Will it come to this? It looks like we might be headed in that direction before these RMN work out all of their bugs, have some sort of standardization, and can produce reporting that could verify manufacturers' ad spend. In the future, will retailers strong-arm manufacturers to participate in spending a percentage of their advertising dollars with them to even stay in their stores? Will the retailers base the location of their manufacturer’s products solely on their in-house ad spending?
The format of “Pay to Play” also known as Payola has been around for decades. This was a very popular practice in the music industry during the ’30s, ’40s, and ’50s. What this meant was that if you wrote and recorded your own music and wanted it played on your local radio station, these radio stations and DJs would be very happy to take your money. If you didn’t, your record would not be heard. In many cases, just like advertising, they would pay for how many times per day that record was to be played. There was no record keeping of this type of data back then. This is exactly like running digital campaigns 5-10 years ago. It was the wild west. Not very many rules and very little back-end proof and verification that what you paid for is what actually happened. And after further research for this blog, it appears that this practice in the music industry hasn’t really gone away.
Just a short time ago in 2021 the US Digital Retail Media Ad spending was slightly over 31 billion US dollars. The projection for 2024 is almost double at 61 billion. In a previous article, I wrote that this additional revenue stream was coming at a good time for these retailers as their shrinkage is at an all-time high, this fairly new revenue stream does offset this problem. However, it does not solve the problem for these retailers. They are incurring high losses both from in-house theft and at the customer level.
There is a report from the National Retail Federation that shows the retail sales revenue loss was at 112 billion in 2022. It is projected to be around 130 billion this year. With no clear way to resolve this, will these retailers continue to inflate their in-house marketing and advertising campaigns? Will they provide data to back up this service so that the manufacturer can assess ROI for themselves? When and will it become standardized?
As these Retail Media Networks get bigger every year and theft continues to grow, it will be the shoppers that will lose big in both pricing of products and there might even be fewer options of products to choose from. It might become too expensive to be in the stores for the smaller brands that don’t have big advertising budgets if they are forced to participate in RMN.