Why First-Party Data is the Goldmine of Retail Media

Retail media is all about understanding your customer base and providing them with retail information that they will find interesting. Therefore, it shouldn't come as much of a surprise that first-party data is invaluable for retail media. But, while most of us have a basic comprehension of how useful first-party data is, few understand the full scope. This is why some retailers choose to still rely on third-party data as a more accessible alternative. Well, to see why this is a short-sighted move let's take a deeper dive into why first-party data is the goldmine of retail media.

What makes first-party data so useful

First-party data refers to data that you collect directly from your customers. This is to separate it from third-party data, where an outside agency gathers data and sells it. While third-party data is often quite robust, which makes it useful, it tends to lack focus. Through it, you'll learn a lot about a certain demographic. But how much of what you learn is applicable to your retail media content is questionable.

Modern data usage requires that you not only use data but update it on a regular basis. Third-party data, while easy to get, is not open to updates (at least not easy ones). This is one of the main reasons why third-party data isn't enough for retail media and why gathering first-party data is paramount.

Accuracy

Another reason why first-party data is paramount is its accuracy. Namely, while you can get a lot of third-party data from an outside source, its accuracy is often hard to verify. Even if they can provide certain guarantees, you can never be sure how much of the data gathered is up-to-date and properly gathered. None of this is an issue with first-party data. Even though it can be more difficult to gather, you can rest assured about its accuracy and reliability. After all, you are the one who gathered it.

This relates to retail media in various ways. Firstly, it allows you to curate your content to properly fit your customer preferences. As you'll soon learn, customer interests and preferences are not set in stone. They are prone to robust changes and on a fairly regular basis. To keep up with these changes a retailer cannot rely on third-party data. Instead, they need to gather and analyze first-party data.

Improved customer retention

An often overlooked aspect of first-party data is that it allows you to identify at-risk customers. These are customers that show certain signs like:

• Not shopping in a considerable amount of time.
• Leaving their shopping carts with items in them.
• Scrolling through new content without making a purchase.
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By analyzing purchase patterns, retailers can identify at-risk customers and re-engage them with targeted offers or personalized messages. One of the best ways to reinvigorate the interest of these customers is to offer something that they find interesting, at a reduced price. This show of care can go a long way in securing their winning loyalty.

Speaking of, keep in mind first-party data empowers loyalty programs by tracking customer purchases and rewarding repeat behavior. For example, offering points, discounts, or exclusive access to loyal customers. There is also the aspect of brand loyalty, which is a bit different from customer loyalty. But in both cases, first-party data goes a long way in improving retailers standing.

Better ROI on content

Content creation in retail media is by no means cheap. Especially if we are talking about quality content. Modern customers tend to expect high-quality, visually rich content that offers both something new and informative. And all that visual richness and information needs to fit in a 15-second window. As such, it would be a waste if all that hard-made content didn't reach the right audience. Well, the best protection against this scenario lies in the proper use of first-party data.

First-party data enables precise audience segmentation, allowing you to run highly targeted campaigns. By targeting only the most relevant audiences, you can minimize wasted ad spend and maximize ROI. The beauty lies in the fact that you can gather first-party data while running these campaigns, thus refining your content. Over time, this ensures notably better content performance and customer engagement rates. Furthermore, it allows retailers to better tackle Customer Lifetime Value (CLV). Only once you know who to engage and with what content to engage them can you look to build a relationship and ensure that their CLV is as high as possible.

Competitive advantage

There is no hiding from the fact that first-party data is difficult to gather and properly use. Setting up the necessary systems, making the right decisions, analyzing the gathered data... All this takes time and effort. This is why even now most retailers still rely on third-party data. Well, for the more ambitious retailers, this presents a unique opportunity. Unlike third-party data, which is available to competitors, first-party data is unique to the retailer. This exclusivity provides a competitive edge in understanding and serving customers better.

Even now, customers will perceive a notable difference between retailers that leverage first-party data and those that solely rely on third-party data. Retail content based on third-party data often seems to be generic, even when it is targeted towards a specific group. Meanwhile, well-made retail media based on first-party data is anything but generic. This enables retailers to create a superior customer experience that competitors cannot replicate.

Integration with other data sources

Another thing to keep in mind is that having first-party data does provide a certain leverage when it comes to partnerships and cross-promotions. Namely, retailers can partner with complementary brands to share first-party data. This can enrich your understanding of customer behavior and bring a new platform to engage with customers. In most situations, having quality first-party data will be a great bargaining chip, and can enable you to have a far better deal than you otherwise would. Just make sure to first get customer consent.

Another thing to keep in mind is that, while first-party data is the foundation, integrating it with third-party data (e.g., demographic or geographic data) can provide additional context and insights. While not as accurate, third-party data can hold some valuable information. This is especially true for a retailer that doesn't have a lot of first-party data to work with.

Lastly, you'd be smart to look for ways of combining online and offline data (e.g., in-store purchases, app usage, and website behavior). By doing so you can create a more unified customer journey, enabling seamless omnichannel experiences. And you can get fruitful information for your retail media which you can use to enhance the shopping experience of both the online and offline store.

Unlocking new revenue streams

Retailers are often surprised at how many ways there are to monetize content. And while publishers are well-versed in different ways one can monetize content, retailers still prefer to still only rely on sales. Well, besides the one used by publishers, retailers can monetize their first-party data by creating retail media networks, where brands pay to advertise to the retailer’s audience. A great example of this is Amazon Advertising and Walmart Connect. On a smaller scale, retailers can leverage first-party data and offer highly targeted ad inventory. This can attract premium advertisers willing to pay more for precise targeting.

Practices for leveraging first-party data

While first-party data is incredibly valuable, retailers must address certain challenges to maximize its potential. The complexity of data gathering and utilization is something that needs to be addressed from the start in order to avoid future headaches.

Data integration

Firstly, ensure data is integrated across all touchpoints (e.g., website, app, in-store) to create a unified customer view. Different touchpoints can provide surprisingly different information. If you don't have a unified data set, it can be surprisingly difficult to make quality decisions.

Regular updates

It should come as little surprise that you need to regularly clean and update data to maintain accuracy and relevance. This, after all, is the only way to ensure that your data is suitable for market use. It is also a good practice to have regular data reviews where you go over what you've come up with and determine what the best course of action is, both for data gathering and retail media as a whole.

Investment

As we said before, quality first-party data doesn't come cheap. So, instead of trying to minimize your expenses, we would advise to look for ways to make the most out of them.  Invest in tools like Customer Data Platforms (CDPs), AI, and analytics to effectively collect, analyze, and act on first-party data.

Compliance and privacy

First-party data is collected with explicit customer consent, ensuring compliance with data privacy regulations like GDPR, CCPA, and others. Any deviation from these regulations puts you at considerable risk of lawsuits and fines. So, do yourself a favor and study how to make your first-party data safe.

On that note, it is important to understand that retailers can only build trust by being transparent about how customer data is used and offering value in return (e.g., personalized experiences or exclusive offers). So, if you choose to gather data from customers make sure that they are fully aware of how you plan on using it. Younger demographics are acutely aware of how important data safety is, which is why transparency is the best policy.

Final thoughts on why first-party data is the goldmine of retail media

First-party data is the cornerstone of modern retail media because it provides actionable, accurate, and privacy-compliant insights. With it, retailers can create personalized experiences, improve customer retention, and deliver measurable ROI. As the retail landscape evolves, retailers that prioritize first-party data collection and utilization will be better equipped to thrive in a privacy-first, customer-centric world. Furthermore, as AI evolves, so will the data-gathering and personalization capabilities of retailers. By treating first-party data as a strategic asset, retailers can unlock their full potential and cement their position as leaders in the industry.