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Wholesalers & Distributors

Fight shrinking margins by monetizing media assets

Julie Jeancolas, Global Head of Media Partnerships for dunnhumby, discusses technology advancements and connecting with today’s consumer.
Photograph: Shutterstock

Amid growing pressure from the discounters and both traditional competitors and new market entrants, retail is in the midst of significant disruption. At the heart of this disruption is rapid technology advancement and changing consumer behavior, making the Always On, Connected Consumer a hard-to-reach, ever-moving target.

Also shaking the retail industry to its core, though, was the Great Recession of 2006-2008. Consumers became focused on finding the lowest prices, but also expected high quality, so they began searching around for retailers that met their needs. Retailers had to adjust to this shift in shopper behavior, while gross profit margins took a major hit. According to the Census Bureau, gross margin as a percentage of sales dropped from 28.9% in 2007, and a decade later, have only climbed back up to 27.1% as of 2017.

gross margin as percent of sales

An opportunity is emerging for retailers to fight back against their shrinking margins by taking on the role of media publisher to create new revenue streams. Look no further than the success Amazon has had as a media network. eMarketer, a research provider for a number of industries, recently predicted that nearly 10% of U.S. total ad spend in 2020 will go to Amazon, doubling its revenue earned from media and placing it alongside major media players such as Google and Facebook (whose core business is media, not retail). This essentially makes media the most profitable business line for Amazon, and other companies including Best Buy and Walmart have also followed suit and are growing lucrative ad businesses.

Data: the most valuable asset

Coming back to publishers, though, companies need to think about what truly separates the retailer-as-a-publisher from a traditional publisher. It’s the absolute certainty of the customer’s shopping behavior. Just think of the data and insights provided by loyal browsing compared to the actual

products bought. Adding in behavioral patterns, insights are deeper and more complex. Recurring trip missions and the implications of breaks in that pattern, the context of historical behavior and the meaning of new purchases are all things that retailers can analyze, knowing their customers and their specific habits and needs better than anyone else. If retailers have all that data, why not use it to deliver the best possible experience for customers across media channels?

Why retail media delivers real value

Retail media benefits CPG brands. Rich data assets telling us where, when, what and how customers shop, if connected, can enable retailers and CPG brands to drive huge gains in media efficiencies and effectiveness. Across websites, mobile applications and loyalty programs, and in-store, retailers own a rich inventory of media properties with close proximity to the “moment of truth.”

Not only can they plan campaigns and buy media based on actual shopping behavior (not based on propensity to buy from declared panel-based data), but they can close the loop between their online ad campaigns and in-store sales. Linking online ads to store purchases is the stuff of dreams for most media owners. Remember when Google partnered with Mastercard? In reality, though, retailers have always been able to provide that feedback loop.

Retail media benefits consumers. Access to better data means more tailored and personalized communications for consumers.

With the move of online players into the offline realm, traditional retailers need to adapt and evolve to thrive and survive. Some have decided to join forces to grow, while other retailers are becoming publishers. In this data-driven world, traditional publishers are no longer the only media companies. Retailers can take a page from their playbooks to leverage and monetize their own data assets the same way publishers do. With the right, data-driven approach, this new, inter-connected ecosystem—from customers to advertisers to retailers—can be a win-win-win for all.

This post is sponsored by dunnhumby

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