The Rise of Retail Media Networks: What Supermarkets Need to Know

BACKGROUND

As the fastest growing ad channel in the U.S., retail media is revolutionizing the advertising landscape. eMarketer referred to retail media as the third big wave in digital advertising, following search and social media. They’re predicting that total U.S. retail media ad spend will reach $130 billion by 2028, up from $55 billion this year. At that rate, retail media will represent nearly a quarter of all U.S. media spend by 2028.

For supermarkets, retail media networks represent a new revenue stream with the power to transform how they engage with both brands and consumers. Supermarkets that embrace retail media will be well-positioned to thrive in the ever-evolving digital marketplace.

WHAT IS A RETAIL MEDIA NETWORK?

A retail media network (RMN) is a retailer-owned advertising platform, where marketers can purchase digital advertising directly from a retailer, while leveraging the retailer’s first-party data for audience targeting and reporting. Retail media networks can include a wide range of advertising channels, which the IAB categorizes into three buckets:

3 TYPES OF RETAIL MEDIA

• Onsite:

  advertising that occurs on a retailer’s owned properties, such as their website and mobile app. This can include display ads, search ads, sponsored product listings, and more.

• Offsite:

  advertising on a digital property that is not owned by the retailer, such as social media networks, connected TV, and third-party websites (e.g., espn.com).

• In-store:

  advertising that is displayed in a physical retail store, such as product displays, signage, and video displays.

Across all digital channels within a retail media network, advertising efforts are often directed by a retailer’s first-party shopper data, giving marketers access to highly targeted and otherwise inaccessible audiences.

WHY ARE RMNs IMPORTANT TO SUPERMARKETS?

With the growth of e-commerce and uncertainty surrounding the cookie, retail media networks are a powerful tool for supermarkets to strengthen their relationships with brands and consumers, while building a new and high-margin revenue stream. While the gross margin for grocery sales is typically around 20%, research from BCG suggests that retail media margins are far more robust, ranging from 70%-90% for advertising on a retailer’s owned media channels and 20%-40% on other offsite channels. With retail media spend expected to grow over the coming years, supermarkets have an opportunity to diversify their revenue streams by monetizing their existing first-party data and digital real estate.

Given the huge economic potential of RMNs, it’s no surprise that Kroger and Albertsons cited retail media as a primary reason for their potential merger. A press release from the two grocery chains highlighted retail media as an “alternative profit business” with “higher-margin revenue streams.” Combined, the two grocery chains could reach up to 85 million U.S. households, creating a RMN with the scale and shopper insights to compete with the likes of Amazon, Walmart, and Instacart.

Speaking of Instacart, the leading grocery-delivery service has shown that they’re all in on retail media, building an advertising business that’s already more than a quarter of the size of Walmart’s. According to eMarketer, it’s expected to grow another +43% this year, generating ad revenues of $1.14 billion. On multiple occasions, Instacart has demonstrated their commitment to retail media growth and innovation. In 2023, they partnered with Roku to help grocery advertisers build a direct link between connected TV ad exposure and CPG purchases. In July 2024, Instacart launched shoppable YouTube ads, with audiences powered by Instacart’s first-party data and orders fulfilled through their delivery network.

Albertsons Media Collective also made retail media headlines in 2024, announcing a partnership with the commerce media company Criteo. Albertsons began using two of Criteo’s self-service advertising platforms to support their onsite display offering, with plans to expand to new ad formats like sponsored video and commerce display.

While Amazon is by far the largest retail media network in the U.S., their limited grocery footprint offers a valuable opening for supermarkets. As demonstrated by the examples above, many supermarkets are recognizing the high stakes opportunity and gaining a competitive edge by leaning into retail media.

KEY BENEFITS OF RETAIL MEDIA

Access to First-Party Data

For marketers, a primary benefit of retail media is the ability to leverage a retailer's first-party data for executing well-informed and highly-targeted ad campaigns. In many cases, supermarkets are sitting on a treasure-trove of first-party shopper data, accumulated through loyalty programs, rewards systems, and store credit cards. This data contains rich insights on consumer shopping behaviors which can act as invaluable signals of future intent. In the context of retail media networks, leveraging a supermarket’s first-party data allows marketers to reach high-intent audiences, even in offsite environments like social media or connected TV. In doing so, marketers can unlock a high level of precision, delivering the right message to the right customer, often when they’re already in a purchasing mindset.

Measurement & Accountability

Beyond audience building, first-party data can also enable closed loop measurement on retail media networks, allowing marketers to analyze the effectiveness of their retail media efforts. Because retailers own both the audience targeting data and the sales data, there’s a direct link between ad exposure and sales, even if the purchase occurs in-store. This unique ability to report on SKU-level outcomes can empower marketers to evaluate the performance of their retail media advertising, gain insight into consumer behaviors, and optimize campaigns based on transactions. KPIs for retail media can include ROI, ROAS, incrementality, repeat purchase rate, % of new buyers, and more. According to Deloitte, 71% of retailers consider themselves to be very or extremely effective at conducting closed loop measurement.

Armed with the ability to make data-driven decisions, 69% of marketers reported to McKinsey that they’ve experienced better performance on retail media networks compared to other media channels.

This was validated by an analysis from Kroger Precision Marketing, which found that their first-party audiences achieved an average sales 5.1 times higher per 1,000 households, compared to third-party programmatic audiences. In the test, Kroger was able to deliver the same sales volume as a third-party audience, while serving only 51% of the impressions, a strong indicator of retail media’s efficiency. Additionally, Kroger’s audiences had a 40% higher lifetime value than those from third party campaigns.

Proximity to Point of Sale

For many marketers, advertising on retail media networks represents a chance to engage with consumers when they’re already in a purchasing mindset, close to the point of sale. When ads are displayed within a retailer’s ecosystem (i.e., their website or app), the messaging is more likely to feel relevant to shoppers and ultimately drive conversion. For example, imagine browsing for dinner ingredients on a retailer’s app and seeing a timely ad for a new pasta sauce. You might be more inclined to add the sauce to your cart in that moment, given its relevancy. This type of personalization not only benefits campaign performance, but also enriches the customer experience, fostering more meaningful connections between brands and consumers.

Omnichannel Marketing Opportunities

While retail media may have a reputation for driving conversion, many RMNs are comprised of a diverse range of channels that can be leveraged across the full marketing funnel. The key to a successful omnichannel retail media campaign lies in the retailer’s first party data, which acts as a common, unifying thread across the entire funnel. This enables marketers to create a holistic consumer experience, bridging both in-store and online touchpoints. For example, within a single retail media network, a campaign could include connected TV ads to help drive awareness, social media ads for consideration, and onsite display ads for conversion, even if the purchase ultimately occurs in-store. Since all channels would be fueled by the retailer’s shopper data, a marketer could receive reporting with valuable insights into shopper behaviors and campaign performance across the full marketing funnel. As shopping habits continue to evolve and marketers strive to create cohesive brand experiences, it will be important for supermarkets to build out an omnichannel offering.

LOOKING AHEAD

For all stakeholders, the future of retail media is bright and full of possibilities. For supermarkets, retail media represents a high-margin revenue stream and a chance to deepen connections with both shoppers and brand partners. For marketers, retail media offers access to valuable first-party data and the potential to build holistic omnichannel experiences. For consumers, all of this translates to a better, more personalized purchase journey. That said, the rapid growth of retail media has caused significant changes that retailers and marketers are still working to navigate. The supermarkets that commit to innovating and leading the way through this growth period will be best positioned to reap its many benefits.