In 2023, with advertising spend expected to slow, retailers have become a staple partner for most advertisers looking to reach their consumers, claims new research.

According to a study released by IAB Europe and Microsoft, retail media has become an established element of marketers’ strategies with 90% of more than 800 buy-side stakeholders planning to work with a retailer next year. Those were made up of brand directors, media directors, media planners and programmatic media directors.

Ad spend is forecast to grow by 10.1% to reach $122 billion next according to Warc, with it set to reach around $26.5 billion in Europe by 2026, claims IAB Europe.

Conducted alongside Xander, which was acquired by Microsoft earlier this year, the research quizzed advertisers on their use and experience of leveraging retail media as well as their plans over the coming year.

The attraction to retail

According to the survey most (92%) advertisers and almost three quarters (74%) of agencies already have established partnerships in place with retailer platforms to reach consumers. Over the next 12 months, 88% of advertisers and 77% of agencies plan to continue to use retail media channels as engagement sources for their content.

More than two-thirds (67%) of those who currently have a retail media partnership said that their experience had been either “good” or “very good.”

The pandemic-induced rise of ecommerce, paired with retailers’ first-party data in a world of signal loss, and the ability to combine ad exposure and conversion into a single platform are key market drivers.

Daniel Knapp, chief economist for IAB Europe

The move to retail media is taking spend away from more established channels such as digital advertising, traditional advertising, social media and trade budgets.

Daniel Knapp, chief economist for IAB Europe said that the retail media market had already reached almost $8.5 billion in Europe with double-digital growth despite current economic headwinds.

“The pandemic-induced rise of ecommerce, paired with retailers’ first-party data in a world of signal loss, and the ability to combine ad exposure and conversion into a single platform are key market drivers. We see further potential for off-site retail media to integrate retailer’s role more widely in the upper marketing funnel,” Knapp added.

Advertisers have turned to retailer platforms as the death of the third-party cookie seemingly looms in 2024, with more than a third citing the desire to implement first-party data strategies as their reason for partnering with retailers.

91% of buyers said that they already had a first-party data strategy in place while less than half (49%) admitted that they were still scaling the strategy.

Another benefit of working with retailers cited by 36% of advertisers and 28% of agencies was the closed-loop attribution which makes the performance of each element of the customer conversion process clearer. More than half of buyers (52%) cited category versus product level as being the most important aspect of the retail media proposition.

Amir Rasekh, director of U.K.-based consumer loyalty program Nectar360, said that the results showed that retail media presents “a real opportunity for brands to reach consumers effectively.”

“We have been building our data-driven Retail Media capability across Sainsbury’s and Argos for many years, with the aim of driving enhanced levels of personalization for our customers and strong returns for clients,” he added.

Challenges to overcome

One drawback cited by a third (33%) of respondents was that “scale” and “integration with other advertising technologies” proved to be limited, with retail media ad tech integration with advertising technology partners a barrier.

Another challenge cited by 30% was for retailers to focus on improving their tech and data offering to continue their growth while 26% of buyers cited the cost of partnering with retailers as a barrier to investment and 25% also moaned about the lack of standard metrics and reporting.