Forecast: Retail media ad spend at $122bn in 2023
December 14, 2022
A sustainable e-commerce strategy has quickly become integral to winning across online and offline platforms. In 2023 and beyond, e-commerce will not just be a section of the retail picture, but a defining element of its composition, according to WARC’s Future of Digital Commerce report.
Gregory Grudzinski, Head of Content, WARC Digital Commerce, said: “In the past few years, in large part a result of the Covid-19 pandemic, the retail world has irrevocably transformed with e-commerce shifting the way consumers shop and becoming essential to the retail ecosystem. Retail media is now the fourth-largest advertising medium, per WARC survey data, and will see a 10.1 per cent increase bringing its ad spend to $121.9 billion (€114.5bn) globally in 2023. Heading into next year, we’ll see retail media networks becoming an essential part of marketing strategies and heightened experimentation in social commerce. This report will help marketers identify and focus on key areas of disruption, determine the most effective strategies, and benefit from arising opportunities in the digital space.”
The Future of Digital Commerce report, part of WARC’s annual Marketer’s Toolkit, explores the intersection of marketing and commerce by examining the future of digital commerce as it relates to brand marketers, their agencies and their retail partners. It deep-dives into three key areas: Retail Media, Organisational Readiness, and Social Commerce.
- Global Retail Media ad spend is projected to increase 10.1 per cent in 2023 to reach $121.9 billion
Retail Media is now the fourth-largest advertising media. Ad spend has more than doubled during 2019-2022, overtaking audio, OOH & cinema, publishing and OTT/streaming, according to WARC survey data. If the retail media industry follows its current path, it will become more valuable to advertisers than linear TV by 2025.
Retail media networks are growing in both number and importance and will be playing an outsized role in the shaping of Digital Commerce. Growth of retail media is positioned to do for the 2020s what search powered digital advertising growth did for the 2000s and social media did for 2010s.
2023 will see a step change in the competition in retail media. Brands will need to go beyond understanding the platforms, to mastering how they can use them to connect with consumers.
Ryan Monigan, VP Insights & Strategy, WhyteSpyder, said: “Winning in digital commerce will mean gaining a better understanding of how your shopper navigates the site. You’ll need to move consumers from their actual path to the desired path, and calculate what level of investment is needed to make that happen.”
Patrick Miller, Founder Flywheel & Co-President, Digital Commerce, added: “I think of this emerging space as more than retail media. It’s closed loop media that allows consumer brands to deterministically see the value they create via media investment across the full funnel. This is a bar raiser for the industry and might just decouple from Gross Merchandise Value (GMV) growth.”
- The growth of retail media has led to a shift of organisational structures
Brand owners are breaking down silos and evolving legacy staffing models to reflect the expertise, experience and flexibility needed to win in the dynamic, ultra-competitive digital commerce space.
More brands are shifting to a more ‘decentralszed’ approach to their organisational structure by incorporating e-commerce across their organisation, rather than as a separate, siloed section of their business.
As brand and trade budgets pour into retail media there is an increased need for the alignment between e-commerce and marketing teams. However, the challenge is not just bringing people together, it’s ensuring the metrics and KPIs they share are correct and optimised.
Jacqueline Baker, Chief Experience Officer, VMLY&R, said: “This new ever-expanding and complex (retail media) landscape can unfortunately be challenging to navigate, not least because it has converted retailers into accidental publishers.”
- Social Commerce is expected to reach $660 billion globally and $80 billion in the US by 2025
Driven by high rates of mobile penetration and demographics with an affinity for social media, social commerce is expected to reach $660 billion globally by 2025, up from $295 billion in 2021, according to data from SJC Marketing.
In the US, social commerce is expected to grow to make up more than 5 per cent of e-commerce sales at nearly $80 billion by 2025, according to a report from McKinsey. While in Southeast Asia, where social media is the primary channel for new product discovery, consideration, set building and product research, social commerce accounts for nearly half of e-commerce sales.
Brands are increasing their spend on platforms such as TikTok, Amazon and Instagram. 76 per cent of respondents to WARC’s Marketer’s Toolkit survey, indicated they intend to increase investment in TikTok in 2023, compared to only 44 per cent who intend to increase investment in Amazon.
Conny Braams, Chief Digital & Commercial Officer, Unilever, commented: “As the Influencer landscape has exploded and matured, the number of opportunities has grown within it. For example, social commerce continues to evolve, fueled by influencers. With increasing comfort around shopping via platforms, brands can now use social commerce to obtain immediate consumer insights and use those conversions to more easily measure ROI.”