The evolution of retail marketplaces and retail media is gaining momentum. Notably, 2023 was a year of significant advancements, including integrating generative AI into online shopping, laying the groundwork for standardization in retail media measurement, and the bankruptcy of the premier Amazon aggregator, AMZN +0.4%.
As anticipated the developments in 2024, what should brands that sell and market on retail platforms such as Amazon, Walmart (WMT -0.9%), and Instacart expect? Here are some principal projections.
1. Conversational AI Will Transform Retail Interaction, Replacing the Search Bar.
Instacart led the charge, being the inaugural shopping application to debut this feature at the beginning of 2023.
In a similar timeframe, Amazon began experimenting with generative AI by providing summaries of customer reviews for its products. The year 2024 is poised to witness a surge in retailers enhancing their digital interfaces with more sophisticated chatbots and innovative methods for consumers to engage with brands, discover products, and access content.
Retailers are moving towards creating immersive experiences that enhance product discovery and tailor recommendations through a chat interface, which allows for greater specificity and customization.
Rather than inputting a broad search term like “school lunchbox snacks” and sifting through thousands of results, we can engage with an intelligent shopping assistant. This assistant will have the capability to remember specific details such as our child’s celiac condition and the nut-free policy at their school.
Consequently, when we seek snacks with a higher protein content, the assistant will not only recall the earlier context but also arrange the suggestions based on the new “high protein” criteria, presenting only those snacks that are gluten-free, nut-free, and rich in protein – potentially even offering to rank them by their protein-to-price ratio.
For brands, this evolution signifies the importance of opting for product descriptions on retail websites to be more AI-friendly. Currently, many brands fall short in adhering to best practices for product content, negatively impacting their visibility in search results and conversion rates. In a chat-driven future, their visibility in product suggestions made by Language Learning Models (LLMs) will diminish if they do not adapt. Brands should closely monitor how retailers develop
2. Walmart and TikTok are set to unveil a major collaboration focused on advertising or commerce
As social media platforms evolve, they’ve expanded into the retail space. Following the footsteps of Facebook, Instagram, and Pinterest, TikTok introduced a shopping feature in 2023.
Similarly, as retailers evolve, they’ve begun incorporating social media elements.
In 2023, Amazon invested heavily in this trend, launching Amazon Inspire and various user experiences reminiscent of social media trends. The goal is clear: to enhance customer engagement and product discovery, although it remains to be seen how effective these initiatives will be.
Walmart needs to catch up in this sector again, while TikTok is likely to face considerable challenges in establishing a substantial commerce operation. A partnership between the two could be an ideal solution for several reasons:
- A demographic that aligns perfectly with Walmart’s offering is heavily present on TikTok, particularly the younger generation, who are mindful of spending. This group is an ideal audience for Walmart, as the retailer is well-positioned to fulfill its promise of delivering excellent value.
- Sharing customer data is central to TikTok’s business model, primarily through its advertising operations—a domain where Walmart also sees substantial profits. Enhancing their collaborative advertising capabilities could serve as a powerful proposition for advertisers. The partnership embarked on a trial in 2022 that allows for the placement of in-feed advertisements on TikTok, utilizing the platform’s engaging, sound-on, full-screen videos combined with Walmart Connect’s sophisticated targeting and measurement tools. This collaboration holds vast potential for expansion.
- Leveraging personalization: The future of digital advertising demands personalization, interactivity, and the inclusion of user-generated content, areas where TikTok shines and Walmart could use enhancement. This is an area where even Amazon has yet to fully succeed. Walmart possesses a unique opportunity to surpass Amazon in this domain.
- TikTok stands to incorporate 50M SKUs into its offerings. To date, TikTok has welcomed 200,000 brands and merchants onto its shopping platform, yet the opportunity for expansion is vast. Products that become hits on TikTok often experience a significant surge in sales on Amazon, a trend that’s likely to persist unless those products can be bought directly through TikTok’s platform. The most effective way to shift consumer purchasing patterns from the renowned “everything store” is by offering a wide range of products and partnering with a reliable fulfillment service like Walmart.
3. More retailers will bring their retail media operations in-house.
In 2023, KrogerKR saw a decrease of 0.8% and introduced its proprietary self-serve advertising platform, moving away from its reliance on Microsoft’s sMSFT PromoteIQ platform, which showed a slight decline of 0.1%. This shift marks a significant progression for large-scale retailers who previously managed their networks through intermediaries such as CitrusAd, Criteo, and PromoteIQ. Kroger highlighted several advantages of this transition, including enhanced flexibility, an improved customer experience, and increased value for advertisers
While not directly stated, another major perk for the retailer is the potential for improved profit margins from this segment after establishing its own infrastructure.
Over the last decade, there has been a surge in the creation of over 50 retail media networks, most of which have depended on such aggregators. Many retailers are expected to steer their course as the retail media landscape evolves.
4.Amazon’s Connected TV Advertisements Will Evolve to Be Deeply Personalized.
It was quite remarkable that Amazon aired three distinct ads for Bose products, each apparently aimed at different audience segments with varied products, during the first Black Friday Football game of 2023. However, this maneuver barely scratches the surface when considering the vast data and technology capabilities already at Amazon’s disposal.
Amazon’s insight into our lives is deeper than many of us will acknowledge. They’re privy to details like the kinds of pets we own, our music preferences, our exercise habits, and even the frequency at which we replace the heads of our electric toothbrushes.
Through Amazon’s Demand Side Advertising (DSP) platform, advertisers could present ads precisely when customers need to replenish items like toothbrush heads or target users who usually buy from competing brands. The platform allows targeting based on segments in the market, lifestyle categories, and even those who have added items to their wish list.
Furthermore, brands can supplement Amazon’s data with their customer information, enabling them to either retarget customers to encourage repeat purchases or exclude them from seeing certain ads.
Despite these advanced targeting features available within the DSP, the level of personalization in ad breaks during Football games in 2023 was unexpectedly minimal. However, I anticipate a significant shift in this trend soon. This evolution will likely make connected TV advertising more appealing to a broader spectrum of advertisers. Those who may not have the budget for the broad reach of broadcast TV could find value in a more precisely targeted media buying approach.
5. ‘Incrementality’ in Retail Media will Continue to Be a Popular Term.
Brands are keen to determine the impact of their investment in new retail media networks or marketplaces, especially in terms of gaining new customers or making sales that wouldn’t have happened without that investment.
This curiosity isn’t new to me; it’s been around since my early days in the retail marketplace. In 2015, a common concern was, “What’s the point of selling on Amazon if those customers could purchase our products through our existing channels?” The reason is apparent: Amazon is a preferred shopping destination for many consumers. You risk losing potential customers to your competitors by not offering your products there.
With the surge in retail media networks vying for brand investment, it’s natural for brands to seek evidence of the “new” revenue each channel can generate. Brands are eager to verify that increased spending on retail media and marketplaces leads to incremental sales rather than eating into the sales of other channels. However, expecting retailers to provide proof of this incrementality is unrealistic. Retailers operating within their closed environments lack the motivation to deliver accurate incrementality measurements. However, some tech firms attempt to gauge this incrementality; their analyses, at best, offer a rough guide.
Due to the unwillingness of retailers to share data, campaign audiences inevitably overlap. One strategy brands can employ involves leveraging Amazon’s Marketing Cloud by uploading their first-party customer data and applying negative targeting to the audience. Nonetheless, in discussions with brands, there’s a notable hesitation to utilize this feature, driven by concerns over Amazon potentially leveraging its data for its benefit.
The journey to purchase has grown increasingly intricate, a trend expected to persist. Customers engage with a brand through various channels before committing to buy. These interactions span search engines, conversational AI, social media engagements, email marketing, in-store experiences, and diverse advertising forms. Untangling the influence of each channel and accurately attributing the correct value to the advertising expenditure that resulted in the conversion is highly complex.
Moreover, establishing a precise benchmark—what the sales figures would look like without any advertising—is challenging. Relying on historical sales data that includes advertising to forecast future sales without it may not yield accurate predictions.
While these forecasts indicate significant advancements, they also present intricate hurdles, particularly as companies strive to grow and maneuver through enclosed retail environments. The brands destined to thrive quickly adjust to new technologies, enhance their engagement with AI, and closely monitor consumer insights to refine their approaches within the growing retail media network.
