Retail media in real life: stores are the next big retail media channel

Retail media in real life: stores are the next big retail media channel

By Sumant Yeramilly

Retail media networks are on a hot streak: With Walgreens, CVS, Lowe’s and Albertsons recently joining the party, the top 10 largest retailers in the US all operate their own retail media networks today. Globally, retail media is now a $100 billion industry, according to a recent report by GroupM, and it accounts for 18% of all digital ad spending around the world. It's not all about Amazon anymore.

A $100 billion industry is impressive, but I’m convinced we’ve only scratched the surface. While e-commerce grew dramatically during the pandemic, more than 85% of all retail sales in the US still take place in the physical world, not online. In-store shoppers are on a mission and ready to buy. The cash register is ten feet away. The retail media opportunity inside the store is enormous, but it’s largely untapped at the moment.

McKinsey puts the number for what it calls commerce media at $1.3 trillion by 2026. How do we get there?

Key drivers of retail media adoption

Online, retail media networks are growing in popularity among advertisers because of the pending deprecation of third-party cookies and other intrusive digital identifiers. Brands are looking for new ways to reach consumers using first-party data. Retail media networks offer a type of digital advertising that is more considerate of a consumer’s privacy, more relevant to their interests and ultimately more effective for brands looking to boost the performance of their marketing investments. It’s no surprise that 80% of advertisers are planning to increase their retail media spend over the next 12 months, most of it net new spending.

But it’s not just brands that benefit from retail media. The economics are very compelling for retailers too: While a top-performing grocery chain might have a gross profit margin of 20%, and a home improvement store 34%, BCG puts the margin for their retail media business at 70%-90%. With inflation pinching profits at both ends of the supply chain—wholesale goods are more expensive and customers are growing more price-sensitive—investing in retail media capabilities can be a lifeline for retailers.

So how do we take the benefits of retail media inside the store?

The case for in-store retail media

It’s one thing to reach a consumer on a website when they’re still sorting out their options, or on an app when they’re going about their daily lives. It’s another thing entirely to reach them with a carefully tailored message at the point of purchase, and with a live salesperson (a barista at Starbucks, a budtender at Cannabist, a beauty advisor at Sephora) close by to answer all their questions.

The key to making retail media work inside the store is to make it valuable to consumers. People are apprehensive about targeted advertising but they love personalized service. There’s a disconnect between the two because the value proposition of targeted advertising isn’t entirely clear to them. This is where in-store retail media can help.

People generally have an idea of what they want when they walk into a store, but that doesn’t mean that they’re aware of all available options, or that they wouldn’t appreciate relevant offers either. What if there was an interactive display in the store that they could use to enter preferences, discover products and sign-up for loyalty rewards? That screen could also be used to present them with relevant brand offers. By tying targeted advertising to in-store personalized service, an interactive screen could dramatically improve the effectiveness of a brand’s media and offer a new stream of revenue for the retailer.

At the store, the proximity of the advertising opportunity to the point of purchase would create a virtuous loop across the whole retail media ecosystem. With the outcome (like a sale or promotion sign-up) so close and immediate, it would become much easier for brands to connect the dots, understand which aspects of their campaigns and personalization efforts are paying dividends, and make the right adjustments before it’s too late. For their part, retailers could quickly size up what segments of their customer base resonate better with this or that brand, and use that feedback to fine-tune how they monetize those audience segments. And customers would win too with better product matches, more relevant offers and top-notch customer service.

It’s a win-win-win for brands, retailers and consumers.

Retail media in real life: stores are the next big retail media channel

What’s the hold up?

With such clear benefits across the board, it’s a wonder that in-store retail media isn’t more developed today. But it’s not easy to do, and do well. Traditional advertising experiences at store shelves, end caps and checkout drive awareness, but they aren’t very effective at driving engagement or conversion. Interactive screens promise to take in-store advertising to a whole new level, but they require significant technical knowledge to develop and a heavy infrastructure lift to deploy.

For starters, enterprise-grade hardware and software are needed that works 100% of the time. A blank screen or a device that requires constant rebooting is not a great customer experience. Then, the software must be up-to-date and able to reliably deliver ads, measurement, impressions, campaign flighting and reporting. Last but certainly not least, full support is required from a seasoned ad operations and sales team to sell media placements and run client campaigns.

Having the right partner is crucial.

At Fyllo, we provide everything needed for retailers to execute a retail media network inside their stores. The Fyllo Retail Suite is a screen-based hardware and software solution that ushers in a new era for retailers on two important fronts: in their ability to interact with customers, thanks to product discovery and personalization at the point of sale; and in their business relationships with brand partners, thanks to the best-in-class targeting and insights of Fyllo Connect, the innovative retail media network embedded in the Fyllo Retail Suite.

We’re already bringing these new capabilities to the in-store experience at top cannabis retailers like Columbia Care, and we can do it for you too.

Request a demo and we’ll show you how we can help you unlock new growth in no time.

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