Grocers are following in Amazon’s footsteps in their pursuit of the retail ‘holy-grail’
Spotify users are known to flood social media in the last weeks of the year with their favorite songs, artists, and genres.
Spotify Wrapped is a marketing tool that allows users to boast about their listening habits, or lament the fact that their children have taken over their account.
Spotify has proven to be a goldmine of data that allows it to connect advertisers to the right audience.
It has been so successful, that it has inspired a number of copycat campaigns. The biggest supermarkets in Britain are among those who have jumped on board.
Based on data from the loyalty programmes like Tesco’s Clubcard or Sainsbury’s Nectar it is clear that supermarkets are trying to capture the current cultural mood.
It also reveals a deeper trend that is affecting retail. In an era of increasing costs and shrinking margins, supermarkets are looking for new revenue sources. They have found one of their most valuable resources: data.
Retailers are able to cash in on detailed information about customers through loyalty cards. A new breed of advertiser has emerged, turning supermarkets into media giants.
David Sables is the chief executive at Sentinel Management Consultants. He says, “It’s a very personalised and targeted way for suppliers to market their products towards their customers.”
It’s a game-changing marketing tool that is incredibly useful. This is a game-changing, incredibly useful marketing tool.
Marketing has been used by supermarkets for a long time to squeeze more money from their suppliers.
Since the 1980s many stores charge “slotting” fees that ensure prominence on the shelves. Brands also pay for promotional displays to help make their products stand out.
According to analysts, this activity could account for as much as 10% of the profits made by major supermarkets. Many retailers have been looking to expand their media footprint over the past few years.
Tesco announced in November of last year that it had installed 1,800 advertising screens across its stores, an increase from 400 just a few months earlier. Tesco is the first supermarket in the world to offer advertising on handheld scanners.
Sainsbury’s plans to double the number of screens in its stores from 320 up to 800. Morrisons launched a trolley advertising network last week.
In-store advertising is a great way to promote new products and special offers at the point of purchase. Data-driven marketing offers many opportunities, but this is just the tip of iceberg.
With millions of customers, supermarkets have a unique opportunity to collect a wealth of information by tracking what and when shoppers purchase.
It allows supermarkets not only to build up a detailed image of their customers’ habits, but to also offer these data to third party brands to advertise in-store and online.
Amazon is often cited as the innovator of this new media format. According to GoWit Technology, the US tech giant had a 54pc market share in digital retail media last year.
The looming demise of web cookies has shifted the importance to first-party data, such as the retailer’s, that helps track users on the internet.
In the past few years, UK supermarkets began to catch on.
Alex Walker, Havas Market UK’s managing director, says that many retailers are facing increased logistics costs, excessive inventory, and other cost pressures following the implementation of Covid. Retail media will be seen by many as an opportunity to win quickly.
Loyalty cards are at the core of this, as they effectively force customers to hand over their data in exchange for discounts. Other innovations such as email receipts also help shoppers link their purchases.
Tesco has more than 21,000,000 customers who use its Clubcard Programme. It is often regarded as a leader in this field.
Nick Ashley, Tesco director of media, said: “We are brilliantly positioned to offer our customers a tailored experience. They can buy the products they desire, whenever and wherever needed.”
Our advertiser partners will be able to reach more customers in-store, online, and through our growing list of media partners.
Sainsbury’s will merge its loyalty program with the in-house marketing company i2C by 2020 to create Nectar 360. The company expects to make an incremental profit of £100m in three years, up until March 2027.
Brands are also attracted to the format. Advertisers can target the exact audience they wish to reach and see how their campaign affects their purchasing habits.
Sam Knights is the chief executive officer of Shopper Media Group which specializes in retail media. He describes this format as “the holy grail” (or the ultimate goal) for brands.
He says, “They are able to see who they would like to reach out to and they can do so at every stage of the customer journey.” They can also see what actions they took. This allows them to understand their real return on investment.
Simon Roberts said this week that brands can benefit from a higher return on their investment than traditional advertising. “Because what you do is able talk to a more targeted group”.
Industry observers think there’s a lot of money to be had. Goldman Sachs estimates that the UK retail market will be worth £2bn in this year. Industry body WARC claims the format has already outpaced the growth of social media advertising spend.
Analysts point out that the retail media sector is largely restricted to brands attempting to reach customers at point of sale. This leaves a large untapped potential for all other sectors.
If someone’s shopping patterns are indicative of their intentions to move, this information could be useful to a mortgage broker or estate agent.
But retail media has its own drawbacks. The shift in media spending is likely to be at the expense other forms of advertising and especially those which are less targeted.
The digital marketing group IAB has predicted that by 2026, retail media spending will surpass traditional TV in Europe.
Dan Larden is the head of media for the ad industry group ISBA. He says, “I think people will move money away from the kind of broader-reach campaigns where they could not tie the data together to understand the effectiveness.”
The rise of supermarkets, as the new data giants, could be a threat to the traditional advertising groups who are already dealing with the growth of social media giants like Facebook and Google.
WPP’s chief executive Mark Read says that retail media represents a “very good growth opportunity”, as the advertising group can offer advice to its clients about how to use the data.
Analysts warn supermarkets that they risk alienating their customers if media tactics are used too aggressively. This is especially true when it comes loyalty cards.
Retail analyst Jonathan de Mello says that many retail businesses are now forcing customers to opt-in. There’s a risk that consumers could be bombarded with too much media as a result of giving their data.
Sables continues: “Not all that you see right now is done intelligently, but is done in a manner that forces the consumer… You literally cannot afford to not have these cards now.”
It could also be a problem of trust for customers if they feel that supermarkets only push products from the most expensive suppliers.
Ad executives argue that consumers trust retail brands more than data-hungry marketers, and that in-store promotions have been a part of the shopping experience for decades.
The supermarkets are ready to take advantage of the data they have collected over the years.