Presenters at this week’s Shoptalk in Las Vegas addressed several themes of great concern to retailers — inflation, sustainability, digital innovation and the weird rise of the metaverse among them.
None captured greater attention than the discussions about retail media, a concept which has captured the imagination and avarice of the industry as retailers sense an opportunity to monetize shopper data and siphon ad spend from traditional media budgets.
Lauren Weiner of BCG Global shared a preview of a new report from her firm that presents a bullish outlook for retail media growth. It projects revenues of $110 billion by 2026, representing 20 percent of digital spend. She importantly emphasized that profit margins for this activity are likely to far exceed those from merchandise sales, amounting to $75 billion in 2026.
Interest in retail media has been elevated by the expectations that cookies will no longer be an acceptable way to keep contact with digital consumers and awareness of the spectacular revenue streams being generated by the search-triggered ads on Amazon.com and Walmart.com. More major retailers are making moves to cash in. Kroger Precision Marketing has been one of the higher profile recent actors, motivated no doubt by fresh understanding of the scale of its omnichannel shopper interactions.
The significance was further underscored here by Instacart CEO Fidji Simo who took the main stage to discuss why her company delayed a planned IPO last fall and refocused its business model with a keen emphasis on retail media as its largest expected revenue stream.
Meanwhile, last week Instacart revealed its plans to go full-bore after the retail media opportunity, she said. The intent is to “put an added revenue stream into the hands of grocers” by implementing a “powered by Instacart” platform that brand advertisers can use to spread their messages across multiple retailers.
The Instacart Platform, rather than third party order and fulfillment services, now emerges as a primary solution offering for omnichannel retailers.
“Over the last 10 years we have been developing technology that we can now put into the hands of grocers,” Ms. Simo said.
Of course, the intent also is to keep a large slice of the retail media ad revenue this generates. As an aggregator and media sales platform, Instacart anticipates that targeted ad messages and personalized offers from brands can be delivered right inside the shopping cart.
Ms. Simo said the company expects its Instacart Platform business will perform at break-even, but that the high-margin retail media business will deliver exceptional profits that will drive the company forward into its next era.
