Retail Media vs. Marketplaces: Definitions, Origins and Benefits

Plenty of online marketplaces have emerged in the U.S. and in Europe throughout the past few years. Many of these marketplaces have, or are in the process of transitioning into what is referred to as “retail media”. In the U.S. and Europe the front runner in this platform category is Amazon Ads, but local marketplaces are picking up on the trend. An exciting development, as experts forecasted 2023 to be the make-or-break year for retail media in both the U.S. and Europe. But what are retail media, which ones are relevant in Europe, how do they differ from “normal” online marketplaces, and why are they so successful? 

With Retail Media Unlocked, we kick-off a series of deep-dives around this topic with which we aim to tame the wilderness and provide guidance not only on how to survive in the wild but on how to thrive in it. We believe strongly in the future of retail media networks and that 2023 is going to be their MAKE rather than the break year.

Retail Media vs. Online Marketplaces: Definitions

Retail media and online marketplaces are terms often used in the same context and sometimes even interchangeably. But while online marketplaces are websites that provide products or services by multiple third parties, retail media is a marketing practice within third-party retail ecosystems that places paid media. The concepts also differ in purpose since online marketplaces merely aim to facilitate sales, and the goal of retail media is converting consumers at the point of purchase. Interestingly, none of these terms are really accurate when it comes to what platforms like Amazon Ads are.

What most people mean with “retail media” when referring to platforms such as Amazon, is actually the term retail media network (RMN). RMNs form the bridge between both the marketing practice of converting consumers at the point of purchase and a marketplace that facilitates the purchase. RMNs are e-commerce ecosystems that reach the audience through advertising on the platform, right next to the third-party offers. Their advertising meets the audience therefore closer to the purchase than any other digital advertising channel. They are further characterised by their breadth of rich first party data, which is collected through their advertising infrastructure. It is made up of the digital channels that RMNs offer to brands for advertising. 

Side Note

The term “retail media” seems to have become one of the big buzzwords in the world of e-commerce. It is, however, not at all an invention of the digital age, the concept has already been implemented in pre-internet times. Offline, retail media marketing practices can be found in various places such as malls or supermarkets: A sample counter, an in-store ad display, etc.  In the digital space, this marketing practice translates into pop-up ads, banners, and other forms of online content.

The Rise of Retail Media Networks

It’s no news that online marketplaces experienced a boom during the pandemic. The mere need to shop online facilitated a rise of the popularity of e-commerce – especially in regard to online marketplaces. According to the majority of respondents of a global survey from 2021, a time in which the pandemic was still quite present, e-commerce was going to become more important to them, even post COVID-19. More than two thirds stated they were planning on increasing their use of digital shopping channels in the future.

Looking at these developments it seems only logical to place one’s advertising in a position within the digital space that meets potential customers where they search for and buy products. 

Although the pandemic boost of e-commerce has now worn off,  retail stores are reopening and economic challenges such as inflation causes consumers to cut back on expenditures – we are not left off where we started. In 2020, the consumer environment changed practically overnight, entailing an enormous increase in demand for online shopping. Experts estimate that this in turn led to innovations and a RMN infrastructure that most likely would not exist yet without the boost. These developments paved the way for more and more online marketplaces to emerge and to transition into RMNs. 

The Benefits of Retail Media Networks

Following Amazon’s lead, various former online marketplaces globally are transitioning into retail media networks. But why is that?

What’s in It For The Marketplaces?

A key reason for online marketplaces to integrate retail media onto their platforms surely is the prospect of their profitability. Looking at the  latest Q4 results of RMN-pioneer Amazon, we see that its advertising business continues to grow as it reported a 19% year-over-year increase in sales, bringing in $11.6 billion for the fourth quarter. Despite making up for only a small portion of Amazon’s overall revenue ($149.2 billion in Q4 of 2022), the company’s advertising unit is rapidly growing. It is a high-margin business unit and we see it as a key player that will make a crucial contribution to Amazon’s overall profitability.

RMNs like Amazon generate revenue by offering brands digital advertising solutions, which allows advertisers to programmatically buy display and video ads across the web (and app) ecosystem. The respective RMN then charges for these ad placements on cost-per-click or cost-per-impression basis. Due to customer data and insights on shopping behaviour gathered by the platforms, RMNs are able to offer highly targeted and effective advertising options. 

What’s in It For The Brands?

Branding and Sales

RMNs offer brands the opportunity to tackle various key objectives within their marketing and sales strategies. 

Brands can utilise RMNs to increase their brand awareness because consumers increasingly use RMNs for product searches rather than traditional search engines. Through their presence on RMNs brands can not only grow brand awareness, but also foster their brand image. Platforms such as Amazon offer various ways to showcase brand identity through for example images, brand stores and A+ content. 

 Monitoring 

Every RMN differs in ad options and the extent to which data is collected but they all add a lot of transparency to the advertising activities of brands on marketplaces. They facilitate closed loop measurement of the data they gather and by forming a bridge between advertising spend and sales they enable the measurement of the connection of these two factors. Although an external tool is often required to access and analyse the data properly, it is highly valuable to brands and marketers when evaluating their marketing activities. 

Retail Media Networks in Europe

Amazon is still the most dominant RMN in Europe. In all markets we surveyed for our International Amazon Shopper Report 2022 the US-American e-commerce giant was the most recognized marketplace (see graph below). However, local players are emerging in various European markets. 

Generally speaking, the European marketplace scene consists of big global pure players, local pure players, vertical marketplaces, and click-and-bricks. Locally, the best-known online marketplaces after Amazon and eBay are Otto in Germany (74%), Argos in the UK (76%), AliExpress in Spain (82%), Cdiscount in France (75%) and the Facebook Marketplace in Italy (61%). These leading players vary by country but almost all of them have the commonality of being retail media enabled. 

Conclusion

Due to their short existence, RMNs are often perceived as immature and surely there is plenty of room to grow – at the same time they provide a variety of opportunities for brands. Their ability to boost sales through driving traffic, to convert at the point of purchase and to function as a branding channel, together with the data they generate, makes RMNs a powerful advertising channel. We think that those who see their potential will benefit from the unique opportunities they provide. 

This potential however, does not come without challenges. One aspect for example is the technological aspect of RMNs. As already mentioned, the lack of standardised technology makes the RMN space a bit of a ‘wild west’. Each of the networks is built differently, there is no one-size-fits-all solution and every brand has to find its own path to success. 

We want to unlock Retail Media, especially in the European market, explain this new environment, guide you through the wilderness and sneak a peek into its future. We will dive into various different marketplaces and discuss their potential together with other e-commerce experts.