater degree than banner ads are capable of. Finally, videos are great for injecting creativity, fun and emotion into an ad campaign, helping a brand’s products resonate with its audience. 

It’s no secret that video content has revolutionized how we use the internet. Studies have shown that 50% of users look for a video about a product they’re interested in before making a purchase. So if a shopper doesn’t see a video to watch on your item page, they may move on to a different product or retailer to find what they’re looking for.

Conversational ads

The number-one reason consumers tend to physically visit a store is for personal buying advice from a store representative. And of course, this presents a great opportunity for the selling party to promote certain products or services. Shop assistants can respond to a consumer’s query by suggesting the product or brand best suited to their needs. Conversational ads perform this service in the digital space, guiding consumers to the right product for their specific requirements. 

The good news is our own benchmarks demonstrate nicely how powerful conversational advertising can be for retailers. First cases look very promising with 10x higher interaction rates and click rates compared with standard media. This proves that asking people what they’re looking for and suggesting a product based on their expressed needs will achieve much improved campaign performance. 

Conversational video

Conversational video combines the best of the above worlds: the power of emotional, engaging video creative and the ability of conversational advertising to engage people with curated advertising messages. These innovative formats are ideal in a number of use cases, from providing context for products to showcasing services, enhancing storytelling, creating positive brand experiences, and boosting lead generation through conversation.   

Conversational video Walmart

Augmented reality      

In 2022, seeing is believing and AR technology is breaking new ground in its ability to bring the shopping experience from the internet into the presence of our everyday lives. For example, do you want to ensure a new kitchen appliance will suit your kitchen counter? AR makes this possible – with the use of a smartphone – by placing a 3D model of the product in your live environment at home. Virtual product placement offers an extra dimension to the product experience of the consumer.    

The future, now

Walmart has recently stated that it hopes to make new ad formats – including video and AR units – available in their online stores as early as this year. This tells us a number of things about Walmart’s future strategy, including the fact that common formats such as standard display and sponsored products are approaching saturation point. 

Ad blindness is an increasing issue for the industry, and Justin Sandee (Head of Retail Media at Bol.com) suggests that experimenting with new ad formats is the best way of both combating this, and finding out “which units add most to the consumer journey, while also giving retailers an edge over the competition.” The interest in these new ad formats is also fuelled by retailers’ wealth of first-party customer data, and large traffic levels, both instore and online. 

Justin continues that advertising success will be down to an increased collaboration between “creative and data.” On their own, neither of these “can make a difference”, but the two combined have real power. Major retailers across the world are sitting up and taking notice, and there’s no doubt they will be closely following retail media developments in both Europe and North America during 2022. It should only be a matter of time before other large retailers across the globe invest in retail media’s exciting new formats.