Why separation of retailers and their media estates is so crucial
Greek storyteller Aesop has a famous fable of which I’m increasingly reminded in the world of shopper and retailer media. It describes an argument between the north wind and the sun as to who is stronger. They decide to settle the matter by competing to see who can strip a passing traveller of his cloak. As the wind howls powerfully, the traveller wraps his coat closely around him. Whereas the sun gently shines upon the man, gradually becoming warmer until the traveller removes his cloak to soak up its rays.
It’s an apt narrative when looking at the current state of play within retailer-owned media estates. When brands invest in media that is owned and operated by the retailer, there’s an evident conflict of interest. When commercial terms are reliant upon brand spend, the retailer quickly embodies characteristics of Aesop’s north wind.
Too often, retailers tell brands they must commit to a certain level of media spend. That’s despite brands taking on the role of customer in this context. Retailers don’t tell shoppers they’re bound to spending a specific amount in store on specific products or else they can’t shop, so why do this to brands?
It is easy for things to become stagnant in this environment. When there’s minimal risk to incoming business or revenue for a retailer-owned agency, what have they got to lose?
There are some positives. It’s this precise competitiveness and commercial-mindedness that keeps independent agencies on their toes, knowing all too well that at any moment brand spend is able to be taken to a number of competitors. It keeps ideas fresh; it keeps employees engaged and it ensures that all spend is spent in such a way as to maximise effectiveness.
But it also highlights why separation of retailers and their media estates is so crucial. Media should be purchased on the basis it’s the most effective channel.
To attract marketing investment, retailers need to make it a positive investment choice. They need to prove to brands that their spend is worth it and to do this there needs to be a level of independence to maintain honest and accountable work. As we slide into recession, marketing managers have never had their decisions more scrutinised when it comes to marketing spend. So the historic model utilised by some retailers, who demand that a minimum incremental spend from brands increase year on year, is quickly becoming defunct.
In this environment, it’s only a matter of time before brands start to tighten their coats more than ever. The longer retailers and their owned agencies act like the wind, the less the industry can grow and improve. And the more brands will head elsewhere in search of some warmth.