By Steve Gray, Director at SG-retail
The biggest driver in retail media growth over the last few years has been the introduction of agency-connected programmatic buying for onsite media.
Amazon’s $50bn of retail media income is almost entirely this and the model they pioneered is now, more or less, embedded in all major FMCG retailers.
Some are way more advanced than others, and there is wide variability in performance, but it’s now rare to find an FMCG retailer of any size who has not launched some form of programmatic buying using tools like Criteo, Epsilon, Mirakl, Koddi etc. or their in house versions which enable media agencies to buy campaigns at scale relatively easily.
Small changes in agency spend shift from Google and Facebook (together not far off 80% of all ad spend in developed markets) translate into very large sums of money for retailers. This new income sits on top of the traditional onsite spend that brands make via their commercial teams, which is typically governed by JBP-type processes. Whereas the JBP spend is still in growth, it’s much more mature than the programmatic spend, which is nowhere near played out. JBP spend is also lower margin as it requires manual selling via the retailer’s sales agency team.
Retailers are learning fast that onsite digital ad innovation, sold programmatically, is driving highly profitable growth and, in many cases, accounts for 50%+ of onsite adtech income.
So it’s no surprise that retailers are asking themselves how they might divert further media agency spend to instore retail media, which in most cases is where 80% of shopping takes place.
But there are complications. Instore retail media is comprised of a disparate number of legacy media solutions (e.g. cardboard POS, trolley ads, physical sampling, instore radio) and augmented by recent innovations in digital screens and personal shopping devices. These are almost exclusively sold via the JBP process to committed suppliers who have learned over time which of them drive a sales uplift and/or warrant some of their annual JBP spend commitment.
Media agencies do not currently play in instore, and this is largely because there hasn’t been the equivalent of the programmatic buying solutions that have been deployed for onsite.
It’s currently difficult, bordering on impossible, for a UK media agency to place ads programmatically into a supermarket radio station’s schedule and be confident that the ad will reach an agreed audience at scale and within an agreed time slot. And even harder to do this in sync with the content they want to place on screens. There has been little innovation from instore radio content providers to enable this.
But this is set to change, and innovative retailers in the USA like Kroger, Lowes and others have introduced new tools that enable this.
We predict the UK will follow. As investments in digital screens accelerate, it’s important that this is done by retailers in a way that enables programmatic buying and content synchronisation as this will bring new money to the retailer rather than divert spend from other activations. Selling needs to become real-time, impression-based. Short-term sales uplifts are nice to have, but media agencies don’t buy on sales uplift, and in any event, radio and outdoor media owners without shops have no idea if they deliver one.
If you run an instore retail media business and want to learn more about how to optimise for this, give us a call.
