Personalization Is an Overused Buzzword. This Is the Real Future of Ecommerce. Retail media is embracing a model that lets sellers and brands use first-party data to build authentic relationships — and it will change ecommerce forever.
By Joshua Kreitzer Edited by Kara McIntyre
Opinions expressed by Entrepreneur contributors are their own.
If you have trouble remembering when ecommerce wasn't a thing, congratulations. You're normal. Still, the environment is developing as we speak, with retailers now building their own ad platforms.
The industry's future is using first-party data within these platforms — without compromising customer privacy — to provide a more connected consumer experience and improve advertiser returns. But, to know where we're going (and why it's so impressive), we need to know where we've been.
Related: Forget Third-Party Data. You're Already Missing Out on Most of Your First-Party Data
Ecommerce was once the Wild West
If you could get inside a time machine and set the controls to the start of the dot-com era, you'd only begin to see the seed of modern retail media sprouting in the fresh soil of the Internet. Back then, Amazon and Paypal were babies. Most companies exploring the new digital landscape were "pure-play" like Newegg.com — no physical stores involved. Then, in the late '90s and early 2000s, physical big-box retailers started creating their own dot-coms. Think Walmart.com, BestBuy.com and Pets.com.
Let's say you were a brand or seller who wanted to advertise with pure-play or big box companies. They were game — for the right price. You'd cough up thousands of dollars in market development funds (MDF) for things like homepage banners or email blasts. The company would put your logo on its website, and if the stars aligned, your sales would go up.
The data inherent to this pay-to-play landscape was so barren that you'd be lucky to see a tumbleweed in return for your funds and partnership. Forget modern marketing tools and metrics like sales return reports, impressions, click-through rate (CTR) or shopping behavior. And without those, good luck tracking your return on investment (ROI) efficiency.
Around 2007, the saloon doors swung open. In walked programmatic marketing and Adzinia Media Group (the forbearer of Amazon Ads), which allowed sellers and brands to use automated processes to buy ad inventory. But it wasn't until 2012 that advertisers started getting data from these services. The breakthrough came in 2016 when Amazon, Triad Media Group, Criteo and a few others introduced relevancy guardrails and performance metrics.
Related: The Premium Inventory Opportunity Amid the Retail Media Surge
Personalization brings some law and order
With big-box companies finally able to leverage consumer data, things in the digital Wild West started to get a little more civilized — or, more accurately, personalized. The goal was to use consumer data to provide an optimal, tailored experience.
Major retailers developed tools to drive traffic to their websites and stores using their first-party shopper behavior data. Walmart, for instance, created Walmart Connect, while Best Buy used Criteo. Both companies used The Trade Desk for programmatic display advertising. With these tools in hand, advertisers could "buy" online space and get some level of performance metrics.
The catch? Sales still closed through the larger retailer. The brands could feature their products with badges or other verification from the retailer, but their own branding was about as visible as rocks in a bucket of mud. All the traffic went back to the retailers' sites, not the brands'. In the same way, any physical ads sellers purchased within these retailers' brick-and-mortar locations drove consumers right back to the big-box stores.
Related: The Premium Inventory Opportunity Amid the Retail Media Surge
Let's finish taming the town
Today, we're entering yet another period of refinement for advertisers. As laws around tracking consumer data evolve to favor privacy, and as the ability to use third-party tracking is dying, "personalization" is an overused buzzword.
The new approach — which is critical when you think about the volume of products, brands and sales channels we're seeing today — is connection.
Retailers understand they have to work with larger, more general audiences. (Superbowl, anyone?) Now, success means ad content that focuses on emotional attachment. It doesn't matter who the audience is, only that they can relate to the message and that it stokes affinity to the brand.
This focus on emotion makes a huge difference. A study found that customers who had both a positive emotional connection and overall satisfaction with an investment firm were six times more likely to consolidate their assets with that firm than those who were just satisfied.
Advertisers who combine emotional connection with retailer first-party data will literally change the media landscape.
Amazon, which possesses tons of data through publisher properties like Twitch and FreeVee (formerly IMDb), leads the pack in this new method. They're opening their platform to serve ads off the Amazon website. Although you can still direct buyers to close a sale on Amazon, if you're like most brands, selling directly to the consumer is probably more profitable than paying a fee. If you sell a product on Amazon and have a website, they can help drive traffic to your dot-com and close the sale there. If you can do that, guess what? You can now collect shoppers' email, shipping and other data to connect with buyers.
Related: How to Build on Your Digital Marketing Momentum in 2023
Revolutionizing the digital skyline
Now, imagine being able to hash your own first-party data from your ecommerce site against the retailers' first-party data. Imagine leveraging it to identify audiences with high affinity for your brand who haven't pulled the trigger and purchased. That's what the future looks like as it evolves to embrace a model benefitting retail media companies, sellers, brands and consumers. The rise in commitment to consumer privacy means leaning on this information to offer buyers security in their transactions.
As retailers prioritize connection over personalization, nothing stands in the way of leveraging first-party data to build stronger, more direct customer relationships — with actionable measurement. First-party data is transforming media and ecommerce, offering a fun, data-driven ride for those prepared to take advantage of it.
