Insiders estimate that the retail media channel will be worth more than $106 billion by 2027. This growth trajectory is not due to growth in ad spending. It’s indicative of a fundamental shift in retail economics.
Advertisers are increasingly redirecting their funds from traditional publishers to retailers who are serving as publishers—retail media platforms like Target Roundel or Kroger Precision Marketing. This trend is projected to continue, with retail media spend likely to double in the next four years.
In this article, we will examine what’s driving this tectonic shift in retail economics, and what this shift means for the C-store industry.
How Did This Huge Shift in Ad Spend Occur?
Amazon was the first retailer to meaningfully capitalize on the retail media space. Generating $38 billion in 2022 with advertising revenue alone, Amazon’s proprietary retail media network is now a mature product, shifting from an online-only model to in-store and offsite revenue streams.
As other major retailers have followed in the wake of Amazon’s success, pundits are framing retail media as the third big wave of digital advertising (the first being paid search through Google, and the second being social media spend). The difference with retail media is that it places the consumer at the center. Where search engine and social media advertising directs consumers to a third-party retailer site, collecting ad revenue in the process, retail media inherently capitalizes on the consumer’s intent through a direct search on the retailer’s website or mobile app.
The dollars from retail media are already at work. Walmart predicts it will generate roughly $5 billion through retail media alone in 2024, which it plans to use to boost the competitiveness of their retail pricing. For Uber, retail media was the boon that finally turned the company profitable. Indeed, with 1 in 5 digital ad dollars funneling toward retail media in 2022, retail media has firmly established itself as the new way to advertise.
What’s Driving this Continued Shift in Ad Spend?
As data privacy regulations and tech company policies continue to grant consumers more control over the collection and use of their personal data, organizations must increasingly relinquish certain means of tracking consumer behaviors (e.g., cookies, tracking pixels, etc.). This data-led transformation has directed retailers to digital commerce as a single arena for attention. Retailers across verticals are seeing increased traffic via digital channels. This leads to more opportunities for personalized messaging and new value propositions through optimized data analysis frameworks.
The blurring of industry channels is occurring as big box, drug store, and other retail verticals tune their storefronts toward a digital-minded approach to attracting new consumers. This channel blurring (combined with third-party cookie signal loss) makes first-party data ever more relevant for convenience stores as CPG providers continue to lose access to audience data streams.
What Does this Shift Mean for C-stores?
As trade and shopper dollars shift to retail media, retail media has been able to fulfill more outcomes for brands. In response, national brand dollars have continued to migrate toward funding retail media initiatives. Retail media allows retailers to leverage untapped revenue from existing brand and performance marketing budgets – something that most C-stores have yet to take full advantage of.
Incremental revenue is meaningful for C-store operators who have capitalized on this shift in retail economics. They’re receiving more third-party funds to invest in their loyalty value proposition and strengthening their digital infrastructure, ultimately funneling high-margin digital revenue into their P&L.
New funding sources also enable retail media operators to make riskier investments, test more market concepts, and invest in a longer-term future. Retailers investing in digital media are making decisions differently to increase their portfolio of addressable consumers, because addressable consumers drive retail media.
How do C-stores Take Advantage of Retail Media Opportunities?
While big box retailers have the footprint to connect advertisers to shoppers on a national or global scale, the C-store vertical is more fragmented with many smaller, regional chains amongst some major players. C-stores that are ready to start monetizing their first-party shopper data are facing a decision: should they enter the retail media market solo? Casey’s and 7-Eleven are among the few retailers who have introduced their own retail media networks. For others, an aggregated retail media network with data collaboration opportunities is the better approach.
An aggregated retail media network works across multiple retailer brands rather than just by those owned by a single parent company. This type of network combines anonymized first-party data from numerous retailers, creating a larger and more compelling shopper engagement offering for advertisers. Axonet’s aggregated retail media network enables C-store operators of all sizes to securely share anonymized data connecting CPGs and shoppers on a wider scale.
Whether you think a single-retailer network or a collaborative aggregated network is the best path for your organization, the time to determine your organization’s role in the retail media game is now. As C-store retail media continues to expand, CPG advertisers are starting to see the immense potential that advertising directly to C-store shoppers has in store for them. Axonet is actively working to connect C-store shoppers and CPGs through a best-in-breed solution that will transform the C-store customer journey in a way that benefits retailers, advertisers, and shoppers alike.
For further discussion on how Axonet is helping C-stores and CPG brands leverage first-party data to create new revenue opportunities, reach out to info@axonet.flywheelstaging.com.