What are the watchouts for non-endemic retail media? And could it hurt UX?

When I hear the phrase, ‘Everything is an ad network’, I usually think of Uber. One reason is that media strategist Eric Seufert, who coined the phrase in a 2021 article, wrote a follow-up piece in 2022 that listed relative newcomers from outside the well-publicised retail sector, including the ride-hailing firm.

Uber had earned $141m in ad revenue back in 2021. By Q4 2023, the global advertising business reached a $900m revenue run rate.

But the other reason Uber comes to mind is that it was for so long thought of as the epitome of a digital product, one where the user experience was a differentiator. Of course, we know that UX isn’t a strategy in itself, and the user is also well aware that the ads are now a fact of Uber running a successful platform (they were a part of 2023 being the company’s first profitable year).

Leaving aside Uber Eats, I think of Uber ads as interruptive (as most digital ads are), and more so than the sponsored merchandising that has made retail media so successful. Look at Uber’s marketing webpages and you’ll see examples of journey ads from the likes of Kate Spade and Grey Goose Vodka. They are very nicely done, but arguably more annoying than the ads that appear when you search for ‘fizzy drinks’ in the Tesco app, for example (NB. I just did so on my phone and got a Tango Orange banner and some sponsored results from San Pellegrino and Pepsi Max Cherry).

However, as retail media grows, retailers too are experimenting with non-endemic advertising.

What is non-endemic retail media?

If you’re not familiar with the terminology, non-endemic when applied specifically to retail media is when the ads sell something not carried by the retailer selling the media space. This has been an option with Amazon Ads since 2022. Tesco is reportedly expanding in this area, too, and it is considered key to the continued growth of retail media.

It doesn’t have to only be about inventory on retailer.com either. Non-endemic advertisers can purchase in-store ads, as well as off-site ads online (for example, brands can use a retailer’s decoupled data via a DSP to target their own campaigns).

A recent trip to the cinema got me thinking about non-endemic retail media. I had parked my car in Manchester, was in a rush to make the start time of the film, and was using an app to pay for my parking spot. Upon purchase completion, the app showed me a screen which now included a display ad for a discount on a subscription to a lifestyle magazine. I found it hard to parse my gut reaction. There was a split second where I was anxious, because I didn’t recall seeing these ads previously when using the app and even this slight change in the interface made me want to check I had paid correctly. I had another split second where I got annoyed about losing a split second when I was in a rush. On the whole, I wasn’t perturbed, but I spent some time after the film wondering about how UX is prioritised in a fairly captive market (sure, I could park elsewhere but that would be inconvenient, or I could pay at the meter with card or cash, rather than the app, but that wouldn’t allow me to extend my stay remotely).

Anyway, how is this non-retail experience relevant to retail media? Well, the same type of non-endemic advertising on order confirmation pages and receipts has recently arrived in retail media. Grocery chain Albertsons has partnered with Rokt. Whilst supermarket shopping is very different to parking, the consumer choice for both often comes down to proximity (to their home and destination respectively).

So, what do retailers need to do to ensure the strategy succeeds, and in order to prevent any chance of customers grumbling when they see non-endemic ads?

The watchouts for retailers offering non-endemic retail media

Ensure relevance / audience overlap

Of course, non-endemic doesn’t mean non-relevant – otherwise, advertisers wouldn’t be interested in this inventory.

Consumers are complex. Gardening magazines might include ads for luxury cruises and, for those that stop and consider life on the open waves, the ad will be a benefit. Similarly, retailers will want to ensure they serve ads for products that suit their audience.

Hulu was a pilot brand for Albertsons, for example, and retail media SVP Kristi Argyilan told AdExchanger that, given Instacart is a delivery partner of Albertsons, those ads would be appropriate, too.

Work with advertisers that are data-driven

Argyilan also noted that advertisers need to understand their own data in order to make the most of a retailer’s first-party data. Hulu, as a subscription business, is a good example of a data-savvy advertiser.

Understand shopper context / shopping stage

Context is vital. In print magazine advertising, the consumer is in lean-back mode, reading. With retail media, the customer may sometimes be leisurely browsing, but they may just as well be rushing to get their shop done.

Serving non-endemic ads in the wrong place is not a mistake a retailer is going to make easily, given these advertisers are not ‘closing the loop’ as such.

In the case of Albertsons, this is why they have begun by adding non-endemic ads in post purchase. Here these ads are less likely to get in the way of the shopper filling their basket. However, this still highlights the need for relevance. The peak-end rule suggests that we remember an experience based on its peak and its end (rather than the sum of the experience) – that could mean a shopper remembers being delighted by a good offer in the course of their shop, and then slightly confused or irritated by an irrelevant ad after they check out. Making this post-purchase communication as inviting as possible is key.

Don’t host competitors

A fairly obvious point, but an important one.

Conclusion – it’s all about understanding the shopper

There’s no doubt that non-endemic advertising can slightly tarnish a slick experience if the ad doesn’t land (in the case of my super interesting parking anecdote). Non-endemic ads are by definition slightly incongruous, and so there needs to be even greater striving for relevance, to include an ad for something the shopper is interested in.

And retailers do need to be conscious of shopper ennui in the face of more ads, offers and t&cs. Marks and Spencer offers such a great customer experience in grocery in part because of the coherence and harmony in its relatively brand-free offering. Yes, it has offers and promotions and a loyalty scheme but arguably is less ‘noisy’ in that regard.

However, we shouldn’t assume that the promise of ad revenue is going to take retailer eyes off the ball when it comes to user experience. Similarly, parking enforcement officers aren’t about to start including coupons when they hand out penalties.

Because when done right, non-endemic retail media can still work for every party involved. Shoppers want a deal, now more than ever, and that doesn’t just apply to their weekly food shop.