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Physical stores could be the next frontier for retail media networks

In-store media is a small slice of retail media spending, but larger brick-and-mortar audiences present a major opportunity for retailers.
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5 min read

The retail media network boom over the past few years has seen nearly every major multi-brand retailer sell digital advertising opportunities to CPGs online. Now, retailers are starting to explore the potential of another major ad space: physical stores.

US digital retail media ad spending is projected to hit $61 billion next year, per Insider Intelligence, while in-store retail media spending is only a couple hundred million dollar market, Andrew Lipsman, principal analyst at Insider Intelligence, told Retail Brew.

But brick-and-mortar stores have the potential to bring in high-margin supplementary revenue streams for retailers, and more eyes for CPG brands, Lipsman noted. In-store audiences are on average 70% larger than digital ones, per Placer.ai and Comscore data. In November 2022, Walmart’s monthly reach was 212.6 million in-person shoppers compared to 144.9 million online shoppers, while Kroger’s 32.4 million monthly online shoppers was just a third of its brick-and-mortar reach.

A number of retailers like Walmart, Kroger, and Hy-Vee have announced moves to cash in on in-store media with screens across stores displaying third-party ads. More are likely to follow, as physical stores are a “natural evolution,” from online advertising, according to Lipsman, who called stores the “next major media channel.” While there are plenty of opportunities for eye-catching innovation from entrance to checkout, bringing retail media networks in stores also comes with challenges.

Ad it up: Along with the number of consumer eyes they can draw daily, physical stores offer “valuable context” for brands to advertise due to proximity to the point of purchase, Lipsman said.

“It’s also when consumers are formulating their decisions and opinions about brands, so it can be very effective from a branding standpoint, in addition to driving sales in the store,” he said.

Bobby Watts, SVP of AD Retail Media, which spans retailers like Giant and Stop & Shop, said it has seen in-aisle screens outperforming those on the outer edges of the stores. “Once you’ve got them in the aisle, that’s the big point to try to influence to make a conversion,” he said.

Paul Brenner, SVP of retail media and partnerships at in-store advertising provider Vibenomics, which specializes in both display and audio, said retailers have the opportunity to build advertising platforms “into the flow of the store.”

Surfaces like the checkout aisle, of course, along with the deli counter, an end cap, the store entrance, even meat bunkers (those open freezers consumers can reach into in grocery stores), are all open to be digitized. For example, Brenner said Vibenomics worked with a retailer to create RFID tags on meat bunkers that shows content about the product the consumer pulls out of the meat bunker.

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“It’s really about converting the cluttered static world of each of these categories and zones into one primary visual element that’s really large or uniquely formatted,” Brenner said.

A happy media: Online retail media has been the dominant channel largely because it’s simpler to execute, so retailers and providers are still working out the kinks.

When Vibenomics partners with retailers, it brings together the merchandising team and the retail media network team, two groups that are “oddly separate,” Brenner said, adding the company “spends a lot of time bringing those two sides together and building things that make both sides happy.”

Retrofitting a store for the future filled with digital screens takes time and also isn’t cheap, so Brenner said the biggest hurdle is helping retail partners avoid sticker shock and understand how they can use and monetize them.

Ahold Delhaize USA also tries to be mindful not to turn its stores into Times Square, Watts noted. While its online retail media network can target consumers specifically based on purchase and search history, the same can’t be done among a sea of people in stores. To remedy this, Watts said Ahold Delhaize USA works to ensure on-screen content “feels native inside of the store based on the store environment,” with content geared toward seasonal events like holiday entertaining, for example. It also works with its consumer insights team to get feedback on consumers’ in-store experiences.

Big picture: With so many CPG relationships, grocery is leading the charge and “being pushed the hardest to reinvent” retail media networks for brick-and-mortar stores. Brenner said next year could likely see a “wave of pilots” as more retailers dip their toes into in-store digital advertising.

Once that happens, the focus turns to the endless ways to utilize screens. Imagine in 2020, when that Ocean Spray skateboarding TikTok went viral, if the next day the brand could’ve leveraged that moment through in-store screens across the country, Brenner noted.

“The placement is step one, the content of like, how do you make it dynamic? How do you mirror the experiences that are happening online? That’s where people are trying to take it.”

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.