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11/08/2021

Retail Media Networks and the New Competitive Reality for Grocers

Sophisticated capabilities of networks such as Walmart Connect highlight new competitive battleground for shoppers’ attention, big ad budgets and grocery market share
Ethan Goodman
Senior Vice President for The Mars Agency
Ethan  Goodman profile picture

A new front in the fight for food retailing market share has opened and retailers of all sizes have joined the battle. The area of increased competition involves the the world of retail media networks, a place where grocers recognize their rapidly growing base of digitally engaged shoppers is an asset of great value, when leveraged appropriately.

Grocers bring varying degrees of sophistication to the complex world of retail media, a fact underscored by recent moves at Walmart. Earlier this year, Walmart rebranded its media business as Walmart Connect. At the time, Rich Lehrfeld, SVP of Walmart Connect, described the platform as a closed-loop system capable of providing a holistic view of Walmart customer behavior. It is an important distinction that highlights how winning with retail media means creating accountable, measurable results for advertisers.

In Walmart’s case, it recently took Walmart Connect to the next level by launching what is known as a "demand side platform," or DSP, in partnership with independent DSP provider The Trade Desk. If this all sounds a little convoluted, that’s because it is, which underscores the increasingly complex and nuanced ways retailers offer suppliers the ability to connect with shoppers and more accurately measure spending that influences behavior.

For help understanding what the Walmart Connect move means, the implications of the DSP partnership with The Trade Desk, and the grocery industry more broadly, Progressive Grocer turned to Ethan Goodman, SVP with The Mars Agency. Goodman is a veteran marketing strategist with expertise in digital commerce and shopper marketing. Prior to his current role, he built, grew and managed The Mars Agency's e-commerce and innovation practice groups. Here’s what he had to say about Walmart's retail media moves. —Mike Troy, Editorial Director, Grocery Group

 

Retail Media Networks and the New Competitive Reality for Grocers
Ethan Goodman, SVP, The Mars Agency

The Walmart DSP has great potential as an effective, efficient tool for the many brand marketers who are working to execute campaigns across the retailer’s ever-expanding media platform. Of course, the service comes with some watch-outs as well. I looked at the issue through the lens of a shopper marketer, but assessing the Walmart DSP from the perspective of a national media buyer would lead to some different considerations.

Walmart Connect already allows advertisers to buy a variety of digital media including onsite search/SPA (sponsored product ads), onsite display ads, offsite display/AXT (audience extension), Facebook and Pinterest ads, among others. Until now, the offsite opportunities were powered by a more limited solution provider and could only be executed through a managed service. And apart from a recently launched beta test for onsite display advertising, the only tactic available through self-serve was onsite search/SPA (through approved Walmart Advertising Partner companies).

Through this new partnership, Walmart Connect is shifting the underlying managed service platform for offsite/AXT to The Trade Desk but also launching a custom DSP, a programmatic media platform that will enable brands to manage their own offsite campaigns. Brands, therefore, will have the option to execute their offsite campaigns through the DSP or continue to use the managed service through their Walmart Connect rep. (It remains to be seen if both options will provide advertisers with the same set of opportunities.) 

Potential Benefits

Compared to what was previously available (and, perhaps, what will now be available through the managed service going forward), Walmart DSP will provide enhanced features for offsite/AXT campaigns, including:

  • Premium inventory across display, video, mobile, connected TV and streaming audio.
  • Augmented targeting capabilities, including the ability to combine brand/agency-side 1st party data and other 3rd party data sets with Walmart Connect’s proprietary 1st party data. 
  • Expanded creative formats.
  • Improved brand safety and 3rd party verification (viewability, fraud, etc.) safeguards.

It also will give brands direct control of campaign setup and real-time optimization which, based on our past experience, will lead to better results. Under the current system of managed service, performance often isn’t maximized because the campaigns aren’t monitored closely or frequently enough — or aren’t adjusted in response to optimization suggestions.

Potential Drawbacks

The most obvious drawback is increased costs. Most brands don't have the in-house skills and/or resources needed to execute self-serve DSP buys in-house. Assigning the work to their media or shopper agency will result in incremental fees that, depending on the size of the campaigns or total annual spending levels, could be anywhere from 5% to 15% of total working dollars.

That said, it's possible — and I might even say likely —  that CPMs for the DSP will prove to be lower than they are for managed services because the premium that Walmart Connect charges for support won't be included in campaign fees. And that savings could be used to cover the additional internal fees.

There’s also the potential for platform overload. If brands shift search, onsite display and offsite/AXT display all to self-serve, they'll be required to work across three different platforms/systems: a 3rd party for search, the DSS for onsite and the DSP for offsite. That feels like a heavy lift for one retailer — although a solution here would be to find an agency partner that will be an expert on all three platforms. (I happen to know of one, if you’re interested …)

The Price of DSP

The key variable that’s still to be determined is the price tag. Of course, the relative expense will depend on the comparison you’re making. It will almost certainly be more expensive than what a media agency pays on a CPM basis for national programmatic buys through its preferred DSP. (Walmart Connect charges a significant premium for access to its 1st party data, which is used for targeting and closed-loop attribution — and is nearly impossible to replicate via "regular" DSPs.) But that’s not a very good apples-to-apples comparison because the objectives of a national media buy are fundamentally different than those of a Walmart-specific program that encompasses so many other business considerations.

Meanwhile, Walmart DSP will probably be similarly priced to other managed-service, offsite digital media offerings operated by 3rd parties. And, as noted earlier, it will probably be less than what brands currently pay for managed service offsite campaigns via Walmart Connect today — and in the future.

Test and Learn Approach

The simplest way for suppliers to see how well the Walmart DSP will work is to try it. One approach is to identify key campaigns to run via the DSP and see how they perform relative to managed service campaigns. That’s a relatively low-risk way advertisers can gain immediate, actionable learning to determine how to proceed in the future.

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