Pharmacy chains are having a retail media moment.
Over the last few years, drugstore chains like Walgreens and CVS Health have spruced up their retail media offerings with self-serve ads, advancements in closed loop measurements, and added in-store features to make the case for being easy to use and competitive retail media destinations for advertisers.
Pharmacies are worthwhile contenders within this space for a number of reasons. Retailers like Walgreens and CVS are sitting on high-quality, first-party data because of their valuable loyalty programs.
Drugstores typically see high-frequency shoppers and payment transactions, and a high percentage of those transactions are linked to their loyalty programs, making their first-party data more sophisticated. Plus, pharmacies sell products that overlap with popular advertiser categories like CPGs.
Writing’s on the wall: “Where the market is evolving is finally playing to [pharmacies’] strengths,” Andrew Lipsman, independent analyst at Media, Ads + Commerce, told Retail Brew. “Pharmacy retail media networks are… ready for prime time.”
Lipsman is referring to the range of upper-funnel ad units retail media networks can be plugged into. Plus, the ability to measure omnichannel attribution, a model that tracks shopper interactions across multiple touchpoints, including both online and in-store.
“There are a lot of ad dollars that they are in position to attract,” Lipsman said. “Their data then can be used for offsite advertising.” (Offsite ads are those displayed on other websites, social media platforms, or on streaming TV.)
Walgreens Advertising Group (WAG), the retail media arm of Walgreens Boots Alliance, was founded in December 2020. Going by the numbers, WAG now ranks among the top five US retail media networks, based on impressions delivered, for ads shown in the food and beverage, and household supplies category, according to a report on Retail Media Advertising Trends by Sensor Tower.
CVS Media Exchange, or CMX, the retail media arm of CVS Health, was also founded in 2020, but the strength of 9,000 CVS stores and ExtraCare, its loyalty program with more than 74 million members, has made the platform a significant player in a short time span.
Lipsman said pharmacies have the unique opportunity to unlock ad dollars from pharma advertisers for both prescription drugs and over the counter through their retail media platforms.
“If you think about pharmaceutical advertisers, they are some of the biggest TV advertisers out there, and they are going to want to reach people who are the best target audiences,” he said. Earlier Lispman said, “If those large advertisers want to reach the right audiences, Walgreens or CVS data may be among the best to be able to find those audiences.”
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Loyalty is the holy grail: For CVS, Parbinder Dhariwal, VP and general manager at CMX, told Retail Brew, the drugstore’s retail media flex lies in its loyalty program and the quality of its first-party data.
“The larger factors that are driving this are around loyalty,” Dhariwal said. “So, that’s where we’re seeing a tremendous amount of growth, and that’s the very clear differentiator about [our] business versus, I would say, many other retail media networks.”
He added that the average CVS customer has been in the ExtraCare program for over 10 years. “Ultimately, we have a clear understanding of that attribution model of that consumer to make sure that we attribute the ad to that particular consumer and that purchase in-store,” Dhariwal said.
In-store opportunity: As retail media networks start plugging into ad formats that move up the funnel—offsite ads, display ads, video ads, streaming TV ads, and in-store ads—pharmacy chains benefit.
Dhariwal said CVS is very bullish on in-store advertising, given the 5 million consumers walking through its stores.
“I believe that we can build an in-store network that is powered through screens,” Dhariwal said. “And when we think about that in connection with our ExtraCare loyalty data, we also can build a measurement solution that has an attribution model in the in-store environment as well.”
Lipsman agreed that in-store is where their strength lies. “Walgreens and CVS are two of the top six or seven retailers in terms of their in-store audience size,” he said.
Dhariwal said that whenever CMX provides reporting data to an advertiser, it is across the entire omnichannel experience.
“And that sets us apart versus our competitive set, because we’re providing a true attributed ROAS [return on ad spend] number to our advertisers.”
Ultimately, all of this leads to one goal for Dhariwal: “How do we change the face of advertising?...We get categorized within retail media, but ultimately we’re media.”
An executive from the Walgreens Advertising Group declined to comment for this story.