With eCommerce continuing to grow exponentially, and even previously hesitant brick-and-mortar brands starting to participate, Retail Media finds itself at a time of unprecedented potential. With so much consumer attention directed toward the industry, getting brands properly positioned in the digital advertising space has never been more critical.
But in this ever-evolving landscape, brands face a complex web of challenges that can significantly impact their profitability. An industry-wide lack of standards has produced a patchwork of advertising networks with conflicting compliance requirements and shifting price controls. These issues make it critical for brands to carefully navigate Retail Media’s intricacies to maintain and enhance profitability.
Profitability challenges in retail media
Profitability is significantly impacted by the challenges that arise from inconsistent marketplace policies, strict compliance requirements, and pricing control issues. The absence of uniform standards has resulted in varying effectiveness across advertising platforms, raising the risk of Ad spend misallocations by sellers and brands. Meanwhile, stringent compliance rules, such as restrictions on certain keywords, can easily disrupt listings and result in lost sales. By understanding the specifics of these challenges, you’ll uncover insights on how to optimize strategies, manage compliance, and control costs effectively, ensuring that your retail media investments deliver maximum returns.
Marketplace policies
Ask anyone in the Retail Media space what a key pain point is, and they’ll inevitably bring up a lack of industry standards. For every advanced advertising module, there is a far less robust offering from another popular site. Wading into eCommerce for the first time, platform variability will inevitably lead to misspent funds from different best practices. While industry leaders continue to call for greater standardization across platforms, the Wild West nature of the contemporary Retail Media landscape means that everything, from overall brand strategy to performance KPIs, needs to be adjusted for and cater to the nuances of each marketplace. If you attempt a one-size-fits-all approach to your marketplace strategy, you could very quickly burn through Ad spend without any clear or insightful results — even if the same thinking led to great returns on a different platform!
Compliance issues
Whether it’s compliance for transnational Sellers or marketplace-specific rules, failing to follow them can quickly turn any Retail Media venture unprofitable. And in marketplaces’ current iterations, they can be very easy to break. A common issue is incorporating a restricted or banned keyword into customer-facing or backend content, such as the keyword ‘anti-microbial’. Incorporating this term can take down your listing, or even more catastrophically, becoming locked out of your marketplace account. Without controlling your products, you can’t control your Retail Media strategy — directly translating to lost sales and harmed advertising performance, with the added downside of a prolonged back and forth with Seller support to attempt to relieve the issue.
Price control issues
As we’ve watched brands migrate from 1-P to 3-P, eCommerce price controls have become impossible for prospective sellers to ignore. While being a first-party Vendor comes with the perk that Marketplaces directly oversee inventory, having to navigate pricing directives can quickly become costly when they cut into brand’s margins. 1-P Vendors have minimal to no control over the prices set by the marketplace, undermining pricing strategies and your ability to manage how your brand is presented and sold. As big marketplaces seek to expand their own margins by raising fees, brands can remain trapped as vendors, with the potential of eCommerce gradually receding further and further away.
How MindgruveMacarta can help
With our full-service Retail Media suite, our experts are uniquely positioned to drive profitability for brands in the eCommerce space. While there is never a one-size-fits-all approach to Retail Media strategy, there are simple steps that brands can take to start trending profitably.
Balancing spend & profitability
MindgruveMacarta identifies and tracks all product and product-adjacent costs, including the price for shopper conversion, positioning us to improve your advertising scalability and profitability. By identifying the discrepancies between overall sales growth and driving efficient sales, we can help brands maximize their profitability using tested strategies. That way, we can keep brands with large total sales from funding static, non-advertising costs without the risk of negatively impacting individual Ad efficiency. Conversely, MindgruveMacarta saves brands from harming overall profitability by spreading fixed costs when over-optimizing towards efficiency without considering overall sales.
Optimizing ad placements & bidding strategies
Due to the sheer variety of Ad types and purchasable placement offered through Retail Media, potential benefits still contain their fair share of risk. That’s why MindgruveMacarta helps brands optimize Ad placements while minimizing risk by finding a brand’s unique balance. To maximize spend efficiency, in-grid sponsored product ads can offer brands the highest returns. Alternatively, if expanding messaging is the goal, displaying sponsored brand banner ads across the web can widen visibility into your brand — at the cost of only targeting upper funnel consumers.
Bidding strategies that drive traffic via an impression-based CPM model can reach expanded pools of customers, but sales attributions based on impressions (rather than clicks) are often less reliable. Plus, they can add noise to any customer acquisition cost calculation. By weighing the pros and cons of potential strategies against the material realities of your business, MindgruveMacarta develops unique strategies for effective marketing in increasingly crowded marketplace spaces.
Leveraging customer data for improved targeting & ROI
We know that every brand’s shopper journey is unique. Digging deep into available data is vital to help marketers, like ourselves, understand which strategies will work best and which will underperform. This is vital to improve ROI and drive overall profitability. Thankfully, vast pre-existing customer segments on marketplaces provide brands with substantial data to supplement their internal findings, allowing us to develop optimal marketing strategies to meet their unique needs. Large brands, or products with high customer awareness, can profitably drive traffic via display ads and CPM traffic. However, this strategy is less effective when implemented for a small business with lesser-known products, which would be far better suited toward aggressive bidding on feature-specific keywords that drive clicks within search.
Conclusion
Maintaining profitability is difficult in any industry, and in this boom era of eCommerce, Retail Media is no different. A profitable ROAS comes down to leveraging the right tools the right way, and maintaining a comprehensive knowledge of the industry’s ever-shifting rules and regulations. MindgruveMacarta offers an alternative solution, where our team of Retail Media experts specialize in driving growth and sustained success for our brand partners!
Want to ask a question or learn more? Get in touch with us today.
