Inside the Retail Media Explosion: Amazon, Walmart, Kroger

  • Retail media is expected to grow 31% this year as chain stores use shopper data to sell ads.
  • Big funds and online retailers have dominated, but service categories, such as travel, may be next.
  • The explosion of retail media brings opportunities and challenges for advertisers who weigh their options.

This is the eighth in a 10-part series looking at Amazon’s burgeoning ad business: the people driving it, the ripple effects on other businesses, and what’s next.

Retailers like Macy’s, Kroger and Michaels started their own advertising business as an online shopping boom, realizing that first-party shopper data is a goldmine for brands looking to reach consumers as third-party targeting cookies have been phased out.

Their business pales in comparison to Amazon, which is now the third largest digital advertising company after Google and Facebook, with $31 billion in revenue in 2021.

For comparison, Walmart, Amazon’s largest competitor in the retail media space, generated $2.1 billion in advertising revenue last year.

Still, there is money to be made.

Insider Intelligence, who shares a parent with Insider, predicts that retail media will grow 31% this year to $41 billion as advertisers diversify their ad spend beyond Amazon and in the longer term, and as retailers discover how to link online ads to sales within the shop. . Digital advertising, traditional channels, and commercial dollars are expected to fuel this increase.

“Once brands, especially CPG brands, get a vision on how online advertising can increase offline sales, huge budgets will open up,” said Andrew Lipsman of Insider Intelligence. “This is definitely the sleeping giant of digital advertising’s next frontier.”

Retailers will benefit from the end of targeted cookies

Any retailer with at least 10 million monthly visitors to their online store should consider monetizing their site for search, said Mike Feldman, Senior Vice President and Head of Commerce and Retail Media for Dentsu International.

“While Amazon is certainly the biggest player in the space, and most of them can’t compete on the same scale, there is still a huge opportunity for retailers to monetize their data and properties,” Feldman said. “From a retail point of view, data based on purchase is essential.”

Retailers with first-party loyalty data and the ability to track purchases online and offline have a good location.

“When you look at the future state of digital media, this hour is approaching the final expiration date of third-party cookies as a way to target and measure ads online. And first-party shopper data collected by retailers will require that,” said Nis Weinheimer, general manager of the commerce marketing platform. Skai, the e-brands that advertises to reach target consumers with their billions of shopper marketing spend.

Retail media penetration is a nightmare for brands because every retailer has their own way of selling and measuring ads.

“When advertising was dominated by social media and search, advertisers were primarily using Facebook and Google to find out,” said Zach Morrison, CEO of performance advertising agency Tinuiti. “But the retail media ecosystem is much more divided. A brand like Kraft, for example, has found ways to advertise in all the places where it sells snacks and cookies, extending far beyond Amazon, and now to Walmart, Kroger and Target, Instacart, and many more.”

Complex landscape for advertisers

Adding to the complexity, the retail media map can be sliced ​​and sliced ​​in a variety of ways.

There are rigidly connected players, with Amazon at the top; department store retailers, such as Macy’s and Nordstrom; grocers, such as Kroger and Albertson; pharmacies, such as Walgreens and CVS; e-commerce aggregators, such as Instacart; specialty retailers, such as Michaels and Wayfair; and discount chains, such as the Dollar General and Dollar Tree.

The list goes on and on, and is only expected to grow, given the low barrier to entry and potential rewards. BCG has estimated profit margins for advertising on private retailer channels at 90%. Over time, she said, Amazon’s share of retail media will drop to 61% in 2026, from 67% in 2021, as supermarkets, such as Target, and smaller retailers expand their advertising businesses.

“The marginal cost of putting another ad on the platform once created is zero. Whether they sell 100 ads or a million ads, it won’t cost them any money. It’s pure profit,” said Yves Le Breton, Global Head of E-Commerce at Oliver Agency.

Retailers are expanding their advertising offerings

They move beyond their websites into areas like connected TV, product sampling, and in-store placements.

Weinheimer said large retailers can expand their physical stores by limiting check-in, digital signage, and audio and video ads targeting in-store shoppers.

Take Walmart, for example, which, through The Trade Desk, allows advertisers to buy ads across connected TV, mobile, and desktop, he said. Walmart also sells ads in its physical stores, on wall-mounted televisions and self-checkout kiosks.

But with the market becoming increasingly crowded, every retailer must determine its distinct value to compete.

Diana Gordon, senior vice president of e-commerce and market strategy at agency 3Q Digital, expressed doubts that opponents such as dollar stores could become big advertising sellers, given the low-consideration nature of their transactions. She also asked about the value of advertising platforms from drugstore chains: “There’s so little scope and reach. Is the CPM premium we’re paying really worth?”

Most retailers are still in the early stage of selling ads, with little data on what advertisers can expect to get from their spending, said John Lodz, CEO of media intelligence agency Arm Candy.

However, the field is open, and not just for retailers.

BCG said airlines, for example, could generate up to $100 million in additional media revenue due to their wealth of data, potential customer identification and matching, robust loyalty programs, and the ability to reach consumers from initial booking to post-travel. BCG also reported that airlines already have marketing partnerships with hotels and credit card companies.

“The opportunity for retail media extends far beyond retailers,” said Lipsman of Insider Intelligence. “Near-term examples are commerce brokers like Uber, DoorDash, and Gopuff. But there are also commerce platforms that serve industries like travel and entertainment, automobiles, and financial services that can find their way into space. These are huge advertiser categories that have been mostly outside looking inside.” .

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