The once illustrious world of brick-and-mortar retail has fallen into disrepair. Some of the hardest hit, including Debenhams (pictured), Mothercare, Carpetright and New Look, are now going "cap in hand" to ask landlords to either take back the keys to their stores or slash the rent on others.
There’s no single root cause to the problem, rather a tide of new challenges. Technology and the rapid adoption of digital, making customers a moving target. Legal regulations, such as GDPR, imposing stricter rules on the use of data.
There’s pressure from discounters such as Aldi and Lidl, which have more than tripled their market share in the past decade, as well as from digital natives such as Alibaba, with different operating models and cost bases, and data as their DNA.
Put all this together and the sector is not just being disrupted, but in effect being reborn. We are now reaching a tipping point as digital natives start integrating the full retail value chain: online, offline, logistics and data. Jack Ma, chief executive of Alibaba, calls it the "new retail".
The British high street is in need of a reprieve.
One of the strategies we’ve seen play out in recent months is consolidation. To shore up their market positions, mergers such as Sainsbury’s and Argos, as well as partnerships such as Tesco and Carrefour, and Kroger and Ocado, have all been driven through in the past couple of years.
However, joining forces is not the only route for retailers trying to fight back. Creating a new revenue stream will enable them to better deal with shrinking margins and rising costs of the highly competitive retail ecosystem.
The hidden opportunity
These days, more and more retailers are taking on the role of publisher. And it’s a smart move, since the media opportunity is a big one.
A recent estimation from eMarketer predicts that 7% of US total adspend in 2020 will go to Amazon, doubling its revenue earned from media and placing it alongside key media players such as Google and Facebook (whose core business is media, not retail). This essentially makes media the most profitable business line for Amazon, and other companies are now realising the opportunity and following suit.
The secret behind Amazon’s success is the same advantage that plays into the hands of every retailer – it’s the absolute certainty of the customer’s shopping behaviour.
Just think of the data and insights provided by loyal browsing and shopping behaviour when compared with the actual products bought. Recurring shops and the implications of breaks in that pattern, the context of historical behaviour and the meaning of new purchases. These are all things that retailers can analyse to know their customers and their specific habits and needs better than anyone else.
Why retail media delivers real value
So if retailers have all that data, where can they start to make a meaningful difference to customer experience and their bottom line? Across websites, mobile applications and loyalty programmes, and in store, retailers have access to vast amounts of data and a rich media inventory that can help them connect with customers in the right way, at the right time.
Based on our experience working with global retailers, we believe they can generate 1% of their retail sales revenues through media – for grocery retail alone, that would be equivalent to at least $14bn in the EMEA region. The exact share of this will depend on a number of factors, such as a retailer’s data and technology maturity, the proportion of brand (rather than own-label) sales and their multichannel presence, but the opportunity exists for all retailers.
Not only can advertisers plan campaigns and buy their media based on actual shopping behaviour, but they can close the loop between their online ad campaigns and in-store sales.
Linking online ads to store purchases is the dream of a lot of media owners. Remember when Google partnered Mastercard to do something along those lines? In reality, though, retailers have always had the ability to provide that feedback loop.
It also benefits consumers. Access to better data means more tailored and personalised communication for consumers.
With the move of online players into the offline realm, retailers are having to adapt more than ever. With this, some have decided to join forces and others to become publishers. In this data-driven world, publishers are no longer the only media owners.
Retailers can take a page from their books and approach, leverage and monetise their own data assets the same way publishers do. They are ultimately masters of a deep ecosystem that’s connected – from customers to advertisers to retailers.
Julie Jeancolas is global head of media partnerships at Dunnhumby