Retail Media Challenges and Ways to Overcome Them

The retail industry is one of the most quickly growing ones. With the new technologies, retailers can leverage new ways to reach their target groups and establish relations with potential customers. Moreover, the evolution of AdTech has dramatically boosted the development of the retail media landscape and provided retailers with additional revenue streams.

However, as it often happens, new times have brought new challenges. That’s precisely what we discuss in this article - retail media challenges and the solutions to address them, as well as other difficulties that retail businesses of different sizes can face today.

Retail Media and the Key Challenges in the Space

The retail media market has been leveraging significant revenue increases over the past years. 2024 US retail media spending is expected to jump by 30% in 2024. This means that it will account for one-fifth of US ad spending. According to recent studies, the future of retail media looks quite promising. It is projected that the share of retail media will continue growing. In 2025, retail media may hit 23.5% of all digital advertising spending in the US.

Nowadays, many retailers across the globe are launching their retail media networks. These advertising platforms allow brands and advertisers to purchase ad space on the retailer’s properties. These networks deal with the retailer’s first-party data, which helps to increase the accuracy of targeting and efficiency of ads.

But are the entrance and further performance in this market seamless and smooth for retailers? Not. Let’s take a closer look at the main challenges that businesses face.

Challenge 1. Technology Deployment and Integration with Existing Systems

When retailers plan to introduce new tech solutions, they may have dozens of concerns. Should they buy a ready-to-use solution or build a custom one? What types of apps are required? How will they help to collect and further manage essential data?

Smooth connection of all new platforms, channels, data sources, and workflows with each other is a task that requires specific skills and knowledge.

Moreover, integrating new technologies with existing systems can be challenging for many retailers due to outdated processes and differences in infrastructure.

Possible solutions

It is evident that making any tech-related decisions without relevant expertise is difficult. That’s why one of the first things that each retailer should do is create an in-house technology team or find a reliable partner to provide consulting services in the retail media domain. This partner should have outstanding expertise in AdTech and a deep understanding of the market needs.

Before implementing new technologies and solutions, it is always necessary to conduct a thorough audit of the existing systems and IT infrastructure, consider the retailer’s requirements, and identify potential integration challenges.

We always recommend our customers avoid proprietary or closed systems that could limit their flexibility. It will be great to opt for open, flexible, and scalable solutions. This will reduce friction in integration and ensure easier adaptation to new technologies.

When we build custom AdTech tools for retail media, be it a DSP, an SSP, or self-serve platforms, we prioritize modular architecture that presupposes the division of an application into smaller, independent modules. This makes apps more manageable and secure.

Challenge 2. Data Fragmentation and Lack of Transparency

Retail media networks need to deal with vast volumes of fragmented data silos. As a result, advertisers may find it challenging to get a holistic view of performance across multiple retail platforms.

One of the crucial tasks is to organize proper data management. However, there can be difficulties when working with customer data accumulated by different tools. Different networks might have varied reporting standards, leading to disparate and non-comparable data.

Possible solutions

For retailers, investing in data aggregation tools such as CDP/DMP could be a good idea. They can integrate data from different sources into a dashboard for clearer analysis.

Despite the existing competition, it can be helpful to collaborate with other retailers to exchange data. The introduction of standardized metrics will facilitate data exchange between different platforms.

Challenge 3. Pricing Concerns and Feasibility of Investments

The introduction of retail media technologies can be expensive due to limited resources for implementing new technologies, especially for small and mid-market retailers. This can become a severe barrier for them.

Also, measuring the actual return on investment of retail media campaigns and, consequently, the ROI of the retail media solutions can be challenging. All this can make the process of defining pricing for retail media services difficult as well.

Possible solutions

To better understand the possible costs and feasibility of launching various AdTech and retail media solutions, you can establish cooperation with an AdTech agency. Such companies can provide you with consultancy services, estimate the possible cost of your project, evaluate its ROI, and help you find a solution that will correspond to your budget.

Challenge 4. Competition from Established RMNs and Retail Businesses

Major players like Amazon, Walmart, and Target dominate the retail media space. They offer advanced technologies, massive reach, and significant resources. Without any doubt, they can easily attract the attention of potential advertisers. Competing against these giants can look rather frightening for smaller retailers.

Moreover, we shouldn’t forget that the competition exists not only in the retail media space. It exists among retail businesses themselves. For example, mid-market retailers must compete with large businesses and global giants. Nevertheless, they can’t ensure the same scale and discounts offered by companies like Walmart or Amazon, and they can’t allocate the same budgets for marketing and technology. The pressure from other regional or local retailers worsens the situation.

When it comes to large retailers, it may seem that if they have strong market positions, they have nothing to worry about. Nevertheless, they still have to compete on the national and often even global levels.

Possible solutions

Smaller retailers can compete by offering targeted groups highly relevant to certain brands. It is especially valuable for specific audiences. Niche retailers can provide more personalized access to customers interested in buying particular products.

As a smaller retailer, you can also offer premium ad placements that are not available in the case of working with large players. For example, many brands may opt for sponsored promotions in weekly newsletters, personalized app notifications, or prominent in-store ads.

To attract the attention of potential customers, retailers can launch loyalty programs and various incentive tools.

As for large retailers, to stay competitive and survive in the market, they need to seriously think about the IT infrastructure and digital solutions they rely on. Many of them still use legacy solutions. It can be extremely difficult to process and analyze massive datasets to make informed decisions in such a situation. They can implement efficient data analytics and Big Data tools to manage their huge teams, logistics processes, and vast supply chains. These solutions will help to automate processes, minimize costs, and improve logistics.

Challenge 5. Data Privacy

Retail media networks deal with sensitive first-party data. And for retailers, it’s vital to ensure the relevant protection of this information. Any leakage or data loss can lead to serious financial and reputation damage for a company. Given this, it is not surprising at all that more than 70% of the respondents who took part in the 2023 Deloitte survey admitted that data security and privacy are among the top factors that prevent them from implementing RMNs.

Possible solutions

With the retail media growth, it’s vital to find powerful methods to ensure the required protection.  Already today, high-quality AdTech solutions are enriched with role-based access control, multifactor authentication, and end-to-end encryption.

When it comes to the solutions themselves, launching a custom, fully controlled data management platform (DMP) with modular architecture can significantly increase the level of data security.

Challenge 6. Balance between Ad Revenue and Customer Experience

Retail media ads can become a valuable revenue stream. Nevertheless, overloading a website or mobile app with many ads can negatively affect the customer experience. Poor ad placements, irrelevant ads, and slow load times can be reasons for high bounce rates and abandoned carts.

Possible solutions

Despite the fact that financial factors matter a lot, customer experience should be the highest priority. It is vital to place ads in such areas that do not disrupt the shopping experience. Moreover, avoid placing irrelevant ads, especially in critical conversion zones, like checkout pages.

It’s important to control the quality of ads themselves. They should be visually appealing and fast-loading.

A/B testing can be an efficient method to determine the optimal balance between ad placements and customer engagement. You can continuously adjust the ad frequency and positioning based on performance metrics.

Challenge 7. Efficiency of Ad Campaigns

Among the challenges in retail marketing, it is also worth mentioning the difficulties related to achieving high accuracy of ad targeting. For example, consumers may show interest in a product. But it doesn’t always mean that they are ready to purchase it. Given this, it is often hard to predict the right moment to serve an ad. Misunderstanding of consumer intent can lead to wasted ad spend and low efficiency of advertising campaigns.

Another factor that can result in showing ads to the wrong audiences or overly broad groups is poor segmentation.

Possible solutions

One of the best ways to address such issues is to apply advanced AI-powered audience segmentation tools. They can analyze vast amounts of data to identify micro-segments based on various factors, including real-time behavior, demographic, and psychographic data.

Implementing machine learning models is also recommended to analyze consumer behavior patterns and predict the best times to serve ads.

One more solution to consider is retargeting. This method presupposes showing ads to users who have already demonstrated their interest in particular products but haven’t purchased them.

Challenge 8. Scaling RMNs

While launching an RMN can be a difficult and expensive venture, its scaling can cause even more frustration. As the retail media network grows, managing more significant volumes of data and campaigns becomes more complex.

Meanwhile, increasingly large and mid-market retailers are entering this space. According to the abovementioned Deloitte survey, 64% of US retailers are considering the implementation of an RMN by the end of 2024. However, with all this, we can still observe a lack of interoperability between these networks. Many of them exist and function in full isolation, though their cooperation and data exchange with other RMNs can benefit them.

Possible solutions

To handle increased demand, retailers need to scale their infrastructure and operations.

That's why from the very beginning of working with retail media, it can be sensible to invest in scalable, cloud-based infrastructure, modular architecture, and programmatic ad tools. Moreover, continuous investments in technology, server capacity, and AdTech platforms will help to support higher volumes and ensure system stability.

Final Word: How to Overcome Challenges in Retail Industry

Retailers may face challenges when building and managing their retail media networks. These difficulties can be related to various aspects, from integrating technologies to ensuring a positive customer experience or competing with established players.

Nevertheless, with the correctly chosen approach, all efforts will pay off and bring benefits.

Focus on data privacy, ad campaign efficiency, technology infrastructure optimization, and balance between revenue and customer experience are among the most important things to do. This will help to overcome the existing obstacles and unlock the full potential of modern RMNs.