Aside from artificial intelligence, perhaps no topic generated as much buzz among Groceryshop 2023 speakers and attendees as retail media.
Over the last several years, elevated digital engagement by consumers has swayed grocery retailers to boost their retail media capabilities to make it easier for CPG partners to reach customers across their online and brick-and-mortar properties with brand marketing. The prize: a robust alternative revenue stream to hoist profits and help fund key e-commerce, technology and business investments.
Just a sampling of grocery retailers upping their retail media game recently include Hy-Vee, Albertsons Cos., Ahold Delhaize USA, The Kroger Co. and Giant Eagle, among others. At Groceryshop, held last week in Las Vegas, Hy-Vee perhaps made the biggest splash with the official launch of its own retail media network, called Hy-Vee RedMedia.
Retail media growth has taken off in the past few years. EMarketer estimated that U.S. digital retail media ad spending jumped 57.3% from $13.23 billion in the 2019 pre-pandemic period to $20.81 billion in 2020, surged another 49.3% to $31.06 billion in 2021 and then climbed 31.4% to $40.81 billion in 2022. The e-commerce researcher projects the nation’s digital retail media ad expenditures to rise 25.8% to $51.36 billion for 2023 and increase a further 19.3% to $61.15 billion for 2024.
Across that five-year time span, retail media’s share of digital ad spending is slated to grow from 10% in 2019 to 19.1% in 2024, according to eMarketer.
Pandemic spurs e-commerce—and digital media marketing
“The pandemic was definitely a global catalyst for e-commerce, and that led to a lot more activity on your website,” Matt O’Grady, Americas president of customer data science firm dunnhumby, explained in an interview at Groceryshop. The increased activity also included greater use of loyalty cards and tracking of repeat shoppers. “So the repeat buy and home delivery or pickup forces [consumers] to go to a website and then see sponsored ads or banner ads.”
Though 85% of sales still occur in-store, the pandemic lifted grocery e-commerce from around 2% to 3% of sales to between 10% and 15%, in turn providing a tremendous boost to retail media and creating more urgency among grocers to get their share of this new revenue pie, he noted.
“It’s going to be bigger than linear TV by the end of next year,” O’Grady said. “Having been around media for 25 years, I’ve never seen something grow this fast.”
Still, for retailers, the process of building a retail media business is no cakewalk, O’Grady noted. “It’s quite confusing for them to now have to deal with multiple new vendors that they’ve never really dealt with before,” he said.
Starting at the “beginning of the retail media journey,” that includes capabilities to determine target audiences, sell advertising opportunities, incorporate consumer research insights, sell media inventory, run campaigns and, finally, measure the return on ads, according to O’Grady.
“You have to actually sell the [media] inventory somehow and use ad servers or demand-side platforms or sell-side platforms, which is all very new to the retailer,” he said. “After all the super-regional retailers, it’s a challenge to figure it all out. And it’s not only dealing with the vendors, but it’s also the ad operations and ensuring that what was sold was delivered and whether you want a salesforce or a third party to sell the ads. So it’s a very attractive new source of revenue for retailers, but it’s not without its hurdles.”
Hy-Vee debuts RedMedia brand
Midwestern grocer Hy-Vee decided that Groceryshop offered an excellent venue to premiere Hy-Vee RedMedia and the retailer’s capabilities in the retail media space, Hy-Vee RedMedia President Jason Farver told Winsight Grocery Business at the show.
“We’ve actually been working on parts of retail media for a number of years. We’ve been partners with CitrusAd—one of the first in the U.S.—for quite a while, but really we’ve been standing up our full team in earnest over the past year,” he said. “So we’ve been meeting with brand partners and explaining retail media for probably the last six months, and this [Groceryshop] was a good place to be able to come out and really talk about what we’re doing with retail media.”
The diversity of Hy-Vee’s business is a core selling point, Farver noted. The West Des Moines, Iowa-based company reaches millions of consumers annually through a portfolio of offerings that span food and grocery, pharmacy, nutrition, specialty health care, banking, manufacturing and financial services, construction, and wine and spirits, along with digital-driven ventures such as Hy-Vee Aisles Online, WholeLotta.com, Vivid Clear Rx and RedBox Rx.
“We have a unique value proposition. There are a lot of retail media companies and more springing up every day,” Farver said. “But if you look at Hy-Vee, it’s way more than a grocery retail company. When you start to peel back the onion, you see how many different businesses that Hy-Vee is actually in. And so there are a lot of layers to those different businesses that give us a lot of powerful insights and information that makes us unique and different.”
Overall, Hy-Vee operates more than 285 retail stores—including grocery, pharmacy and convenience/fuel locations—in eight Midwestern states and generates annual sales of over $13 billion.
“The other disruptor for Hy-Vee is that we’re big and have scale, but we’re also small enough to be agile,” explained Farver. “A lot of the brands are excited about testing and learning inside our retail media network because we can pivot. We can try something to see if it works or try something else, whereas with some of the bigger retail media networks it’s a high cost to enter and maybe not as flexible as us.”
For CPG brand partners, Hy-Vee RedMedia’s chief goal is to provide a better use of advertising dollars, Farver emphasized.
“So it’s to better know customers and better personalize conversations, advertising or promotional deals to customers with relevant content—and then also to be able to close the loop on, did that investment and advertising actually raise my sales?” he said. “So the big focus is return on investment or incrementality, did it actually move my sales up or not? We feel like we have some really good reporting and capabilities to be able to show that.”
Albertsons drives retail media standardization
In late June, Albertsons Media Collective—the Boise, Idaho-based grocer’s nearly two-year-old retail media unit—unveiled a preliminary framework to help standardize specifications, methodologies, terminology and disclosures across retail media networks. Then earlier this month, the Interactive Advertising Bureau announced that it would incorporate Albertsons’ retail media standards work into IAB’s efforts.
To provide continued support, Claire Wyatt, vice president of business strategy and marketing insights for Albertsons Media Collective, was tapped as co-chair of IAB’s Retail media Network Committee.
“There’s this big movement towards standards. And one of the things that I thought was really interesting is that if you looked a couple of months ago, a lot of people were saying we should standardize, but nobody was actually doing anything. So our push to ‘this is what it should be’ and get the momentum going and this collective realization in the industry of, ‘we can actually do this and this might actually happen’ has been really exciting for us,” Wyatt said in an interview with WGB at Groceryshop. “Retail media is a really interesting industry and we are all competitors, but we all also want to work together to make the space better.”
Albertsons’ first version of the framework, detailed in an Albertsons Media Collective white paper, focuses on product characteristics, performance measurement, third-party verification and capabilities.
“When we thought about the framework, the position we started from is that each retail media network is its own special snowflake. Right now, we are all very, very different. But the issue is that it makes it very hard for brands to work with us, and then the end result of that conversation is, ‘It was so hard. so we just decided not to invest,’” Wyatt said.
The explosion of digital retail media has pushed advertisers and agencies to allocate significant resources to produce varying ad formats and transact, measure and integrate insights from each platform, Albertsons noted in announcing its framework. As a result, advertisers are encountering snags in cross-platform comparison, limited transparency and inconsistent reporting.
“As we think about standardization, the places that we focused were really the points of friction for the industry as a whole, which prevents these brands from investing in general. The four places that we focused were product capabilities—really just creative standardization—measurement, third-party verification and capabilities. So thinking about the ways of working, how retail media networks work, what types of third-party technologies they use, how often you get data, what you can expect from an account team, what sort of support you get—those different pillars that caused points of friction for our clients,” Wyatt explained. “One of the things that we were excited to partner with the IAB on, and have conversations about with other retail media networks, brands and agencies, is that everybody was seeing the same thing.”
Another impetus in the push for standards is that what seems to be the state of things in retail media today can transform tomorrow, Wyatt added.
“We all are sort of in this stage of trying to figure out what to do and what this space could be,” she said. “So I would say the way that retail media exists today, I guarantee you even in the next six months, it will not be the same. Somebody is going to make an announcement where you’re like, ‘They’re doing what? Oh, my gosh. And we’ll all be like, ‘Wow, we’ve got to pivot.’”
Ahold Delhaize builds up U.S. retail media operation
East Coast supermarket powerhouse Ahold Delhaize USA is upping the ante in retail media by growing its nearly year-old AD Retail Media network into an end-to-end, in-house retail media business, now led by new Senior Vice President of Retail Media Bobby Watts.
In building out AD Retail Media, ADUSA aims to engage omnichannel customers in a bigger way as it expands. The company’s operations include the chains Stop & Shop, Giant Food, Giant/Martin’s, Food Lion and Hannaford—and their respective e-grocery brands—plus online grocer FreshDirect, digital innovation unit Peapod Digital Labs, services arm Retail Business Services and distribution/logistics subsidiary ADUSA Supply Chain.
“When you think about the future of retail media, you now have the opportunity to connect with consumers in a very unique way and in a smart way. We have all this rich, robust data. We have their shopping history, and we know what they like to buy. We can really bring ads that feel relevant to them and do it in a data-privacy-safe way,” Watts said in a conversation with WGB at Groceryshop.
“We want to make sure that the ads that we’re serving are meaningful to them and do it in a way that allows us to connect all the channels,” he noted. “Because you’ve got off-site media, digital out-of-home, on-site display, sponsored search in-store, and then you connect all that to the merchandising team and the commercial plan they’re building. So a site display, a TPR schedule and then an ad flyer with that, too, for the consumer. That’s magic, right, because you’re reaching them across the full path to purchase.”
When ADUSA announced AD Retail Media—part of Peapod Digital Labs—back in October 2022, the company said the retail media business would be advanced via a unified on-site and off-site platform to deliver one point of activation and measurement for CPG partners; proprietary data to create more relevant ads and improve returns on ad spend; one dashboard for transparently measured campaign results, spanning in-store and online transactions; and self-serve control for brand partners reach customers in a simpler and targeted way.
“For us, now having in-house capabilities and all those channels, we can really sit down and build a strategy with an advertiser,” Watts said.
And that’s what brands have been asking for, he added. “What I hear from a lot of our CPG partners is, ‘Bring me retail media capabilities as part of an omnichannel approach.’ So [they want to] make it part of the business planning process, where we’re sitting down and building a truly holistic, omnichannel JBP and having retail media and shopper marketing, loyalty and all those parts work together and have one conversation around that.”
Though Watt said retail media brings big potential as an alternative revenue stream and helps “offset some of the profitability strain from running an e-commerce business,” he sees it as a way to better serve today’s customers.
“Our consumer base is ready for this. When I think about the shopper, if you put the customer at the center of what we’re doing, we have—at least for Ahold Delhaize—33% of our consumers digitally engaged. The print circular is going to go away. At some point, the distribution channels are drying up. So I have to continually get my consumers more and more digitally engaged. Retail media is a fantastic way to do that in partnership with loyalty and shopper marketing and the other things we do. Because at the end of the day, if get your digitally engaged consumer count really high, the lifetime value is there with them. You’ve got them super sticky, and then you can engage with them in a lot of different ways.”
In his keynote at Groceryshop, ADUSA CEO JJ Fleeman gave a shoutout to Watts, who was sitting in the audience, and noted AD Retail Media’s strong progress.
“Our digital media income is up about 70% year over year. I think we’ve done a nice job of balancing our in-house talent along with being humble learners and partnering with some experts from outside of the food retail space, which has given us a really strong capability set,” Fleeman said. “Of course, we’re really maximizing that opportunity, partnering with our CPGs, allowing them to work with our local brands, but also being able to leverage the full size and scale of Ahold Delhaize.”