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How grocers can unleash the power of retail media networks

In-store and online digital assets can be a powerful (and lucrative) tool
retail media networks

There is good reason many are calling retail media networks (RMNs) the latest and greatest opportunity for grocers and brands. With a growing number of people spending time online – and realizing the ease of online shopping – RMNs open new potential advertising revenue for grocers and give brands a more targeted way to reach shoppers. 

A strategy where retailers use their own digital properties to sell advertising to brands, there’s no disputing that RMNs are gaining momentum as digital ad spending continues to accelerate. According to the latest data from Statista, digital media ad spend worldwide is expected to reach US$126 billion by the end of this year and grow to US$176 billion by 2028.

“What makes retail media so compelling is that it gives advertisers the ability to connect with their target audience when they are in a purchasing mindset, whether they are looking to buy in that moment or are planning a future purchase,” says Leanne Gibson, vice-president and managing director of Walmart Connect Canada, which provides a platform for advertisers to reach shoppers through various channels.

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Walmart has built a robust omnichannel strategy that Gibson says allows advertisers to connect with shoppers in-store and online. In-store has been actualized through digital screens, signage and audio ads, while online tactics include search, display, social media and influencer programs.

Since launching its retail media division in 2015 in Canada, Gibson says Walmart has evolved its offerings beyond just awareness tactics to include performance tactics that measure a campaign’s return on ad spend both online and in-store. “[Brands can] close the loop and measure the effectiveness of their advertising strategy and see the return on their investment,” she says. “In the future, we expect to see continued personalization in our offerings and more brand lift measurement opportunities.”

Are RMNs feasible for most grocers?

For those still questioning the need to invest in RMNs, consider that GroupM, the world’s largest media buyer, is predicting revenue from retail media, which the company defines as including ad revenue from last mile delivery services, will eclipse TV ad revenue (including connected TV) between 2026 and 2028. And the latest data from Kroger’s retail media branch, Kroger Precision Marketing, shows that 75% of targeted online display impressions and clicks were from new-to-the-brand households, with one in four of these new shoppers becoming repeat purchasers. (See sidebar for more on why RMNs are buzzing now.)

Mercātus is an e-commerce platform provider that helps grocers create seamless shopping experiences across their digital channels. President and CEO Sylvain Perrier warns that those who aren’t in this space or in the process of building out some sort of comprehensive retail media program are practically surrendering their dollars to Instacart and every other grocery retailer already doing it. 

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While the grocery giants are better equipped with the capital, resources and scale to develop robust RMNs, Perrier says these types of programs aren’t out of reach for smaller grocers. In February, the Independent Grocers Alliance teamed up with digital firm Ideal by Design House to create the first RMN for independents in the United States. Not only can independent retailers partner with trade associations and vendors who can help them build out a program that gives them presence and scale, he says, “they can back that up with quicker, faster, more nimble programs that are more personalized and generally more difficult to execute at a national level.”

Preparing before the leap

Yet, even with all the potential benefits of implementing an RMN, analysts and grocers already running successful programs stress the need for pre-planning. Having a strategy is key, both from a technology and resource perspective, as well as in figuring out a grocer’s unique value proposition in the market that will draw those brands in. “Retailers want to jump in, but with so many retail media networks emerging, what’s the differentiator and why should I as a brand come to you,” says Livia Zufferli, a partner at Deloitte Canada.

Beyond selling advertisements on their sites, she says grocers could be packaging up reports on customer insights and analytics that brands would find very valuable. “If they are tracking their data in a way that is safe and appropriate, it’s a powerful position for retailers to be in,” she says. “But for those who aren’t there yet when it comes to collecting their data and being able to put it into usable, useful repositories ready to activate, there’s going to be an expense to getting their house in order.”

READ: How to prepare your business for artificial intelligence

In developing a media business within a grocery business, retailers should be prepared to bring in talent from other sectors, including people with experience in ad tech, media and digital capabilities, says Alfredo Tan, senior vice-president and managing director of Advance powered by Loblaw (a retail media business unit launched by the grocer this past August). Then, collaboration is key. “It’s one thing to launch a media company on its own and another to launch one that also has to be tightly integrated and collaborative with the massive enterprise that Loblaw is,” he says.

Whereas many grocers in Europe started with the in-store experience and then drove customers progressively to digital, Tan says Loblaw’s approach has been the opposite. “The evolution of retail media for us will be from digital to omnichannel, which includes the physical space,” he says, noting the integration of in-store screens and audio to help promote national brands and private-label products. “If you do it right, all of that can be integrated … and there shouldn’t be a separate strategy for category merchandising teams that doesn’t include contemplating how to overlay retail media on top of that.” Loblaw has already started rolling out digital screens at its grocery stores nationally and at its Shoppers Drug Mart stores.

While RMNs make it much easier for grocers to provide metrics to their brand partners, the expectation for immediate return on investment in this medium can be challenging, too. Walmart’s Gibson says advertisers sometimes concentrate on the metrics alone, focusing only on lower funnel marketing tactics. “We know that 87% of shoppers regularly or always start their purchase journey online. They plan their trips, compare prices and read reviews,” she says. “Advertising at the top of the marketing funnel informs shoppers and influences their purchase decisions, but does not always result in an immediate sale [yet]; each stage of the marketing funnel is important and plays a key role.”

In that same vein, retailers expecting their RMNs to be profitable right away will be disappointed. “If you think about it, the creation of inventory that you can sell and work with your vendors on takes time to build and there’s often a lag effect before people start adopting it,” says Loblaw’s Tan.

A promising path forward

As artificial intelligence and other technologies evolve, the capability of RMNs will too. Perrier points to advances in product sampling capabilities Mercātus is already working on that allow a real-time analysis of a shopper’s online cart so that appropriate, full-size samples can be suggested. “The beauty of this is that these products are already on the shelves… and you get a nice text message before your groceries are delivered or you pick them up saying you qualify for a free one-litre bottle of Tide,” he says. “That is RMN on steroids and contributes value to the trifecta of CPG and consumer and retailer – and is easy for a regional retailer or chain to do.”

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For Loblaw, Tan says the goal has never been for retail media to serve as a standalone solution. “You need to start thinking about how you combine media with loyalty, with data insights, consulting capabilities, and collaboration with merchandising and category activities,” he explains. “We’re expanding more and more to be a solutions-oriented division that provides these services to our vendors and clients in collaboration with the broader enterprise across all of Loblaw’s capacities.”

He’s also optimistic about the future as grocers continue to make headway in this new retail space where they hold such a unique position in understanding their customers. “I love the fact that no one would have predicted that retailers that have been around for 30, 40, 50 years are now potentially playing in the same competitive landscape as traditional media companies and big tech giants,” he says. “Being able to provide relevant marketing messages throughout the customer journey in an omnichannel environment, and essentially influence the path to purchase… it’s amazing that retailers can now leverage that capability to build a new business.”

This article first appeared in Canadian Grocer’s November 2023 issue.

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