In 2021, Retail Media grew by +53% in the US (according to eMarketer) driven by the digitization of sales and marketing during COVID as well as Google's phasing out of third-party cookies by the end of 2023. BCG forecasts this market to reach $100b globally by 2024, representing a huge opportunity for retailers to add new revenue streams to their digital activities. However, growth will not be equally distributed, as the value of a Retail Media network lies in activating the broadest and the most qualified audience possible.
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Previously, Retail Media tech providers recommended increasing ad formats, including upper-funnel strategies, to target the broadest audience possible. However, since marketplaces are rising and accounting for more than 80% of global online Gross Merchandise Volume (GMV) of the top 20 e-commerce companies worldwide (according to Statista), there is already a huge opportunity with existing marketplace traffic.
Amazon attracts 78% of advertisers spend primarily in just one format: sponsored product ads. This is because of its marketplace model with millions of sellers and listings. But, more importantly, Amazon sellers see a strong return on ad spend since their ads are deep in the sales funnel when customers are finalizing their purchase decisions.
Sponsored products, when implemented correctly, will add an incremental 5% of high-margin revenue on top of a retailer's existing GMV. With many retailers expanding into marketplaces, they are looking for Retail Media to benefit both their e-commerce brands and marketplace sellers. However, the technology to support sponsored products on a marketplace is significantly more complex than on non-marketplace e-commerce.
The four challenges for marketplaces implementing Retail Media.
Monetizing the long tail of advertisers. Traditional e-commerce retailers sell a few hundred brands; marketplaces sell many times more. According to Marketplace Pulse, there were 1.9 million active sellers on Amazon in 2021. But while the challenge is greater with huge multi-seller assortments, so is the opportunity. Up to 70% of potential ad revenue comes from the long tail of advertisers.
Up to 70% of potential ad revenue comes from small first-party suppliers and third-party sellers.
To maximize the number of advertisers, Retail Media platforms must demonstrate ROAS, regardless of the advertiser’s expertise or size, to deliver fair, unbiased competition for all. Marketplace media networks should also ensure a seamless user experience starting with frictionless onboarding of a high number of users. Self-service interfaces, AI-powered wizards providing recommendations, and automation are essential for monetizing the long tail.
Delivering relevant ads is more complex than before. 10% to 15% of sales come from the top 4-5 product positions of an e-commerce website. Since efficient sponsored ads are positioned within these power zones, retailers cannot afford to irritate customers with irrelevant ads.
For marketplaces, the existence of multiple offers for the same SKU complexifies ad relevance. Algorithms must take into consideration offers with minimal or no purchase history, incomplete product catalogs due to the varied sophistication of sellers, and complex keyword and filter combinations.
Multiple offers for the same SKU require big data processing to guarantee relevance.
Protecting relevance without limiting reach. Keeping ads relevant while maximizing reach (serving ads on all available pages) is a careful balancing act. AI tools find all the keyword and placement opportunities that a manually created campaign will not uncover.
Keeping ads relevant while maximizing reach is a careful balancing act.
Cdiscount, the biggest French e-commerce marketplace, saw the value of this approach: “Since implementing the Cdiscount Advertising platform, we've seen a real impact on sales thanks in large part to the powerful automated campaign management tools that with one click selects the right products, keywords, and bidding strategies to maximize ROAS. This allows us to pick up revenue opportunities that we would have missed before. Campaigns built manually cannot match the combination of ROAS and reach that automation is delivering. In this area, Cdiscount is the only Retail Media network in France able to compete with Amazon” stated Virgile Cuba - e-commerce Director at Ericfavre.com.
Choosing a technology that leverages your in-house expertise
Retail Media SaaS platforms for traditional e-commerce don't work for marketplaces because of their inability to address the complexity of multiple sellers, relevance, and real-time big data processing. Even platforms that have recently expanded into marketplaces have been unable to match the returns that Amazon provides its advertisers.
Some marketplaces consider building their own ad technology, including relevance algorithms and bid managers, which proves to be a distraction from their core business. Instead, combine internal expertise and historical data with a best-in-class marketplace Retail Media platform to deliver the most relevant ads to fully monetize the long tail of sellers.
RelevanC's powerful white-label platform achieves this by assimilating the retailer’s own historical data into its machine-learning algorithms. RelevanC combines AI-driven campaign creation and offer-level pertinence management to maximize ad revenue and advertiser ROAS. It was thanks to this focus on marketplace-specific needs that Cdiscount, the biggest French e-commerce marketplace, successfully replaced Mabaya (Criteo) with relevanC.
Grégoire Flatin
