Marketers see limitless potential in the e-commerce version of stocking candy and chewing gum by the checkout aisle.  

Since the advent of GDPR in 2018, and the subsequent nosedive taken by external ad tech vendors, the walled garden model has become the dominant structure in digital advertising. 

Retail media ecosystems in particular have managed to leverage their large user bases and troves of first party data to offer marketers better insights into the end consumers and a better return on ad dollars spent. Nevertheless, there are trade-offs being made, with some operators choosing to limit access to the more granular aspects of their data insights, as well as requiring the use of proprietary ad tech solutions.

GDPR pushed third party ad tech into survival mode, and walled gardens rose up in response. Now, an increasingly fragmented digital landscape is making walled gardens even more valuable. But thriving within this ecosystem is far from simple, and maximising the retail media opportunity in a world of walled gardens poses a generational challenge for marketers.

“Today’s walled gardens are more fortified than ever, but they serve a crucial role in giving advertisers access to rich, first-party data that wasn’t accessible before,” observes Simon Spyer, CEO of global creative network Iris’ Data-Driven and Performance Marketing business. Now, however, the difference is that consumers expect a more “participative, personalised experience”, Spyer explains. “Walled gardens therefore thrive.” 

The rise of (digital) retail media 

In many ways, retail media is one of the older marketing channels — certainly older than search and social, for example. But its growth into the digital space has been relatively recent and, compared to previous ad-tech revolutions, remarkably quick. “The rise of retail media has been stratospheric,” enthuses Claire Leon, Co-Founder at Acorn-i and Lead at Jellyfish Commerce, who notes that, while marketers have “seen similar growth patterns in other areas, like social and programmatic…even in their early days, it was challenging to get them included in plans.” By contrast, retail media’s performance can be measured in ways that weren't previously possible with media budgets, making it an immensely popular way to advertise in a very short space of time. 

Physical retail media is not new, dating back to the first appearance of generalist retail stores. “It’s been around in supermarkets for a very long time,” Rita Harnett, Global Head of DTC & Social Commerce at Wavemaker Global, says, pointing to “supermarket shelf talkers and end of aisle gondola hotspots” as “the physical versions of Retail Media.”

In many ways, the nature of a physical store mirrors the ecosystem of walled gardens comprising the online e-commerce landscape. “One supplier wants higher relative prominence than their competitors and starts paying the retailer for eye-level shelf positions, or near the payment areas of stores for impulse buys,” explains Gareth Holmes, a VP of Commercial Strategy & Media at SeenThis. Today, supermarkets charge brands a premium to place their products in high footfall areas, where consumers are more likely to impulse-buy. Likewise, around 2012, Amazon started applying the same principles to their e-commerce retail environments, with brands paying for featured placement and preferential treatment in search results, and digital retail media exploded in response. Holmes describes this arrival of Amazon’s advertising platform, as the point where “retail media, as we know it today, really kicked-off with gusto”. 

Retail Media in digital has been going strong for around 6 years in some form or other. However, Harnett highlights the pandemic’s effect on e-commerce has also impacted the retail media space. “Retailers started to race to find ways to monetise their real estate. After all, brands were clamouring to be the first to be seen in retail site search results in the face of fierce competition when shoppers were forced to stay indoors during lockdown,” she says. Over the last 2 years, Harnett adds, retail media spending has gathered pace fast. “Retail Media offers up to 80% margins — a far cry from the typical return for the products they sell — meaning it is a real money spinning opportunity.”  

Spyer adds that retail media’s rise really came into focus when advertisers began to recognise the potential of retailers’ first-party data to convert dollar spend into ROI. “As e-commerce surged and the threat of cookies crumbling became real, brands saw retail media networks as a crucial way to target consumers directly at the point of purchase,” he says. “Amazon was an early mover, but the explosion came when more retailers realised they were sitting on a goldmine of customer insights.”  

Today, a retail media strategy is a must-have element of any serious marketing strategy, unlocking both reach and conversion at the bottom of the sales funnel. The last five years, retail media spend grew from a USD$1bn (£771m) to a USD$30bn (£23.29bn) per year channel. “This is undoubtedly impressive, especially when putting this in the context of other channel growth,” says Jessica Doulton, Managing Partner at OMG Transact. “For example, it took social 11 years and search 14 years to reach similar levels.”

However, making the most of the opportunity that retail media presents — especially as the cookie era draws to a close — presents its own challenges. 

The “messy middle” of the retail media era 

Walled gardens are a double-edge sword in the hands of marketers. As Victoria Lee, Founder and CEO of 100 Pound Social reflects, walled gardens “offer a data-rich, controlled environment but limit the openness traditionally associated with the internet. These platforms integrate access to data seamlessly but within their boundaries.” 

As a result of these constraints, she adds, advertisers tend to gravitate towards “platforms with broad reach, targeting maximum impact.” This can be tricky to do, however, in an increasingly siloed market. Walled gardens are, by definition, closed off, so ad dollars spent in one provide no benefit elsewhere. 

It’s created an “extremely difficult to navigate and fragmented environment,” Harnett agrees, noting that “In EMEA alone, there are over 130 retailers with a retail media capability, and each is a separate walled garden with separate measurement approaches. We are currently in the messy middle, with lots of retailers at different stages of maturity in the space. It is becoming clear that a structure is needed to bring things in some semblance of order.” 

Growing fragmentation when it comes to data sources, coupled with the siloed nature of walled gardens, is also, “creating challenges in consistency and measurement when it comes to insights,” says Pete Wallace, General Manager, EMEA at GumGum. Nevertheless, industry experts also argue that retail media in a walled garden ecosystem isn’t all bad, and won’t serve to disproportionately concentrate ad spend with the largest players in the space. (At least, no more than it already has).   

Punching up with retail media in a world of walled gardens  

While market fragmentation is pushing some advertisers toward the largest walled gardens, like Amazon or Walmart, Spyer notes that it’s “a mistake to chase just the biggest reach,” noting that smaller gardens can often offer more powerful community connections, as well as unique audience segments and higher engagement rates, especially for niche or local campaigns. “The key is balancing scale with precision, and brands need to focus on data-driven strategies that take advantage of these smaller networks’ strengths.” 

Smaller retail marketers can stack up remarkably well against their largest competitors by offering more specialised, high-intent audiences and focusing on deeper integrations between commerce and content, argues Holmes. “Think of it as a tailored approach – while Amazon wins on sheer volume, smaller networks can win on delivering hyper-relevant, high-quality ad experiences,” he says. By “leveraging unique insights, fostering direct brand relationships, and staying nimble with emerging tech like AI-driven personalisation”, as well as “niche targeting delivered with vertical video will allow smaller players to punch-up.”

In the same ways that the retail media market’s biggest players compete on quantity, smaller organisations can compete on quality. Amazon is vulnerable when it comes to service, speed, and agility, creating an opening for smaller retail media vendors to outperform in areas like on customer service, niche targeting options of consumers, and the ability to localise offers.