Supermarkets Adding ‘Media Company’ to the Résumé
The number of traditional retailers developing their online media platforms continues to grow, with giants such as Walmart, Target and Kroger investing substantially and profiting in return over the past couple of years. Now, today’s landscape makes food retailers both big and small even more attractive to CPG companies and advertisers to execute their media campaigns.
- The surge in online shopping during the pandemic offers a huge opportunity for an alternative revenue stream in the grocery industry, which is characterized by tight margins and minimal growth.
- Walmart, Kroger, Target and Albertsons are among the major retailers to roll out media platforms, either in-house efforts or partnerships with e-commerce advertising companies, to offer analytics for advertisers.
- Independent grocers — even single-store operators — can avail themselves of similar services from providers such as Freshop.
Grocery e-commerce sales have skyrocketed during the COVID-19 pandemic. August 2019 saw only $1.2 billion in online pickup and delivery sales, while August 2020 saw $5.7 billion, according to a Brick Meets Click/Mercatus grocery shopping survey. This surge — that was projected to take years instead of months — means a huge new audience for retailers’ digital properties and their supplier partners.
These new eyeballs offer a huge opportunity for an alternative revenue stream in an industry characterized by tight margins and minimal growth.
“Grocery itself is not a growth area — let’s not be confused,” clarifies Steven Boal, CEO of Mountain View, Calif.-based Quotient Technology, which has partnered with the likes of Albertsons, Giant Eagle, Dollar General and Ahold Delhaize USA on their media networks. “There are no incremental dollars in this industry. It’s about moving offline, ineffective spend to digital, effective spend.”
Some retailers have been more successful than others so far in becoming viable national advertising platforms and obtaining the additional dollars that come with these programs.
If one traditional retailer has the ability to compete with or even surpass the media platform capabilities of Seattle-based behemoth Amazon, it may just be Walmart. The Bentonville, Arkansas-based company’s Walmart Media Group — branded as such in 2018 — continues to evolve by offering advertisers on-demand visibility into how their campaigns are performing in-store and online.
In January, Walmart Media Group launched its Walmart Advertising Partners program to expand advertisers’ direct access to their sponsored products campaigns, giving them more transparency and control. Since this launch, new dashboards have also added an easier on-demand solution to their analytics, bringing together in-store and online campaign reporting in a new single sign-in platform.
There’s no doubt that Walmart — and many other food retailers — have Amazon beat when it comes to brick-and-mortar stores, giving them an edge for national brands that want to deploy omnichannel campaigns at a large scale.
“I could see e-commerce stabilizing between 9% and 12% post-pandemic, and then starting to rise from there again with the normal rise rate that it was before, but that doesn’t mean 9% to 12% of households are going to be exclusively e-commerce,” Boal says. “When you have a physical presence and you have a brand affinity with a shopper, that shopper shops in your stores, and they do it physically or with e-commerce.”
Other retailers won’t be outdone by Walmart’s media efforts. The Kroger Co.’s Kroger Precision Marketing launched in 2017 under its 84.51° data science subsidiary. Earlier this year, the Cincinnati-based retailer introduced a new sales attribution capability powered by Microsoft PromoteIQ to provide brands full transparency into media performance for in-store and online sales results attributed to advertising campaigns.
Kroger and 84.51° can capture large amounts of data from shoppers both offline and online, and can use this data to provide a more personalized shopping experience and a better idea of what advertising to what targeted customers will lead to the largest number of purchases.
Gary Millerchip, CFO of Kroger, has said that he expects Kroger Precision Marketing to experience 50% growth in 2020. That’s a lot of additional revenue in a year when many CPG companies had to halt or cancel advertising campaigns amid the onslaught of the coronavirus pandemic and its resulting out-of-stocks.
Walmart Media Group and Kroger Precision Marketing aren’t the only in-house self-service retail media networks in the grocery space. Minneapolis-based Target rebranded its platform to Roundel in 2019, and Boise, Idaho-based Albertsons has Albertsons Performance Media, although this solution is powered by Quotient.
These types of partnerships with e-commerce advertising platforms and technology companies are a way for retailers of all sizes to become more viable media networks for CPG advertising and harness the companies’ ad dollars.
Take, for example, CitrusAd, which launched in 2016. The Australia-based company works with such U.S. supermarkets as Harris Teeter, Wakefern Food Corp. and Hy-Vee to help them serve up personalized digital marketing experiences for shoppers. These experiences can include sponsored products and display ads.
The CitrusAd platform is designed as a white-label native ad server, so retailers still maintain control over when, where and how ads are served. CitrusAd says that products that are live with its offerings have an average 94% increase in total online sales month to month.
All of these advertising offerings center on the idea that personalization is beneficial to retailers, CPG companies or advertisers, and consumers, something that Boal strongly believes.
An advantage to the increase in online pickup and delivery sales is that every e-commerce experience is a logged-in and directly connected experience, so retailers can deliver this personalization.
While major retailers have well-established and sophisticated media operations, even independent retailers are able to operate as media platforms.
This is true even for those with a single store whose e-commerce capabilities are provided by a third party. Just like major retailers, functioning as a media platform gives independents the ability to drive digital sales and ad revenue.
Rochester, New York-based Freshop provides e-commerce solutions for digital engagement through key features such as promoted banners, paid search results and interception at checkout.
“One of the ways Freshop supports independent grocers is by leveraging digital ads for revenue,” says Kevin Sullivan, director of digital category management with Freshop. “We work directly with leading consumer packaged goods companies to bring the most up-to-date product info to the site, but also drive sales and bring in extra revenue streams for the retailer.”
Plans are constructed for promoted products that also integrate with sales and coupons, using mechanisms such as clickable banners and sets of promoted products, with revenue generated on a cost-per-click basis.
“Digital ads with Freshop are a way for CPGs to promote their products and a way for retailers to add an extra stream of revenue,” Sullivan adds. “To participate, retailers just opt into the ad program, and Freshop does all the negotiation with the CPG companies.”
An individual independent retailer wouldn’t be worth the effort, but collectively, the more than 3,000 stores using the Freshop platform represent meaningful volume.
Whether for independent retailers or the likes of Walmart, the success of digital media channels lies in the ability to make them a win-win-win for all parties involved. Shoppers need to benefit from the personalized offers; CPG companies need to experience increased sales, brand awareness and return on their ad spend; and retailers need to garner increased product sales and alternative revenue.