Retailers in recent months have gushed about the profitability of their media networks. Walmart said it generated $2.1 billion from its ads business last year. Nordstrom announced its retail media network brought in $40 million. Macy’s fetched more than $105 million from its own media offering in 2021. And they’re not alone—25% of retailers received more than $100 million in revenue from media networks last year, according to Forrester.

The windfall has made the ad networks one of the biggest growth trends in retail today—and given the sector a lucrative new revenue stream. However, with nearly every retailer now boasting its own ads program, the competition for an essentially fixed share of brand budgets is heating up.

“The big question is, how do you scale from here?” said Andrew Lipsman, principal analyst of insider intelligence at eMarketer, which predicts that retail media will account for more than $50 billion and receive nearly 20% of all digital ad spend by next year.

The landscape of retail media networks is more cluttered than ever. Every month or two a new retail media network emerges, Merkle Co., the Dentsu-owned marketing agency, reported late last year. Those vying for growth are not limited to grocers like Kroger, or mass-market stores like Target—chains including Best Buy, Dollar Tree, Walgreens and Lowe’s all have their own programs in which they use their own valuable shopper data to run targeted ad campaigns for brands.

The media offerings were initially limited to selling a vendor’s ads on a retailer’s own website and later grew to include some ad inventory outside of their own properties. But now more retailers are increasingly turning to other forms of media offerings, such as in-store digital ads, product sampling and campaigns on connected TV—and that is where experts say opportunities lie for expansion. At the same time, retailers have a chance to improve personalization strategies to better attract shoppers on behalf of brands.

"Retailers have to get more savvy at how they’re looking at their customer from end-to-end,” said Sherry Smith, executive managing director of global retail media at Criteo, a platform that partners with retailers such as Best Buy, Michael’s and Lowe’s on media programs. She called it a "3.0" stage of development, noting that progress has been “turbocharged."

Get your ticket for the April 5 Ad Age Next: Retail event at AdAge.com/NextRetail.

Budgets under stress

The competition is heating up against a backdrop of rising consumer prices and supply chain constraints, two trends that could hamper brand budgets. The Consumer Price Index was its highest level in four decades at 7.9% last month as prices on essentials like food and household items soar.

Swiftly, a nearly five-year-old startup, is one of a host of new companies that partners with grocers and drugstores such as Family Dollar on building out their e-commerce sites and also their media network capabilities for their owned channels. The company, which recently raised $100 million in a Series B round of funding, said it is seeing more interest from retailers eager to navigate the crowded field, particularly at a time when shoppers are limiting their spend.

“Consumers have shown that as prices start to rise, they’re hungry to be able to stretch their dollars as much as possible,” said Sean Turner, co-founder and chief technology officer, noting that retailers can take advantage of this hunger by offering better services around discounts and inventory on their owned channels. For example, if Tide is running an advertising promotion through a retailer’s media network that offers $1 off a product, Swiftly will help the retailer show a shopper exactly how much the product will be with coupons and if it is in stock.

“We don’t just provide the advertising layer, but we also provide the retail platform that sits underneath that advertising layer,” said Turner. “That’s how you’re able to take an ad placement and make it something that is native to the platform and feels like content, it doesn’t feel like spam.”

Delivering on in-store

One of the biggest opportunities experts say retailers are exploring is in-store, both in terms of ads and data. Despite the explosive growth of e-commerce during the pandemic, the bulk of grocery shopping still takes place within the confines of brick-and-mortar and retailers are offering brands new ways to reach those shoppers. Such offerings include TV display screens in stores, an initiative startups such as Cooler Screens are experimenting with, as well as in-store audio ads. 

Albertsons Co., the parent of grocers including Safeway and Jewel-Osco, recently hired Kristi Argyilan, who ran Target’s media business Roundel, to build up its own media network. Albertsons Media Collective went live a few weeks ago, said Argyilan, who is senior VP of retail media at the Boise, Idaho-based company. For brands, Albertsons currently offers “the opportunity to participate in in-store sampling and audio and is planning to roll out additional initiatives later this year,” she added, noting that in-store “creates engagement amongst our customers and opportunity for brands.”

At Criteo, Smith said the company is fielding a lot of requests from retailers with gas stations about incorporating digital screens at the pump for advertisements.

“They’re being creative and thinking about how do they tie it across the board,” she said. Of course, effective measurement of such advertising is contingent on knowing who shoppers are when they transact. Encouraging shoppers to use loyalty programs at checkout, versus cash, can help identify customers and provide more data.

“The moment you start to show the impact of an online ad exposure on those in-store sales it completely opens up that ROI equation and it starts to bring in a lot more investment,” said Lipsman, noting that the strategy of bringing in offline sales data for the purpose of targeting and measurement is still nascent. “E-commerce offers a tight closed loop—when you buy a search ad on a retailer’s web site, you see a closed loop but it’s much harder and the systems aren’t 'architected' to measure sales at the store,” he noted.

In addition, marketers need to be careful they are not being overly intrusive with in-store displays. Cooler Screens, which shows digital ads on freezer and refrigerator doors at some Walgreens locations, recently caught flak from confused customers, for example. One shopper complained about being constantly advertised to, according to CNN. "Plain glass works just fine," wrote one consumer on Twitter.

Turning to TV

Connected TV is another category ripe for retail media expansion, judging by the growing list of new retailer partnerships. Several retailers are looking to tie their first-party data into streaming services. Amazon recently announced it has the rights to "Thursday Night Football" in a deal with the NFL lasting through 2033. Walmart’s deal with the Trade Desk, in which the Bentonville, Arkansas-based chain called out access to connected TV capabilities; Kroger’s partnership with Roku; and Target’s work with Disney will all grow media opportunities in the connected TV landscape.

“We’re going to see a lot of potential with that inventory powered by retailer data—the key piece here is the ability to not just target the right audience but measure closed-loop performance,” Lipsman noted. “The ability to bring in that targeted measurement to TV-like inventory will be the holy grail for brand marketers.”  

Some retailers are also expanding into product sampling as a form of advertising for brands. Gopuff, the Philadelphia-based delivery company, has been offering samples from its brands for years, but the service recently caught on with advertisers as part of Gopuff’s new ad platform with CitrusAds that debuted last year. In a campaign, Gopuff customers receive their regular order, plus a related sample, like a beverage or a snack, with a QR code to order the new product. While sampling has been historically difficult to track in stores, Gopuff is able to offer measurement data to advertisers because its customers are already in a consumption mindset and more likely to place an order, according to Daniel Folkman, Gopuff's senior VP of business.

“The likelihood that you might try it in that moment is high,” he said. Gopuff recently ran a campaign timed to the Super Bowl for Tums that included sending samples to customers. Folkman said that 80% of customers who repurchased the sample had never tried Tums before. Gopuff is continuing to explore unique ways to expand its sampling capabilities, including options like opt-in sampling.

“It’s a really good opportunity for brands to introduce themselves to new customers—for the customers to try [the product] and for [the brands] to retarget those customers with other types of campaigns on the platform,” Folkman said.

In addition to expanding into new marketing channels for brands, retailers should also be thinking about improving their personalization strategies to add value to the shopping experience and be less obvious about running ads, experts say. Shoppers have become more sensitive to obvious advertising, exemplified by the recent criticism of the digital screens at Walgreens. The richer the first-party data a retailer has, the easier personalized and targeted advertising will be, said Criteo’s Smith. Such data will prove invaluable as the cookie disappears. Retailers will need to find a balance between serving their advertiser clients and also making sure their shoppers get the best experience as well.

“In order for retailers to make sure they capitalize on the [ad] spend, they have to act like a publisher—they’re going to have to make sure they have highly relevant targeting making sure it’s easy for agencies and brands to buy,” said Smith. She added, “The more that the retailer can ensure that they are being helpful in the customer journey, the better for the overall experience.”

At Albertsons, the company is exploring new partnerships with companies like Firework, the livestream shoppable video company, to bring more shoppers to its site and entice advertisers. The initiative is one Albertsons points brands to as a success story, Argyilan said.

“There’s an untapped sales opportunity for them to reach our customers with the right product or brand message in their shopping journey and a big part of our job is to help brands understand where they fit into that journey today and appreciate all that’s possible in the future,” she said.  

Get your ticket for the April 5 Ad Age Next: Retail event at AdAge.com/NextRetail.

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CLARIFICATION: Macy’s generated more than $105 million from its retail media network in 2021. This amount was not included in an earlier version of this story.