Conversations about retail media networks emerged as the dominant theme during Day 3 of Groceryshop. Speakers from Amazon, Sam’s Club, Dollar General and Hy-Vee spoke about the changing media landscape and used the Groceryshop platform to tout the unique features of their respective platforms. Major CPG companies including PepsiCo, Coca-Cola, Mondelez and Reckitt-Benckiser also weighed in on the hot topic.
The rise of retail media networks is more than a marketing story. As huge shifts in ad dollars loom, there are implications for other aspects of a retailer’s business, especially if reallocated or incremental ad dollars have the desired impact on sales. For example, the ability to glean insights from shopper data becomes more important and there is a need for increased visibility of in-store environments to ensure execution. There are also potential impacts for category planning, assortment optimization, the supply chain and demand forecasting and collaboration on shared data platforms.
For more on the seismic shift happening in the retail media landscape, here are highlights from Groceryshop Day 3:
The size of the prize is huge
There is a gold rush underway in retail for alternative revenues and credit Amazon as the catalyst. Its advertising business is huge and other retailers are keen to replicate that success.
The retail media market is currently about $45 billion and is projected to grow to $105 billion in four years, according to Andrew Lipsman, a principal analyst at Insider Intelligence. Other estimates place it as high as $150 billion in five years.
“Amazon has 75% market share, but Walmart has learned a thing or two and they are following a similar playbook,” Lipsman said. “The future of retail media goes through grocery. It is where the action is. Retail media fills a huge need for brands because TV ratings are hemorrhaging making it harder and harder to reach audiences.”
The appeal of retail media is brands can know what is working because it is more measurable and more targeted. Lipsman explained retail media creates an opportunity to apply closed loop measurement to upper funnel activities and determine incremental return on ad spend, or IROAS.
Brands are seeing red
Hy-Vee launched its RedMedia platform at Groceryshop and President Donna Tweeten offered a stern warning to retailers in the audience while also extolling the virtues of RedMedia.
“If you are a retailer of any significance you have to be in this business to business space. I don’t know how you will exist without it,” Tweeten said. “I think we are mavericks in this space compared to some of our industry colleagues. We are not just competing with other retail media networks we are competing with media networks.”
Tweeten, and many others, foresee ad dollars shifting to retail media networks, a trend that could be accelerated by striking writers and actors in Hollywood with the work stoppage forecast to cause a 30% loss of viewership.
“That very well could be the nail in the coffin for linear TV,” Tweeten said, noting that brands have stories to tell, and viewers still have an appetite for 30 second spots. “It’s why we are structuring our RedMedia to compete with media networks.”
She also acknowledged it has the potential to be a huge revenue generator, as evidenced by public disclosures by Amazon, Walmart and Kroger, regarding alternative revenues. However, retail media also takes personalization and customization to a new level, according to Tweeten.
“There is absolutely no way that a retailer can exist without being able to have the opportunities to partner with CPGs to get messages out because the traditional way we’ve been doing things forever is not going to work. You can’t not be in this business if you are a retailer of any significance,” Tweeten said.
Amazon elevates it ad game
While Hy-Vee and others are launching or refining their retail media strategies, Amazon continues to innovate and do things other retailers can’t match. The best example is its sponsorship of Thursday Night Football with the NFL. Begun last year, by livestreaming the games Amazon is able to do things that aren’t possible with conventional broadcasts.
“We are a streaming service so everything we are building is designed to have those sensibilities combined with the scale of the NFL,” said Danielle Carney, head of NFL ads at Amazon. By scale, she means an audience of 15.1 million watch the games for an average of 84 minutes.
With scale, Amazon is able to deliver audience based creative so brands can talk to different segments with different types of creative in the same time slots.
“It was the number one thing we heard from advertisers who asked, ‘when are we going to be able to do this?’” Carney said.
The refined segmentation ability means Amazon is able to attract non-traditional NFL advertisers such as General Mills which appeared for the first time on this week’s Thursday night game between the Giants and 49ers.
Another unique feature is that ads can be made interactive. Viewers can click to add to cart right from the screen or request more information but do so in an unobtrusive way so as not to disrupt the viewing experience and potentially miss a touchdown.
“We are seeing some early success rates, but nothing I can share because it is week one,” Carney said.
Best of the rest
Other retailers talking retail media on Day 3 included Dollar General and Sam’s Club. Dollar General talked about how its expansive physical footprint of nearly 20,000 stores with roughly 2.3 billion transactions gives it a unique point of differentiation.
After building out a first party database the past four years, Chad Fox, SVP and chief marketing officer at Dollar General, said the company now has 1,400 unique shopper attributes that can be used for targeting. The company’s media network, DGMN, is a way for brands to connect with audiences that are hard to reach and hard to measure because 80% of its stores serve communities with 20,000 or fewer residents. Fox boasted that DGMN offers a 5X return on every dollar invested.
With only 600 locations, Sam’s Club doesn’t have the geographic reach of Dollar General, but it does boast a growing membership base, perfect data on spending behaviors and some unique functionality.
According to Diana Marshall, EVP and chief growth officer, at Sam’s Club, it recently launched in-club attribution and intelligent retargeting.
The in-club feature lets Sam’s demonstrate a 30% return on ad spend while intelligent retargeting means members aren’t shown ads for products they purchased or aren’t interested in. Marshall also noted that this week Sam’s launched a dashboard capability so brands came make in-flight adjustments to campaigns.
CPGs and the retail media tax
Retail media networks and the alternative revenues they generate for retailers only work if CPGs are willing to invest and see returns. That’s why some of the most candid comments of the day came from CPGs participating in the final session of Day 3.
Things got rolling from the start when the moderator of a session titled, Brand Perspectives on Effective Retail Media Strategies,” asked whether participation in retail media networks was a new tax on brands?
“Tax is a controversial term to use and not all retail media networks are created equal today,” said Jie Cheng, VP and global head of digital commerce at Mondelez International. “Those that are mature with stronger capabilities that deliver a return feel like it is money well spent.”
To make the participation in retail media feel less like a tax, Simon Miles, VP, global omnichannel commercial strategy, The Coca-Cola Company, said, “transparency, particularly around data, is going to be key along with alignment with objectives.”
“The more retailers give us access to the data the more we will invest and find new shoppers for our brands,” said Imteaz Ahamed, performance marketing director, Reckitt Benckiser.
The other thing on which panelists agreed is the need for standardization of reporting metrics.
“We need consistent metrics across networks so we can compare one to another,” said Miles.
With standardization, brands will be better able to determine whether investments generated incremental sales to justify further investment and support retail media’s lofty growth projections.
If we missed you at Groceryshop 2023, but still want to experience how AI is transforming retail, reach out today to connect with a solutions expert.