Target, the US retailer, has announced the rebranding of its in-house media company[1]. Target Media Network, which was originally launched in 2016 and has over 1000 clients across a wide variety of categories, will now be known as Roundel. The rebranding signifies Target’s expansion of its Retail Digital Media activities beyond their website and reflects a wider trend among big box-retailers to emulate the success of Amazon and ramp up their profitable RDM businesses.
How do Roundel and other eRetailers benefit from investing in Retail Digital Media?
Retail Digital Media, or RDM, is digital advertising that targets online shoppers at the optimal moment of receptivity and drives them to the product detail pages on eRetailer websites. In their simplest form, the ads come in the format of a banner on the retailer’s website but they can also be placed on external websites that then drive the shopper to the retailer’s site. Back in 2017 we covered a number of important reasons why RDM is a winning strategy for eRetailers. You can read the article here. Today, there are even more reasons why RDM is a crucial strategy and the example of Target is instructive. Firstly, unlike social media, search engines or online news and magazines, Target’s in-house digital media company has subdivided and specific consumer data on what Target customers are actually purchasing in its store and on its website. Therefore, Roundel can pitch to brands that they are likely to have a higher conversion rate when advertising on Target platforms. As president of Roundel, Kristi Argyilan explains, “The results when you market and use data based on real people is significantly better than data pools that are out there.”[2] Secondly, Target customers are already in a shopping mindset and looking to make a purchase when they are on Target’s website. Therefore, they are likely to be more receptive to an ad they see on the retailer’s site than to a similar ad on social media or on a search engine[3]. Thirdly, the simple fact that customers are already on Target’s website when they see an advertised product they can purchase on the same website means that they are more likely to respond to the ad. Even when consumers are receptive to an ad on Google or Facebook, the fact that they have to switch to another platform makes their customer journey more complicated. This affects their motivation to complete the purchase, especially on mobile devices. Lastly, what makes this a winning strategy for Roundel is that it is expanding its ad business beyond the Target platforms. Not only will Roundel be creating personalised ad campaigns for Target-participating brands on external platforms such as Pinterest, PopSugar and NBCU, but it will also be extending its Retail Digital Media offering to new brands from the financial services, automotive and travel business, for example[4].
Using Retail Digital Media to help counter the tough climate
Roundel’s RDM push could not come at a more crucial time. Retailers like Target are having to invest huge sums in their websites and build-out services, such as home delivery, at the same time as being placed under immense and unprecedented pressure from the likes of Amazon, deep-discount stores and digital native brands. Roundel’s RDM drive also comes during a period of substantial growth in US ad sales. Magna reports that sales in 2018 reached a record $212 billion, with digital advertising accounting for more than 50% of advertising spending[5][6]. In the UK, online retailer platforms have twice the number of page views as news and magazine websites because of the high volume of traffic. However, despite this, retailers are selling three times less digital advertising than news and magazine websites ($190 million compared to just over $500 million). If UK retailers were to develop their digital ad offer as expected, they could sell over $1.25 billion of digital advertising, just in the UK[7].
Amazon: Retail Digital Media’s star pupil
Amazon has successfully deployed its first-party customer data and brand relationships to create an advertising business that generated over $10 billion in 2018, a 50% increase on 2017[8]. In their recent survey, Digiday found that 90% of media buyers said they were buying ads on Amazon. Target, where 16% of the media buyers chose to advertise, has some way to go before it can rival Amazon.
Like Target, Walmart had also been spurred on by Amazon’s digital media success and is seeking to expand its ad business. While the big-box retailer has 4,755 stores, 1.5 million employees and generates $380 billion in revenue in the US alone, the company’s CEO Doug McMillon describes its ad business as “tiny”[9]. Walmart is taking a different approach from Target and is seeking to leverage the data it garners from the 300 million shoppers who visit its stores each month by using tools such as shoppable streaming ads through its streaming platform, Vudu[10].
What we are seeing is an increasingly complex RDM landscape as eRetailers pursue different media sales strategies. For example, some large retailers such as Sainsbury have externalised their digital media business to third parties while others, like Argos, have adopted a strategy that combines internalised and externalised capabilities. At eBusiness Institute, we produced a chart in 2016 to unpack this complex RDM landscape.
As you can see, there are four different eRetailer operating models. Given the speed of change in Retail Digital Media, the retailers used as examples in the table back in 2016 might not be categorised in the same way today, but the operating models remain highly relevant and help us to better understand the complex RDM landscape.
What brands need to do to navigate the evolving ecosystem
It’s clear that the way in which eRetailers organise their RDM sales offering has changed significantly, even over the past few months. For brands, mastering RDM will take some time: time to get the right team with the requisite skills in place, time to find the most appropriate retailers, time to understand how to negotiate with them, time to test and learn the tools that are best suited to the brand and lastly time to understand how to build effective creatives for the eRetail environment. Most companies negotiate RDM through their key account managers with no involvement from their media or marketing teams. This results in a lack of transparency, an absence of data sharing, poor key performance indicators and an overall waste of budgets. As you can read in our infographic here, what is needed is for the expertise of the sales, marketing and media teams to be combined.
In conclusion
Target’s rebranding and expansion of its in-house media company, Roundel, illustrates a trend among large retailers to follow Amazon’s example and increase their RDM businesses. This is highly likely to be a winning strategy for Target and could not come at a more opportune time given how tough the current climate is for traditional brick-and-mortar retailers. Roundel will attract advertising business from brands not only on Target’s platforms but also on external sites by having significant and specific data on consumers and their behaviour and by being able to target customers when they are most likely to make a purchase. While they are usually sold as “brand solutions to win online”, as in the case of Lazada for example, eRetailer investments, whether they are services, features or media, can completely transform how a commercial organisation considers an online retail partner and vice versa. In order to develop viable commercial strategies and select the kind of retailers best suited to their partnership or expansion plans, brands need to incorporate eRetailer analysis into their market research.
This article was written by Jordane Beller, Retail Digital Media Consultant at the eBusiness Institute. Jordane conducts research and analysis for the RDM Centre of Expertise, monitors market trends, and writes for the RDM Editorial Content Program. Over the past five years at the eBusiness Institute, we have been gathering intelligence on online retailers both in terms of eContent and Retail Digital Media. This intelligence has been entered into a proprietary database which we have segmented according to the criteria that we believe to be most appropriate to a commercial team looking to diversify and differentiate their commercial strategies. We are utilising this database as a tool for analysis and commercial strategy in our workshop sessions. Contact us for further information on our RDM and eRetailer segmentation methodologies. In addition to our work on Retail Digital Media, our experts at eBusiness Institute have extensive experience of working with numerous brands on all aspects of their digital transformation. We understand the importance of an optimised consumer experience to drive your brand’s sales online and offline. Contact us to learn more about how we can help you.
Sources
[1] https://corporate.target.com/article/2019/05/roundel
[2] https://digiday.com/retail/target-wants-build-media-business-rival-amazon/
[3] https://dmexco.com/stories/how-amazon-is-stirring-up-the-advertising-industry/ [4] https://techcrunch.com/2019/05/02/target-ups-its-ad-efforts-with-revamped-media-company-roundel/
[5] https://digiday.com/retail/target-wants-build-media-business-rival-amazon/
[6] “Creating Strategy from Every Visit” by OC & C Strategy Consultants, www.occstrategy.com
[7] “Creating Strategy from Every Visit” by OC & C Strategy Consultants, www.occstrategy.com [8] https://digiday.com/retail/target-wants-build-media-business-rival-amazon/ [9] https://www.seattletimes.com/business/amazon-has-a-big-advertising-business-walmart-wants-one-too/
[10] https://www.marketingdive.com/news
