As Supply Chain Woes Persist, Retail and Media Collide

Retail media is at the top of many marketers’ minds as retailers amass huge amounts of ad dollars, chipping away at other platforms’ dominance. Distribution and marketing collide Traditionally many agencies went without access to merchandising data that can indicate when a product sells out. Sometimes, this disconnect led to advertisers allocating media budgets to promote products that didn’t exist. With new data available, conversations with clients are shifting—if they haven’t already—from how to manage a client’s media to how to impact its business objectives. Agencies with merchandising knowledge have an upper hand. “There's so many marketing agencies that might live in a silo, but they’re not impacted by logistics. So they're blind to supply chain issues,” said distribution company PCA Group’s president Piyush Golia. To facilitate a U.S. expansion, Caroline Thunstedt, CEO of Swedish beauty company IDUN, opened a warehouse in Long Island along with distribution centers stateside. Just before the pandemic, IDUN began working with PCA, which recently launched integrated marketing agency Sela, to manage both its distribution and its marketing initiatives. “The scope of work is actually quite unique,” said Thunstedt. The brand leader found several logistics companies that could do that job, but integrated distribution and marketing gave PCA a competitive advantage. Digital’s flexibility helps … most of the time Supply chain constraints, which also extend to a worker shortage that squeezes bandwidth in factories, upended traditional advertising channels too. A company that purchases magazine ad space might see ROI dashed if its product is out of stock when the issue goes live. Linear video buys, a part of the media budget typically set in advance at the Upfronts, also took a hit. Brands are still navigating these issues almost three years later. Prices on specific items were lower in January than they were during the holidays or during Cyber Week, said Sarah Engel, CMO at January Digital, an agency offering media, analytics and consulting services. She explained that lower prices directly correlate with products that did not make it to stores in time for the holiday. IDUN experienced those delays. Last fall, it launched a new mascara in Europe, but because of travel delays to the U.S., it had to modify its Facebook and Instagram advertising strategies. “We couldn't push this novelty in the U.S. at the same time as we did in Europe,” said Thunstedt. Clients are also holding onto the money they’d typically spend on linear video, said Christine Martino, executive vice president of national ad sales at Screenvision Media, which sells advertising screen space for movie theaters across the country. Martino said that some advertisers who predictably buy cinema spots at certain times of the year held off on the Upfronts last year, intimating marketers’ persistent doubt that their products will arrive in time for large buys to pay off. This, and an influx of digital activity during the pandemic, led marketers to move budgets previously bookmarked for linear TV buys or in-store retail media signage, into digital channels. “You have dollars coming over from linear into these new channels. And then you have dollars coming from formerly retail and shopper that are going to media. So you see a huge influx and change of where dollars are, aligned to that change in consumer behavior,” said Megan Pagliuca, chief activation officer at Omnicom Media Group (OMG). Digital’s inherent flexibility allows advertisers to be more nimble, sometimes. Other times, retail media's intricacies serve up problems. Sela found a correlation between inventory and media performance on one retailer's platform. When the client's product runs low, its campaign performance is crimped.“That's the sort of simplest correlation that happens—low inventory, warning, decreasing impression, decrease in clicks, decrease in sales,” said Brady Donnelly, managing director at Sela. Ultimately, this means that advertisers pay more for the clicks they do glean when the product is low. Donnelly provided data to Adweek to showcase the correlation. “For this particular brand, spend was kept consistent through the holiday period, during which inventory started at around 100 units and gradually decreased down to 15. Somewhere between 20 and 15 units, marketing spend starts to drop toward $0 even though, on our side, we’re pushing to maintain a consistent spend level—as in, we’re not reducing spend ourselves,” he said. Although he acknowledges the holiday period had an impact on spend deceleration, impressions on the platform fell from 31,000 one week to just 2,000 the next, suggesting inventory levels affected the campaign. If buyers opt to shut off campaigns for items low in stock to avoid that wasted budget, their campaigns suffer later, according to the director. “If we're the number one fragrance, and we run out of inventory, and we turn it back on, seven days later, we don't remain number one,'' he said. “We’re moved really far down the list. They update the list, I think, on an hourly basis. So by then, you're on a totally different page.” Clients expect media to work harder Issues like these mean that teams need to understand merchandising and SKU data that might have never been part of a planner’s job before. Agencies need to craft new strategies across disciplines including audience planning, activation and analytics. It even extends to ensuring that marketing technology and data are integrated correctly to make it possible to report results accurately. “The expectation is that media needs to work harder. It needs to impact the bottom line,” John Schorr, managing director of commerce at OMG told Adweek. “Now we are starting to have conversations with the sales teams, the retail teams and sales operations teams, as these internal silos client side are starting to crumble." How Cannabis Brand Kiva Turned a Supply Chain Snafu Into Artful Marketing