As 2022 fades into the great rearview mirror of history, the gaze of the media industry is set on the horizon towards future opportunities. One of the most commonly discussed channels promising to drive the industry towards this opportunity is that of commerce media.

In the final article in the ExchangeWire RetailMediaHub, in association with PubMatic, we detail key research undertaken in the channel over the past few months, and how this reflects upon the growth opportunities and challenges the commerce media industry faces in the coming years.

The growth opportunity

Before charting the movements of Mercury and Mars, and launching one’s face into a spherical crystal, we must separate reality from buzz. Is the industry truly engaging with commerce media, or is it just another media equivalent to the fidget spinner?

On the buy side, it's a resounding win for team reality. Research examining media buyer attitudes towards commerce media published by IAB Europe found that the majority, a whopping 92%, of brands are currently partnering with retailers to reach customers via their properties. Surely this level of interest would suggest that a hefty amount of work would be needed to educate and enthuse retailers on the opportunity the channel provides in order for them to match this optimism?

Well, it doesn’t. Retailers are even more excited.

A recently-published report from ExchangeWire and PubMatic found that 91% of European retailers are either increasing or maintaining their commerce media investments through 2023/2024. Moreover, 80% of retailers are also open to working with third-party technology providers to aid them in their retail media endeavors. This latter point is critical as working with independent tech providers can lower the entry barriers to the channel for smaller specialists within specific verticals and/or markets, leading to a healthier ecosystem.

With both sell and buy sides so strongly aligned on exploring opportunities in commerce media, and the promise the channel offers in terms of unifying marketing efforts with sales data in a privacy-compliant manner, retail media is in an incredibly strong position as a channel.

However, as our data suggests, there are no one-size-fits-all jumpers for sale in the metaphorical store of commerce media. Marketers need to demonstrate meaningful flexibility in accommodating retailer needs and concerns according to scale, vertical, market, technical expertise, etc. Likewise, retailers need to work closely with their advertiser and technology partners as we traverse through the current period of economic uncertainty. Specifically, the sell-side needs to build a resilient narrative, underpinned by robust metrics, that retail media activations are providing a meaningful sales lift, and that ads are not simply being delivered to customers that were going to complete the purchase anyway. Striking a balance between ad loads and customer satisfaction will also be a tricky path to negotiate for many sellers, therefore will need assistance in maximising the effectiveness of their available inventory.

Challenges in retail media

The first challenge which certainly needs to be addressed is the clarification of key definitions around commerce media. Even within markets, the interchangeability of key terms including “commerce media” and “retail media” continues to add unnecessary complexity to an emerging sector laden with opportunity.

Secondly, standardisation will also be crucial in realising the true potential of commerce media. This mostly pertains to end-to-end and cross-market standards in data. Even in Europe, which hailed a new age in consumer data rights nearly five years ago with the release of its GDPR framework, arguments are still flittering among the higher echelons of the EU regulatory sphere. Most notably, the Irish Data Protection Commission (DPC) is facing serious rebuke from its peers in data regulation over failures to investigate complaints with proper “due diligence”. Other global markets are years behind Europe in terms of solidifying national or regional data laws, so this confusion at a time when marketers are scrambling to adapt to mobile and display identifiers, and while retailers are trying to get their heads around the intricacies and legalities around data clean rooms, is less than helpful.

For retailers, this also applies to (almost) age-old problems in advertising. One commerce professional, who elected to remain anonymous, told ExchangeWire, “Standardisation is lacking in advertising and I believe this is also one of the reasons we see so many challenges and unclarity. There are a few bigger walled gardens holding the industry hostage[…] One concrete example of this is how the lack of the end-to-end adoption of standards is playing out can be found in contextual, specifically content taxonomy. One of our brand clients told us that they could not transact their branding campaigns, as the verification tools they used blocked our sites. As brand safety is an important factor, buyers (and therefore their verification tools) tend to disallow uncategorised content. In general, these verification tools work by crawling the URLs. But in our case, we do not really use URLs as our platform is search-based. More than 80% of our page views are dynamically-created based on user preferences and search queries. There are very few URLs that can be crawled upfront, therefore these tools simply do not work. Standards need to be developed which account for this.”

The final two challenges to address are those that are set to dominate many digital media channels, and indeed the technology industry in general, namely economic and environmental sustainability. Again, retailers need to be mindful of ad load here, both in terms of their websites and proliferation of in-store digital screens to minimise environmental impact. Furthermore, as with other emerging channels, there will likely also be a saturation point in the coming years in terms of inventory. Partnerships between retailers, for instance mutual inventory pooling, along with support from technology providers will be critical to ensure this proliferation of inventory does not become an economic barrier for smaller entrants across the market.

Commerce media: 2023 and beyond

Given the fervent interest in retail media across the supply chain, 2023 will be another year of rapid expansion, with a flurry of new buyer, seller, and technology entrants. Providing present challenges are resolved, demand will continue to rise before peaking as the market becomes more saturated.

Naturally, this will then be followed by a period of consolidation, though it is important to stress that opportunity within the channel will remain. Depending on wider economic conditions, M&A activity around commerce media is set to rise. Scaled retailers will also explore the launch of either their own technology platforms (akin to Tesco’s Media and Insight Platform) or bespoke offerings in conjunction with their technology partners, in order to capture additional share of demand.

Fragmentation within the market will continue, as a result of variance across regional markets and verticals. A further layer of complexity will be added as retailers decide whether to maintain tight controls on their data, the ‘walled garden’ approach, or employ a more open and partnership-based approach, the ‘hedged garden’ strategy.

All said, it will be crucial for the commerce media industry - marketers, agencies, retailers, technology providers, and industry associations alike - to continue to work closely together. Beyond standardisation in linguistics, it will be hugely important to form robust attribution and measurement standards as demand scales. Maintaining alignment in marketer and retailer goals will also avoid a rising fog of distrust across the supply chain which has perhaps plagued other channels, while it will also ensure that consumer experience can remain at the forefront. A golden future for retail media is within our grasp, let’s not harm the goose.