Retail Fluency — Claudia Johnson — Flywheel Commerce Network

S2 E21 T42 - Flywheel - Claudia Johnson Introduction to Today's Episode [00:00:00] Tom: Welcome to the Middleman. Today's, episode's gonna be a fun one. It's Claudia Johnson from Flywheel Digital. Understanding Flywheel Commerce Network Todd: Flywheel digital for everyone who is listening, especially if your sell side is. Kind of like the mediacom of retail media. They and shopper marketing, they control a huge amount of dollars and manage, spend for a number of brands across the retail media and shopper, uh, marketing landscape. And so what they say matters. Todd: And if you're really, for all, for those of you on the sell [00:01:00] side and you're not familiar with them. Listen in because this is gonna be a great, way to learn and understand their roots and how they are really plugged into the sell side ecosystem. Todd: Amazon, Walmart, target, and others. And they start out with a lot of hardcore retail people. They're really trying to focus on understanding that ecosystem, so they're not a someone who came from the media world. They're people who grew out of the retail world and came to really dominate spend in the space, starting with shopper marketing and then getting into retail media. Todd: Now on the brand side, . Retail Media Networks vs. Marketplaces Tom: Yeah, and the distinction that you'll hear in the episode is that there are retail media networks and then there are just the marketplaces themselves. So Amazon as a whole is a marketplace. Walmart has a marketplace target. Now a Target plus has a marketplace and that marketplace. Acts in different ways and requires different tools. Tom: And flywheel is really one of the, the companies out there that supports a lot of that complexity. So it's, you know, they [00:02:00] acquired companies that built the PDP pages and, created the entire, set up so that you really look at the marketplace or even the retailer as a publisher. Tom: Um, and so that part of it I think will be an interesting, thing for us to work through with, with Claudia because, we always talk about the retail media networks retailer as publisher. Um, we don't really talk about their actual pages , and the mechanisms and levers of, of how they, they do business. Todd: Uh, and I think it's important, right? She's a good anecdote that talks about the important, the realities of the retailer systems. And we've touched on this, you know, over the last Tom: Yeah. Way back a year ago. Importance of Retail Specific Systems Todd: about the importance of retail specific systems. And like Xavier talked about this, right? Todd: In terms of, of. If you don't speak the language of retailer, you're gonna struggle. As in, in retail media, that's still a world. It's not straight publishing. It's very different. PDP is a good example, right? That is the heart of a retailer's site. And as a someone who's either selling ads that show up on that page or trying to [00:03:00] buy traffic through that page, like understanding what that means is really critical. Todd: The other thing that kind of drops is when she names kind of the, the, the most important. Retail media platforms or retailers that Right. Obviously number one will be Amazon. Number two is Walmart. But her number three, interestingly enough, a plug for former guest Mark from Costco was Costco. Todd: And, um, she has a nice ask for Costco, what she wants, um, whether Mark can, can get permission to deliver it. It'll be fascinating to watch, but I think that's interesting in terms of, right. I'm not sure I've ever heard Costco said by someone else is the number three Tom: Well, yeah. Todd: the same breath as the first two. Tom: Well, I think, you know, the message that she is bringing is if you're a retail media network, you have to have your own special sauce and she'll, she talks about Dollar General and she talks about Costco and there are certain retailers out there that really serve specific needs, specific geographies, specific types of customers. Tom: And I think Costco services a lot of people, but it does it for a [00:04:00] specific need, which is, you know, the huge stock up. As you get deeper and deeper into retail media, yes, the bulk of things might be going through Walmart and Amazon, but if you're, a beauty brand, you're gonna really care about Sephora or you're gonna care about the store, in store at Target for, uh, you know, CVS and, and things like that. Tom: So. For the real practitioners? Yes. , Every brand has probably one or two other retailers that are super important to them just because of the, the brand index of their sales. Todd: And I think what's different from publishing world to retail media is. That tail of retailers is absolutely important. But given they have the consumer records, the consumer information, they can really prove the transaction, they can prove their audience, they can prove how it's unique. Todd: Whereas long tail publishers had to kind of hope and pray they had some good third party data representation, maybe tracking in a Nielsen that was never that great. And so with a retailer, I think it's almost you, you can succeed as this long tail in a [00:05:00] way that Tom: Yeah, Todd: was always a little bit of a stretch. Tom: smaller retailer doesn't mean bad retailer 'cause you're still buying stuff there. Todd: Exactly. There's real transactions, real consumers with real verifiable data as a part of that. And honestly, as retailers that we've worked with like Microcenter that have just a passionate fan base in an insane way. And there's connections that, that people have that I think are really interesting from a retailer standpoint. Todd: Like she talks about DeeGee and they have a very specific area of stores where there are no other retailers. Therefore DG is the only way to reach that, that consumer in that environment, and I and just, or like Microcenter has unique inventory Todd: And so is even if you're a long tail re retailer, you're gonna have the opportunity to sell something that is unique. Tom: yeah, and, and it has a media implication too. It's not just the retail because, when I was at Quotient, we ran the, the DG network for them, and so. The, the real sell was that here are ways to get [00:06:00] people outside of the DMAs. So like if you're a media buyer, and it's always been about, oh, what are the top DMAs? Tom: Dgs? Were in all of the non DMAs, it was all rural communities. And so how do you reach those people? Well, the normal, typical media buying model broke when you tried to get to those people. So yeah, lots and lots of interesting stuff. Um, I hope you guys really enjoy it. Claudia Johnson's Background and Journey Tom: We are here with Claudia Johnson, who is the tech advisor to the CEO at the Flywheel Commerce Network. Um, she came to us, our friends over at the CPG guys, uh, made an intro and , in our , early discussions, we found a lot of common ground in our, uh, our backgrounds and history. Tom: , I'd love for you to make a little bit of an intro to yourself, and let's talk about some of the stuff that you've done. Claudia: Yeah, absolutely. Hi, and um, thanks for having me. , Like you already said, I'm, I'm the tech advisor to our CEO. So, uh, that's over top of the, the platforms business that runs [00:07:00] everything that we do at Omnicom as well as our commerce business, which is where we tell media and shopper marketing are. And, I kind of ended up in e-com by accident. Early Days at Target and E-commerce Challenges Claudia: I actually started at Target, and this was quite a while back when they were on Amazon's platform. Which is probably why their item numbers are called Tsin, which is very similar to ASINs. I have some trauma that probably isn't fully unpacked of begging Amazon engineers to get homepage placements live, um, which is always a bizarre place to be. Claudia: But my favorite story from that time, and I, I couldn't find the PowerPoint, but it might be somewhere, um, is there, I still have this presentation somewhere that says Amazon. Is it a competitor? Um, and certainly that has not aged well because it is indeed a competitor. Um, but it just kind of speaks to the, the time we were in. Claudia: And so that's Todd: I mean, in fairness, like that wind era, and I was saying beforehand, I, I live in Seattle, so Amazon, [00:08:00] Amazonia and a, a friend of mine, a former coworker, was the sales guy who sold that deal to Target. Claudia: really? Todd: And it's sort of fascinating to see. Like I remember that deal got sold and it was the beginning of Amazon as a platform. And, you know, they, they were not the world's largest retailer by any stretch of the imagination at that time. And so it's your, to your point, I always thought the same thing. I couldn't believe that Target and other big retailers were like, I certainly saw the future of Amazon as a competitor. So I sat there as a. Todd: Nobody in this world and, and years before I got into retail media and what have you. And so it was this interesting era of like really. And then obviously that lasted, what, three years? And then Target woke up and said, what the hell are we doing? Talk about letting the box into the hen house. Claudia: Yeah. Yeah. And that was a pretty quick turn and we had a big project to kind of ramp up our own website. Um, but you know, in some of our conversations prepping for this, like, that's kind of what got me stuck into e-comm because when [00:09:00] you're moving so quickly and growing so fast and, and Target obviously is its own extreme. Claudia: Version of that because we were building our own website and, and growing very quickly. But there's tons of opportunities. So if you have the personality where you're curious and you're willing to kind of go into new different spaces, there really is no limit to what you can get yourself into. Um, so I mean, I did everything from helping build site taxonomy to traditional, you know, business analyst work, like making forecasts, et cetera. Claudia: Um. Taking pictures for products so that it's live on the product detail page, like it, it really was the full range of tasks because it was all hands on deck. I think we had, when I was there, I had toys, sporting goods, outdoor and luggage, and the equivalent on the store side. There were dozens of them, but there was one of me. Claudia: Um, so it was, it was wild times for sure. Transition to Kimberly Clark and Supply Chain Insights Claudia: Um, and then after I left Target, I ended up going to [00:10:00] Kimberly Clark, so moving from retail to manufacturer. And at that point there was no e-commerce team. Um, so I actually ended up in supply chain Claudia: and at the time it felt like a detour. But in retrospect. That was a really, really productive, uh, place for me to spend time. Kimberly Clark is wonderful in their supply chain department and they spend a lot of time, uh, with lean manufacturing in particular. So you really build up those muscles of simple problem solving, and it's kind of ingrained in how I think now. Claudia: Um, plus it's just great to know how logistics work and, and how cases actually get from door to door, uh, especially in an e-commerce world. So I started there at Kimberly Clark as soon as an opportunity came to support e-commerce growth. So Direct Vendor Ship started to ramp up with Costco and Target. Claudia: Um, it was basically a channel manager position, so you're sitting between marketing and the sales team and helping translate the needs of that channel, um, to make sure you get proper support. [00:11:00] And then my husband was also at kc, so we were lucky enough to move together over to Italy. He ran the paper business in Italy and then I worked across EMEA helping ramp up our e-com business. Claudia: Um, and that also. Like ear early days for some of those, those countries and platforms. Um, very similar lineage of, of target days where it's all hands on deck. I, at one point I was writing content in German, and I don't speak any German, but you're just like, this is what we're doing today, and you have a native German speaker review it before it goes out. Claudia: But I did, you know, EDI, ramping up, I ended up learning about the tax nexus and how many countries you have to touch in order for it to be legally viable. These are all things that I had no idea what I was doing. Um, but it was great learning. And then probably my, my favorite story from the Italy Times, uh, kind of speaks to the complexity of the marketplace. Claudia: And, uh, [00:12:00] early on we were working. Uh, actually in the uk and we were having really hard time staying profitable in the uk, which is tricky anyway. Um, and we couldn't figure out why, like where the price matching was coming from. And after a bit of investigation, we actually found out that the root cause was the south of Italy. Claudia: And it wasn't even on like e-commerce, it was the distributor network. Uh, and they have something in Italy called Sotto Costo, which means below cost. So basically they were giving, you know, 80, 90% trade rate to these Italian distributors that was making its way on Amazon, Italy, and then, then getting it to the rest of emea. Claudia: Um, so kinda wild times, not very tidy. Tom: it reminds me, and I think for our listeners who are strictly in the media space, from publisher to publisher, you know, there's definitely, you know, ad server, ad server, there's always issues and things like that. But when you get into physical goods and you go country to country, even state to state, sometimes there's some real wacky [00:13:00] things. Tom: Like in my experience, when you talked about EDI, it gave me flashbacks of my time at Unilever in China Unilever was there at the time when they acquired best foods, which meant they had like lip and tea and lip and tea in China. First of all, it's a little bit of coals to Newcastle trying to sell tea to China. Tom: Um, the second thing there though was that we were being undercut by the tea merchants and we're like, how does, how does this even happen? And they're like, well. Leaf tea merchants have really high margins, and so they were figuring out ways from Singapore or Southeast Asia to pull in Lipton tea, uh, below cost. Tom: And we, you know, Sotto Costo. So it's same, same idea. Um, but it can wreak havoc on, your pricing strategy and all the things that you're trying to do. So, in, in the retail media world, you know, the, the trade. People who see all these like challenges in in media and they're like, oh, look how crazy this is. Tom: There's some crazy things in the trade world too. Claudia: Oh, a hundred percent. And I early days, you know, e-comm got a lot of blame in those situations, [00:14:00] but I always used to say E-commerce is just the giant microscope. On what already existed, like should you have a 90% trade rate in any class of trade? Probably not. Like that was probably an antiquated decision that needed to be upended. Claudia: Um, but e-commerce is the thing that put it into the spotlight and made you have to deal with it. so that was Kimberly Clark. Great, great experience. And then, um, to, to get a little bit personal, I'm obsessed with my grandmother. She's since passed away, but when we lived in Italy, I was like, we, we've gotta get back to where grandmother is. Claudia: So we literally drew a circle around her house that was like a three hour driving radius, um, and started talking to recruiters to come back to the states. My husband ended up at Bridgestone, which is in Nashville, and then I started at Flywheel. Joining Flywheel and Initial Concerns Claudia: Um, there were some former colleagues that I had worked with at Kimberly Clark who went to this startup. Claudia: I think at that point it was sub 50 people. Um, and quite frankly, I was a little bit nervous [00:15:00] because I had only ever worked for a huge corporations, and my first questions were like, do they make payroll? Is there, is there health insurance at this place? Like Todd: By the way, working with startups, that's a legit question. Claudia: Well, yeah, and, and I had children, you know, I mean, obviously my husband worked, but so I ended up making the jump and I'm very happy that I did That was, um, pre ac the pre-first acquisition. So we first got Tom: time? What time period would this be? Claudia: oh gosh, you're, you're quizzing me now. My oldest was three, so, and now she's 12. Todd: So nine years ago, Claudia: Yeah. Nine. Nine Used nine, two. Todd: ish. Claudia: Yes. Flywheel's Growth and Acquisitions Claudia: Um, and that was, so we've been acquired twice now. Um, that was about three months before we got acquired the first time by a British company called Ascential. And Ascential owns some pretty big names. They have Cannes Lions, which most people in our industry obviously are aware of. Claudia: Um, WARC, [00:16:00] which is another big one. And then some really cool products, um, that do like trends forecasting. Um, there was a funny story where, uh, they actually had forecasted those big chunky white sneakers coming into trend. And I was like, I didn't know I had someone to blame for these Dino sneakers, but it's a pleasure to meet you and what have you done? Claudia: Um, so they had a pretty diverse range of products, but over the course of several years, Duncan, who is, is my boss, that's who I advise. Um, he acquired a host of businesses that allowed us to scale globally, but then also across the different levers that were necessary for commerce. So we had a market Retail Media's Evolution and Challenges Tom: that I, yeah, before you go into that, so the reason I asked you when was this is because that was kind of the time when Amazon was starting to do sponsored search and really paving the way for retail media. So Claudia: Yeah, yeah, Tom: That was the time when they, it was still under wraps. Like not everybody knew it. Tom: They didn't break it out in their earnings, but that was the time where [00:17:00] all of the potential fomo that every other retailer was gonna have started. Todd: Well, I don't know. It's it the FOMO didn't start. Then. What led to the FOMO in 2022 started then. Tom: Yeah, 2020 Todd: to be clear Tom: broke it out. Todd: right? The FOMO and retail media doesn't really show up till the pandemic. Um, but Tom: 20, 20 18 is when they broke it out, and that was when the panic broke, broke out. Claudia: And then COVID really accelerated. Yeah. I mean that's why, that's why Flywheel was founded. So Flywheel was founded by Chip Depa and Patrick Miller. Um, and they, as soon as they found out that Amazon was launching a product where you could attribute actual sales to marketing activity. They were like, wow, this is something big. Claudia: This has never been done before. Like, we want to participate in this. So they launched the business based off of that. So Flywheel started Amazon sponsor products focused. Then we got acquired by Ascential. Throughout that next few years, we collected different, [00:18:00] companies via acquisition. So some big ones, WhyteSpider, which is based and founded in Bentonville, very much focused and founded around Walmart, best in class agency around Walmart. Claudia: And then we were able to, Tom: Todd, if you don't know White Spider, this was another fun one. They were like the company that helped you build your PDPs. Claudia: yeah, Tom: I thought it was interesting, Claudia: well, so the, the way that it works. The, um, the team is a very close partner with Walmart and so they're very familiar with site taxonomy. You talk about like things that maybe retail media don't always worry about, but how you are browsed and how you're categorized matters a whole heck of a lot. Claudia: I'll give you an example that's kind of a fun one. We had a, a Christmas candy vendor. So someone that sold candy canes and we had campaigns live where we were trying to bid on the term candy cane as one would. Um, and we couldn't, we couldn't serve on Christmas candy. We could only serve on candy cane. Claudia: And the team kept increasing our bid [00:19:00] because the Walmart reps were like. Well, you're obviously not bidding enough. CPCs must be high, blah, blah, blah. So the team kept upping their bid until it was something outrageous, and finally we're like, no, this is a taxonomy problem. And the way that it worked in the back end is because it was browsed under candy canes. Claudia: It didn't qualify for the Christmas candy auction. And that is something that you would've never known or never understood if you didn't have that retail expertise involved as well. And so that's kind of how white Spider grew up, is making sure that that site experience, the backend taxonomy and how consumers navigate the platform, um, is logical for the consumer, but also known by the brand so that they can make sure they're showing up in the right way. Todd: I mean, I think it kind of brings out a good point, and Tom and I have talked about this before as publishing and media people now into retail and think retail media is just another form of publishing. It's not, there is this [00:20:00] whole new world that matters and there's different business rules. Todd: And your point about your, your webpages now are PDPs, right? There's, there's this three letter acronyms we all have to learn, like product description pages or product detail pages, you know, whichever of the two you wish to prefer, but that those things matter. And there's a, and I think that's one of the things is as retail media is getting built out, yes retailers need to act more like publishers. Todd: But publishing people also need to do a better job of understanding. Retail and the realities of it. And your point is good in terms of, we're thinking about avails and and keyword volume and like even things like EDI, if you're a hardcore publishing or media person, that's not a term you've ever heard before. Claudia: Yep. A hundred percent. And you know, even things, we, we had a planning session the other day that was a, it was a full funnel planning session. So you have traditional media folks in there doing TV buys and all that kind of jazz. And then you had your commerce folks in there. And there was a question from the traditional side of the house of, well, why are you guys changing your [00:21:00] paid search plans every month? Claudia: It seems like. And so I, I spent the time to walk them through, like when I was at Target and you working with the buyer. Monday morning, you print out your sales and you have sales by SKU and then you have to march into your senior buyer's office and explain to them why the top five are the top five and why the bottom five or the bottom five. Claudia: Then your next phone call is to your vendor to say, Hey, you guys are in the bottom five. What are we doing here? How do we drive turns? Pepper in some shopper marketing tactics, change your retail media tactic, but that is a fundamentally different muscle than traditional media, which happens on a much slower timeline when you think of optimization. Todd: Well, what's interesting is, you know, that's, that's even a problem within media, right? Because within media, there's the brand upper funnel, people who don't give a rat's petie typically about performance. And then there's the bottom fund of people, the performance buyers, like where search is [00:22:00] traditional, you know, typically a part of the performance. Todd: Buyers are very much like that. They're very much a queue of logging in every morning. Seeing what yesterday's results were, what converted, what was your CPA, how do I adjust bids? How do I look at volumes? Where am I not getting volume? And so that's also been an interesting challenge here is, you know, retail media is, uh, starts on the performance side and shopper marketing is very performance driven and then moves up towards brand. Todd: But the problem is on the, on the vendor side, the client side is, the CMO has been often the only juncture point for all of these different. Stage funnel tactics , and it exists to this day, like this is not a problem That's been, that retail media solved or or marketing has solved of who's responsible for what. Todd: And even in some organizations, Tom and I talked about this recently, which is shopper marketing reports up to sales and brand marketing reports up to the CMO and. Like the two don't, the only person above them is the CEO. Right? And that they have different budgets and tactics and whatever, and there's [00:23:00] no consistency. Todd: And you're bringing up a good point, which is they're all related now. So there's a holistic plan across all of these different. Opportunities that we can move units and move dollars and move whatever. like even, I remember, I have a number of friends who work at agencies and who are on the creative side and how they were like the last. Todd: Bit of, of the tail of the work processes and they'd be like, how come we are not a part of the decision making around right creatives and performance and how good creative can drive better performance? And they would just get like told to go, I need an image that does this. Without, well have you thought through like, how are we gonna, what, what types of creatives can drive results? Logistics and E-commerce Challenges Todd: And, and it was frustrating there. And I think that's kind of the point here is media, people, logistics do matter. Todd: Like if units can't be sold an area or they're not inventory an area. And I've certainly read reports like even just how Target and other retailers are really struggling around e-commerce fulfillment. Like is it being [00:24:00] done by stores? Which stores, it's kind of a mess. Like it's just, but that's a practical reality of if the logistics side's a mess, it doesn't matter what you spend on the media side, it's hard to make it all work. Claudia: Yep. A hundred percent. And you know, if you've, if your dynamics within the digital space are different than in store, then it gets trickier as well, right? Marketplace Dynamics and Retail Media Networks Claudia: Like if we, how many, I don't know how many marketplaces there are off the top of my head, but in the US obviously you've got Amazon, Walmart, home Depot, Sephora, um, there's Todd: I think that we've, we've heard of what, 400 retail media networks now, Tom: I think she's talking Claudia: about the marketplace. Tom: versus the networks. So like Target Plus is a network or is. Todd: I mean, if you're implying like a platform that allows third party sellers, I mean, Al almost, I, I think all the large retailers have moved in that direction. Claudia: Yeah. Or or at least start, not all of them, but like the Todd: all launched, but they're moving in that direction for sure. I mean, it's your, your your point of Home Depot. It absolutely is. Todd: And Target absolutely is. [00:25:00] But you're seeing others moving the, and, and you look at, and Tom and, and you know, where's it stop If the direct fulfillment for vendors like that changes the game. Suddenly everybody is kind of a platform if they're doing direct fulfillment from a, from a vendor at that point, right? Todd: Like what's the line of a marketplace then? Brand Strategy and Market Fragmentation Claudia: Well, I, the thing that I think makes it extra challenging, and, and I'm gonna like just oversimplify for sake of clarity, but like, if you're a big brand. You have a view to who your key competitors are, and you spend a lot of time analyzing your consumer, thinking about your competition, and then. Putting a stake in the ground of what your brand platform for that year or quarter is going to be. Claudia: And then you get everyone around that, right? You've got your creative agency, your media agency, your commerce folks. The challenge with that is right now on these big marketplaces, which by the way, Walmart and, uh, Amazon, if you just chose those two, is a mass amount of people's sales. Um, they have massive fragmentation of market [00:26:00] share. Claudia: So it's not just the big guys that are chomping away at 'em, it's these little guys and the, because they've been focused, and I'm not picking on them because it makes sense to focus the way that they have, but because their creative platform and their brand platform is focused on the big guys, they're not readily available to address those ankle biters and a lot of ankle biters put together. Claudia: Matters a great deal. Tom: Yeah. Claudia: Um, and then you said start making decisions that maybe don't feel like they're in line with, with your brand necessarily. Right. Like I had a client, and I'm gonna, I'm not gonna say their name, but this is an older example, so it's fine to share where we did a deep dive on their market share to figure out what was eroding their business on Amazon. Claudia: Um, and I'd asked them like, do you want me to look at non-medicated nasal spray because they're a medicated nasal spray? And their initial reaction from the brand team was No. Like, that's less than 1% percent of our business offline. Like it's not a good use of time. I had the data anyway, so I [00:27:00] pulled it on Amazon. Claudia: It was 10% of the business and it was the fastest growing segment. Um, and that was something that you wouldn't even thought to address in your content or in your portfolio because in brick and mortar, it's less than 1%. And so it starts to create these uncomfortable conversations of like. Do we invest in addressing those ankle biters and how much, and do we just do it in e-commerce? Claudia: And do I distract my content team and my retail media team and the brand team like it? It's tricky questions. Shopper Marketing and Retail Media Budgets Tom: So there was another thing that we talked about, um, in our prep and that was about how Flywheel is, a market leader in writing white papers about these marketplaces. And you are writing about how like shopper and retail together as a concept is getting harder and harder to sell. Tom: Do you want to sort of Todd: Really inter, because I, I would think it would be, we're starting to see the opposite trend. So it's an [00:28:00] interesting perspective, huh? Claudia: So I like Fly, was always publishing white papers. Um, there's a Todd: As you should. Claudia: were recently released. Yes. Um, I think the point on shopper is that. There's a few things going on at a macro level that are making it harder for shopper marketing teams. Um, I think the first one is that the retail media budgets have gotten so large. Claudia: You know, most brands are spending 20 to 50% of their total ad budget within retail. Um, that the marketers are very invested in how those dollars are being spent. So you used to have customer teams wholly in charge of that. Now you've got marketers. In their business asking questions. Fine. Todd: you get to the whole sales versus right marketing split Claudia: A thousand Todd: those budgets and what have you. And that's a real interesting dynamic to Claudia: correct. Claudia: So, so you've got that. You then have the likes of Amazon, Walmart, target, et cetera, vying after upper funnel [00:29:00] dollars, right? They're launching streaming TV and they have all these different ad products where they want you to invest national media Todd: there's a lot of money in brand, which is why they're going after it. Claudia: Correct. So now they're inviting the brand people in themselves and the brand is centralizing decision making because they have this huge investment. Retail Media Networks and Measurement Challenges Claudia: Um, so that's one of the dynamics. At the same time, obviously the economy is in a tough spot right now, right? You've got literally at the same time, you have people doubling down in promotional investment to help drive turns, but then also pulling back promotional investment. To hit cost and margin requirements, and it's literally swinging back and forth week to week, month to month. Claudia: So that's adding complexity. Um, and I think all of those things together create an environment where shopper marketing has gotten squeezed. Um, Todd: Oh, interesting. You're thinking that's where the the, the squeeze is happening. If there is a squeeze, it's that level. Interesting. Claudia: so the, the budgets are Todd: I mean, [00:30:00] typically isn't the shopper marketing the most, I always thought that was the most sacrosanct . Like if I was, you know, we hear rumblings of, if anything, they're gonna cut retail media, not shopper marketing, because they have shopper marketing. commits From the right requirements from the buyers at the retailers, and you're sort of, eh, maybe not Todd. So that's an interesting, you Claudia: so here. Todd: double in on. Claudia: So here's how it all comes together. Yes. The merchants want to have those commits, and we are seeing them try to do that harder. But the power dynamic shifted. The second the retailers wanted to go after upper funnel dollars. So now who has the power in the mix? If you are a big brand and you have big dollars and you are wielding your power effectively, the merchant doesn't have as much threatening power as they want. Todd: Ah, this is a very fascinating sort of dynamic. Tom: the trap has been laid and, and the, the retailers are falling into it. And basically, like brand retailers have always been asking, I want those national brand [00:31:00] dollars. Okay, okay, let, let's figure it out. It's gonna be too expensive. No, we can get it. We can get it. And finally they're there and they've now potentially put things outta balance. Tom: And now the brands actually have the ability to say, you know what? Todd: If you want brand dollars, I gotta cut my shopper dollars, is what they're saying. Claudia: Or, or, or it's not even that direct. It's like they used to threaten and, and I'm not villainizing merchants. I used to be one, but like Todd: no one's villain here. They have their own goals and that's the dynamic. Right? It's, but it's been fascinating to sort of of watch this, you know, emerge and. It's funny, so I think about this, but I had the equivalent of owning shopper marketing dollars for the Disney Channel because the cable networks had a very similar dynamic where you had to, if you were a cable channel, right? Todd: The cable networks, uh, uh, systems paid you for the, that, a monthly fee as part of their subscription, right? You're 40 bucks a month. 40 years ago now, a hundred bucks a month, right? That you would get a buck or two as a, as a channel. And then you had to commit [00:32:00] back in terms of promotional spend to help promote, co-promote the, the cable system in that market. Todd: And so as equipment of shopper marketing and these dollars and these givebacks, right, these promotional commitments were negotiated upfront as part of the overall relationship, right? I'm willing to give you this, but you gotta gimme this back so they're not villains. It just was the cost of doing business. Todd: And it was, again, to promote ultimately. Cable subscriptions. Um, you know, and same thing, you're trying to promote sales within, whether it's in the Northeast Wegmans or Publix in the southeast, or you know, Kroger on the west coast or whatever. Um, and so it makes, it makes total sense in terms of, of how that, that gets done and what those commits look Tom: what's different is that, you know, Walmart always had the ability to, to sort of say, no, we're gonna stop your distribution if you don't do this. Todd: Oh, the cable systems would threaten to take you off, the subscription package and make you a la carte if you didn't spend either. So it's the same Claudia: Yep. And there's, there's still some of that. I just think it's becoming less effective for Todd: because the Claudia: for the big Todd: up and they have more [00:33:00] power. Claudia: Exactly. And then the other part of that is like, they're starting to think more holistically about their investment at these retailers. And, and that is hindered right now because of. Claudia: Measurement capabilities and all the things that we already know, um, but they're asking the question of what is the return on that shopper investment because they, ve clearly know what the return is on their paid search investment and they can get a pretty good idea of what the return is for the other streaming tv, traditional media type investments. Claudia: But shopper marketing has always been a black hole. I interviewed a bunch of clients. There were some that literally told me they don't have KPIs. Because their organization has accepted that shopper marketing is something that you do and Todd: Uh, it, Claudia: it Todd: well, we're, so we're talking to a retailer who's building out right, a retail media network. Claudia: well, you have to grow sales, but like, no, that's very different. Think about retail media. Like if you're a retail media manager, you [00:34:00] have very strict targets and guardrails. And people will be on you. If your CPCs are too high, your ROAS is too low, your incrementality is tanked. It doesn't seem like that same rigor is put around shopper marketing, and some of them use MMMs, but it's sort of broad strokes, not retailer specific Todd: No, we've heard stories around Claudia: CFI size are good or bad. Tom: Right. Todd: Now the stories we're hearing are on the shopper marketing side. When we talk to retailers that they don't even know the effective CPMs of what they've been selling. Like they're like, we gotta, now that they're trying to launch retail media, suddenly they're like, oh, crap. Todd: I had to go back and like compare, is my CPM too high or too low compared to what I was selling in shopper marketing? And what they're finding is they had some things that were like thousand dollars CPMs. They're like, oops. Like, oh, this is, and you know, it, it's sort of those dynamics are showing up and. Because you're right, the, the vendors looked at shopper marketing as well. It's the cost of doing business. Like if I get anything out of it, great. But it's, it's a tariff [00:35:00] for lack of a better term or toll, and it is what it is. Flywheel's Role and Retail Media Evolution Todd: I mean, I guess did Flywheels start as a business intended to help vendors do a better job with their shopping marketing dollars, obviously. Todd: And how much of your business is shifting into owning. Retail media and now brand, like anything that the vendors are, can be doing. Have you, are you guys now managing that entire spend across all of these different levers that the retailers are now trying to sell to the Claudia: Yeah, so the, the Flywheel Commerce Network, you know, we're holding companies, so there's, there's pieces, um, has legacy Flywheel, which has always been retail focused with an awful lot of retail media in it. Um, our, our founder says we're not a media company. We're. A retail company that does an awful lot of media buying. Claudia: Um, so that's always been the case over there. And we do content and market share and everything that kind of goes around winning within retail. The other businesses within the network are Tracy Locke, TPN, and Haygarth. Um, and those are the traditional shopper [00:36:00] marketing agencies. So they do everything from, you know, like a, a Target, Walmart type environment, Kroger, but they also do owned retail. Claudia: So we've got. Clients that have their own stores, who have stores within a store. Um, and so it's really building that retail experience. So that's where the shopper marketing capability sits. There are certainly overlap clients where we are one team and we think holistically about what all that looks like and how it comes together. Claudia: Um, but they are distinct agencies. Strategic Advice for Brands Tom: Now that you've, you've laid out all these problems that are, that are happening, what are the types of things that, um, you tell us if you have, uh, some advice. On this, but what are you telling brands now in 2025 into 26 about how things are changing and how they can leverage flywheel, Claudia: yeah. Um, I, I think, um, you guys hit on it earlier, but retail fluency should be everyone's priority. Um, I think we're gonna continue to see brands owning more and more of that decision making. [00:37:00] But they have to pick up that retail fluency or they're gonna kind of step on their own toes, um, and in taking over that space. Claudia: So I think that's the first one. Um, the second one is really measurement. We have not, as an industry figured out measurement, we've got to get to a place where each of the levers are equally measurable. Um, and we can truly think, how do I drive sales at Walmart? Whether that's walmart.com in store, shipped to home. Claudia: Buying a Google ad that directs to walmart.com or doing social that ends up on Walmart. All of that should be evaluated together. Um, and no one is really there yet, at least not through a unified measurement solution. So I think that would be the second priority. And then the third one is, um, really basic and human, but being very comfortable about what you don't know. Claudia: And being curious and asking [00:38:00] questions. I think the most dangerous thing people can do is assume that they know something and not ask questions. And you, you guys spoke about it earlier, but like, you know, marketers and salespeople kind of clashing. Part of that is they don't speak the same language. And if you don't seek to understand why each of you is coming to a different conclusion, then neither of you're gonna learn from that. Claudia: Um, and so I think we just need to do more of that as an industry. Fragmentation of Retail Media Landscape Todd: One other thing that we've, talked about is with the rise of 400 retail media networks and every one of those businesses has been doing shopper marketing, obviously for the entire history of their existence, how do you guys look at the fragmentation of the landscape? Obviously the big. Todd: To Walmart and, and Amazon and they're getting the disproportionate number of dollars today. But as this sort of long tail starts to show up, the mechanics of trying to manage cross retailer spend is that something you guys are, are worried about or is that something you guys are building your own solutions? Todd: [00:39:00] Or are you guys seeing the emergence of solutions that you guys are adopting yourselves? Claudia: Yeah, so Flywheel has our own tech stack and we have since day one. Um, and so it is purpose built for complicated matrix brands. Um, one of the largest ones in the world is one of our first clients. Um, so it got pressure tested, certainly. Um, and we just keep evolving to kind of meet the needs as more of these platforms come online. Claudia: Um, for us, it's very important that we're able to take those real time signals and make real time adjustments. So we're updating bids every seven minutes, both from media metrics and signals that we're getting, but also those retail sales metrics. Um, and so we continue to evolve that as more platforms come on. Claudia: But practically speaking, you know, we, we do our own forecast. We have a product called Flywheel Retail Insights, and over the next five years. The top 10 retailers are going to make up the vast majority of sales, [00:40:00] and really that is quite heavy in Walmart, Amazon, and Costco. Um, and so we do prioritize those three a fair amount just because our clients care about them a lot. Claudia: Um, but the way we would advise brands is think strategically about what those other retailers and retail media networks might offer. Um, if you think of a Dollar General. I'm from a town of 2000 people, Morganville, Kentucky. I'm going there this weekend for our family reunion. Um, we have a Dollar General. Claudia: We don't have anything else. And so you are able to talk to that audience. In a way that you can't anywhere else. And that's unique and that is special and that does have value. Um, and so if you're a brand that's trying to get in with that demographic or address that audience, DG might be a unique way to do that. Claudia: Um, but each of those retail media networks needs to figure out like what is their secret sauce in that mix, I think. Todd: Interesting [00:41:00] advice as the these other players emerge. . By the way, um, mark from Costco, I hope his little neck, you know, thing in the back head because he, Claudia: We, we talk a lot. He knows that we're passionate about Costco. Todd: Well, and it's funny 'cause he was a, he was a guest on the show, um, uh, on, on the middleman already. Todd: And one of the things that, you know, he's trying to do is so much more with retail media and Costco being a relatively conservative company has been, he, he's pushing them to do more and whatever. And, you know, hearing what you say is like, you'd love to, the clients wanna do more, Claudia: yeah, no, we're annoyingly focused on deterministic data and Costco is like, their high fidelity data set is like our mothership. It just, it beams and we're all drawn towards it. As soon as Mark opens the door and lets us then. Todd: I'm sure he's asking for that, by the way. It was, but that's sort of, you know, it's, those tensions are fascinating and it's fun to see you make these connections of, you know, between having talked to both of you now and understanding those dynamics, and I [00:42:00] think it's kind of one of the things we're trying to explore is this three-way dynamic between, you know, there's, there's this new service provider role in terms of buyers like yourselves. Todd: There's the retailers as sort of like the publishers and then obviously the, they're the brands. Who are always been the brands, but that through Ady and, and seeing that play out in, in a new and different way versus traditional media has been fascinating to kind of, kind of witness. And as we've gotten to know the players involved, to your point, like had a chance to talk with Mark. Todd: Um, and so we'll, we'll, we'll send the bat signal back to him to say, Hey Mark, Tom: It's, yeah, it's not. Todd: for you. Please, Tom: not the bad signal. You have to, you have to, if you know Mark, you have to, uh, speak in Seinfeld meme. So there's probably a way to unlock it. You Claudia: Oh, I haven't been subtle. I, I've been thirsty Todd: who wants to unlock it. He does. It's Mark convincing the CFO and CEO at Costco to, right, because he pitches new ideas all the time and you know, he, he's not bitter about it. He totally understands that they built a hugely successful business Claudia: well, you have the benefit of learning from others, right? [00:43:00] Like if you think about how target's approaching building out their marketplace, they're very methodical about which sellers they let into that. And you know, Amazon's bumped their head a couple of times on that. They've grown fast, but you kinda get the benefit as a second mover to learn from the other. Todd: Oh yeah. Challenges with Third-Party Sellers Todd: Amazon's dealing with huge, you know, brand IP fraud issues right now. Um, I've ties to that seller, third party seller community in Walmart and Amazon, and it's fascinating to sort of see that that world is the Wild West, who, it's an interesting world. Yeah, third party sellers at Amazon and Walmart. Todd: That is, that is like, it's like going back to the old, you know, PPC toolbar days for me in terms of the characters in that world. Conclusion and Final Thoughts Tom: Well, we wanted to thank you, for coming on because I think Claudia, you really have. Uh, the full perspective to, to talk to these things with agility. So we went all over the place and I really appreciate the fact that, [00:44:00] that you were able to, to always, uh, keep up with us. And so thank you for that. Tom: Um, and let us know how we can help, uh, people keep up with you. We'll definitely put your LinkedIn in the, uh, in the show notes, but if there's anything else that you'd like us to share, white papers, we are happy to Claudia: Yeah, well, we'll definitely. We've got podcast, we have a newsletter. Um, and our team, both the marketing team and our practitioners do a wonderful job, um, producing that content. So I'll, I'll be sure to share that. Thank you. Tom: Great. Thanks a lot and thank you for being on the middleman.