E-commerce is in a constant state of evolution, and retail media has become a transformative force in this landscape. Amazon, a giant in the e-commerce world, has led this revolution in the United States, redefining how brands connect with consumers.
Retail media significantly impacts brand awareness and the effectiveness of digital marketing strategies, providing new opportunities for companies of all sizes.
This article explores the secret behind Amazon’s success in the retail media field and its effects on traditional retail. We will analyze how Amazon’s advertising platform has become a powerful tool for advertisers, examining its evolution and dominance in the American market. Furthermore, we will discuss the impact of this shift on the retail landscape and the lessons that can be learned for business growth in today’s digital environment.
The Evolution of Retail Media in the U.S.
Emergence of the Concept
The concept of retail media is not new, but it has gained renewed attention in recent years. Amazon pioneered this field, catalyzing the rise of retail media by converting its immense traffic of potential buyers into a valuable audience for advertisers. This model not only diversified Amazon’s revenue streams but also redefined market expectations regarding the potential of retail media.
Key Players
While Amazon was the trailblazer, other major retailers in the U.S. have also entered this market. Walmart, with a high percentage of orders fulfilled through physical stores, offers rapid shipping, directly competing with Amazon. Target stands out with its Target Circle loyalty program, providing valuable first-party insights to brands. Kroger, with its extensive network of physical stores and distribution centers, has also positioned itself strongly in this market. Additionally, Instacart, present in 14,000 cities in the U.S. and Canada, has become a significant player, particularly in the food sector.
Market Growth
The growth of retail media has been impressive. Between 2019 and 2023, global revenue in this sector more than doubled, reaching USD 123 billion. Projections indicate that this number could rise to USD 293 billion over the next five years. In the United States, it is expected that one in every five dollars spent on advertising will be directed towards retail media by 2028. This represents significant growth and highlights the increasing importance of this sector in the advertising market.
Currently, outside of China, Amazon accounts for nearly 70% of retail media advertising revenue. However, this share is expected to decline as other players strengthen their market presence.
Retail media is not limited to the online environment. Retailers are recognizing the power of integrating physical and digital assets. For example, the Hy-Vee chain is using smart panels in physical stores for advertising, developed in partnership with Samsung.
How Amazon Dominated Retail Media
Advertising Strategy
Amazon revolutionized the online retail landscape by incorporating targeted advertising into its e-commerce platform. This innovative approach has allowed the company to become one of the leading players in online advertising.
Retail media, which refers to the display of digital ads targeted at consumers during their online shopping experiences, has been a cornerstone of Amazon’s strategy.
The company introduced its advertising platform, Amazon Advertising, which offers a variety of tools and services for advertisers. This platform enables brands and retailers to promote their products and reach consumers at the moment they are most likely to buy.
Integration with E-commerce
The seamless integration of advertising and e-commerce has been a significant differentiator for Amazon. The company employs advanced algorithms to display relevant ads to consumers based on their interests and purchase history. This increases the chances of exposure to relevant products and, consequently, purchases.
A unique advantage of Amazon’s retail media is its integration across the entire company ecosystem. Ads can be displayed not only on product pages but also at other consumer touchpoints, such as Amazon Echo devices, Fire TV, and Kindle. This extensive integration provides advertisers with the opportunity to reach consumers at various moments and contexts during their shopping journeys.
Utilization of Customer Data
Amazon possesses a vast amount of data about its consumers, including purchase history, preferences, and browsing behaviors. This allows advertisers to segment their ads precisely, targeting specific audiences that are most likely to be interested in their products.
Accurate segmentation results in a better return on advertising investment, as ads are shown to highly relevant consumers. Additionally, Amazon Advertising provides advertisers with detailed data on the performance of their ad campaigns, including metrics such as impressions, clicks, conversion rates, and sales generated directly through ads.
This measurement capability allows advertisers to optimize their campaigns in real time, adjusting strategies and budget allocation based on ad performance.
With a broad audience and an immense amount of consumer data, Amazon has been able to generate significant sales increases for brands and retailers utilizing its advertising platform.
Impact of Retail Media on Traditional Retail
Retail media is causing a significant transformation in the traditional retail landscape. This omnichannel strategy allows retailers to market advertising space on their online platforms and physical stores, creating a profitable symbiosis between advertisers and retailers.
Changes in the Business Model
Retail media is driving a fundamental change in how retailers operate. With the rise of e-commerce, traditional retailers are adapting to integrate their online and offline operations. While traditional retail grew by 2.3% in 2018, e-commerce experienced a growth rate of 15%.
This trend underscores the necessity for traditional retailers to adopt digital strategies to remain competitive.
New Revenue Streams
Retail media provides retailers with an opportunity to diversify their revenue sources by selling advertising space to industries. Studies indicate that retail media can yield 70% to 90% profit for retailers.
Moreover, data from consulting firm McKinsey estimates that this is a $45 billion market in the United States, projected to account for 26.9% of total digital advertising spending by 2027.
Challenges for Adaptation
Transitioning to retail media presents significant challenges for traditional retailers:
- Data Management: It is crucial to organize and analyze data not only for internal use but also to fuel the advertisers’ business.
- Technology: Integrating advanced technologies, such as artificial intelligence, is essential for creating personalized shopping experiences.
- Advertiser Partnerships: Establishing new forms of interaction with suppliers based on innovative metrics and intensive data usage.
- Transparency: Retailers need to provide access to exclusive audiences and be transparent in their operations and communication of results.
To tackle these challenges, retailers in Brazil need to be agile, innovative, and attentive to changes in the macroeconomic landscape, seeking operational efficiency and diversifying their business strategies.
Conclusion
Retail media has caused a revolution in the e-commerce landscape, with Amazon leading the way in the United States. This strategy has a significant impact on brand awareness and the effectiveness of digital marketing campaigns, offering new opportunities for companies of all sizes.
The seamless integration of advertising and e-commerce, along with the intelligent use of customer data, has allowed Amazon to dominate this rapidly growing market.
For Latino entrepreneurs in the U.S., understanding and leveraging the power of retail media is essential for business growth in today’s digital environment. This involves adapting to changes in the business model, exploring new revenue streams, and addressing the challenges of adaptation.
To assist in this journey, the Imigrante Rico EVO mentorship program offers valuable guidance for expanding businesses in the United States. By embracing these trends and seeking the necessary knowledge, immigrant entrepreneurs can position themselves competitively in this ever-evolving market.
