The future of retail media and marketplaces: 6 predictions for 2023

The pace of change in the retail marketplace and retail media world appears to be accelerating. It seemed that in 2022 a new media network for retail would be launched every two weeks. We also saw retail business models begin to fracture, and the eventual easing and over-correction of inventory shortages that first appeared in 2021.

Aside from more new retail media networks, what will 2023 bring for brands that sell and advertise on retail marketplaces like Amazon, Walmart.com and Instacart? Here are my top six predictions as a retail practitioner.

1. The emergence of return-on-content as a key performance indicator

The quality bar for product and brand content as well as performance creative has risen significantly. Shoppers are seeing more immersive, eye-catching, and detailed branded content online and are beginning to expect the same from all brands.

Combine that expectation with what I call the democratization of premium content. In 2022, Amazon made premium A+ product content free for all brands, a benefit that previously came with an 8-digit price tag. Instacart also introduced brand shop pages and the ability for brands to update product content – a big shift in brands’ ability to control and optimize their positioning.

Many brands are in “retail content debt” and have some catching up to do. They have ignored the required investments and have a lot of catching up to do. 2023 will be the year when they will be successful in this field.

The challenge, however, is securing the budget for content. To date, there is no ROAS-equivalent metric that digital teams can use to justify an investment in content. In 2023, we’ll see brands adopt metrics like Return On Content to legitimize investments that are often seen as “vague.”

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2. AI will increase content quality, but branch

AI writing tools will make it much faster and more affordable for many brands to fill their aforementioned product and brand content gaps. But widespread adoption of AI will create an ocean of the same content and undifferentiated positioning.

Brands that invest in human-led, innovative content can stand out from the crowd. There will be a bounty to creativity that not all brands appreciate.

Think of Cheetos, who ran a beautiful, custom campaign on Amazon for a limited edition, niche, “drop” style product called Cheetos Duster. It was a PR gimmick, but the execution was extraordinary. Creating memorable brand moments like these requires a level of creative thinking that AI simply can’t deliver…yet.

3. Amazon’s ad revenue growth is driven by non-endemic brands

Amazon’s offering to brands that don’t sell physical goods on the marketplace (automakers, insurance companies, restaurants) will pay off. I have previously written on this subject for Forbes, Amazon has its sights set on an even bigger prize: the non-endemic advertiser.

These brands face rising customer acquisition costs through other channels, and Amazon’s ad inventory, targeting, and measurement capabilities are robust. More non-endemic brands will take advantage of this opportunity in 2023.

Meanwhile, Amazon has already made significant strides in its core base of endemic brand advertisers, and this advertiser group has less potential than the existing pool of endemic brand advertisers.

4. Walmart ads will increase their share of the retail media pie

Walmart has invested heavily in its advertising offering. In 2022, Walmart made changes like adjusting its promotional auction format and offering a free analytics layer. In response, brands are showing more interest in Walmart as a sales and marketing channel.

The latest forecast from eMarketer puts Amazon’s share of retail media ad spend at 77%, compared to Walmart’s 6.2%. The size of the overall retail media pie will grow, but in 2023 Walmart will increase its slice of the pie.

This is simply because of the law of large numbers. In the second quarter of 2022, WM announced that its ad business grew 30% year over year. By comparison, Amazon’s advertising revenue grew 18% year over year in the second quarter.

5. Bankruptcy of one or more major Amazon aggregators

We are past the exciting days of the Amazon aggregator business model circa 2020. The basic idea was a private equity model for Amazon-based companies. But we still haven’t seen any of these brands come close to their claim of becoming “the next Unilever or Proctor & Gamble” in terms of household brand recognition.

At the same time, DTC brands are welcoming Amazon like Peloton. These brands are moving to Amazon and other wholesale channels for lower distribution costs. Some of these DTC brands have had great success in breaking into mainstream consciousness.

New competition from these trusted brands creates further headwinds for aggregator brands — in addition to higher debt costs and greater supply chain disruptions.

2022 saw some precedent in the form of Amazon resellers facing financial problems. Packable, the parent company of Amazon retailer Pharmapacks, closed its doors in 2022. Spreetail, which also operates a reseller business model, made major cuts to its workforce. The business model differs slightly from a portfolio of own brands, but the turmoil points to the inherent challenges of an Amazon-first distribution model.

6. Retailers start sharing anonymized shopper data

According to insider intelligence Benchmark for media perception in retail According to the report published in 2022, the top three factors driving the adoption of RMNs (Retail Media Networks) by advertisers are:

  1. Traffic scale (reaching a sufficiently large target group)
  2. Traffic quality (reaching the right audience)
  3. Audience targeting capabilities (audience attributes/segmentation)

Limited audience size is the Achilles’ heel for many retailers looking to generate profitable advertising revenue. The time cost of managing a very small media channel is close to that of a large one, making only the largest corporate brands candidates for smaller retail media networks.

The obvious solution to scale is for retailers to work together to share anonymized first-party data in a secure data lake. This larger pool of shopper data and ad inventory will attract a much larger group of advertisers, and potentially the non-Endems that Amazon is now courting.

Today we are able to do something similar with Amazon’s DSP (Demand Side Platform) and Amazon Marketing Cloud by uploading first-party DTC buyer data. Buyer profiles are anonymous but can be matched. This allows a brand to whitelist or blacklist ads, perform audience overlap analysis, see the lifetime value of a customer researching and transacting across both sales channels, and more. The multi-retailer partnership will create great opportunities for both the retailers and advertisers.

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