Making the (business) case for Retail Media
In part two of our blog series exploring some of the common challenges in setting up a Retail Media operation, we take a look at the building blocks of a strong business case.
In July last year, we estimated that grocery Retailers in the UK could be missing out on as much as £1.7bn in unrealised media revenues – equivalent to some £11bn across EMEA. While those numbers might give us an indication of the overall scale of the Retail Media opportunity, they tell us a little less about its potential on a business-by-business basis.
One way to start working that out for your own organisation is via the creation of a business case. Not only will this help you evaluate your current capabilities around Retail Media, it will give any other stakeholders involved a clear analysis of the benefits, costs and risks involved.
The good news is that, for many Retailers, the key components needed to turn Retail Media into a profitable reality will already be in place. And where they aren't, many options exist for augmenting your existing activity to maximise the value it can deliver.
Let's take a look at some of the most common considerations, and the questions that will need to be addressed in an accompanying business case.
Every Retailer today owns valuable, engaging advertising inventory. From in-store space to apps, websites and more, Retailers have an opportunity like few others to reach Customers with relevant, timely content across the duration of their shopping journey.
Many Retailers, of course, already utilise these channels for advertising to some degree. As a result, the biggest question that needs to be answered as part of a business case here is not "can we do this?", but "can we do this better?".
Historically, most Retailers have included advertising opportunities as part of trade negotiations with consumer packaged goods (CPG) suppliers. But with access to Customer data on an unprecedented scale, Retailers now have a gigantic opportunity to offer those brands a more targeted and personalised way to reach out to shoppers – maximising the value of their media inventory in the process.
The major questions to answer in your business case around channels are:
- Does our store portfolio give us the ability to execute consistent advertising campaigns in partnership with or on behalf of our CPG suppliers?
- How many customers can we reach out-of-store through channels such as websites, apps, email or direct mail?
- Is there a strong enough financial incentive for us to offer this service to CPG brands?
If the answer to those questions is yes, then you may also want to consider maximising the effectiveness of your channels by:
- Providing your CPG partners with insight and measurement solutions that prove the value of data-driven, personalised campaigns.
- Adapting your primaryecommerce channels to take advantage of banner ads, search-led promotions and other non-intrusive advertising techniques.
- Offering CPG partners the ability to book, execute and optimise media campaigns across your inventory using self-service tools or via a dedicated managed service.
As is the case with media inventory, Retailers are in a unique position in terms of their ability to gather and analyse data on Customers and their purchasing habits. If digital media revolutionised advertising by introducing unseen levels of precision and measurability compared to traditional media, Retail Media makes a similarly evolutional shift by allowing Retailers to add real purchasing behaviour into that equation.
As vital as this data is to Retailers for their own planning and loyalty purposes, it can be just as invaluable to CPG suppliers looking to maximise their own return on advertising spend. Put simply, the easier you can make it for them to target, reach, and influence the Customers they care about, the more likely they are to spend on advertising with you.
Monetising data in this way isn't just about pure profitability either. For your stakeholders with an invested interest in loyalty and satisfaction, they'll no doubt be pleased to hear that around two-thirds of Retailers who do monetize their data see an improved Customer experience as a result.
The major questions to answer in your business case around data are:
- Do we operate a loyalty card scheme or have customer-level transaction data that allows us to track the relation between delivery of promotions and purchase behaviour in-store and online?
- Do we capture enough information on our ecommerce channels to be able to make data-driven decisions about Customer behaviour?
- Is the quality of the information that we hold on Customers as accurate, current, and complete as it could be? Do we hold the right permissions to use it commercially?
If the answer to those questions is yes, then you may also want to consider maximising the effectiveness of your data by:
- Applying advanced data science to create a deeper understanding of your Customers' needs.
- Linking and packaging this data in a way that makes it useful and valuable to CPG suppliers – i.e. by helping them identify target and high-intent audiences or set pricing strategies.
- Exploring the possibility of using this data to help CPG brands target customers across digital, social and physical channels.
While effective use of data and channels form the backbone of an effective Retail Media operation, some other issues are worth addressing as part of your business case. As with the above, few of these questions should prove difficult to answer.
- How many CPG suppliers do we work with, and how strong are our relationships with them? How best will we generate demand and become their marketing partner of choice?
- What percentage of my product sales are own brand compared to CPG lines? In which categories are the greatest opportunities?
- What does success look like, and how will it be measured? Is it purely revenue-based, or will we measure improvements in Customer loyalty, satisfaction, and the strength of your relationships with CPGs? How will you measure the contribution of Retail Media to these criteria if so?
- Which departments within your organisation will have a role to play, and are there any skills or areas of expertise that you should invest in?
- Ultimately, when putting together a business case around Retail Media, the majority of grocery chains will likely discover that they already have many of the fundamental elements in place and running well. The challenge will be not in making sweeping changes or justifying grand expenditure, but in fine tuning existing processes in order to maximise their value – something that external expertise can really assist with.
Next in this series, we'll be looking at building the perfect Retail Media blueprint.
The Future Of Retail Revenues Must Be Data Led, Forrester Consulting, November 2019
his blog was co-authored by Jeremy Neren, Founder & CEO of GrocerKey, part of the dunnhumby Ventures' investment portfolio.
In the past few months the shift to online sales in grocery has been significant, increasing across all geographies. We now expect to see online grow to 5-7% of sales in most grocers and up to 15% for those retailers who have the ability to capitalise on that demand.
With this growing demand from consumers and heightened importance of the online channel, it's important for retailers to both maximise the customer experience while at same time drive efficiency and profitability of their service.
It's not without challenges, but there are some key strengths retailers can focus on.
Online satisfaction and adoption
Whilst satisfaction with online is higher than stores during the Covid-19 crisis, getting customers to fully adopt this new way of shopping can be massively influenced by delivering on what matters most:
1. Amplify your offline strengths – shoppers tend to use their preferred offline grocers for online if they can, so reflect your brand strengths fully be it key categories, private label, your loyalty programme. Most customers will be using both offline and online channels going forward and expect a seamless experience
2. Make the first few shops easy and quick to do – baskets are bigger online, typically 60+ items, so quick and easy basket building is essential. Instant favourites – where Shoppers can see all their normal items they've brought previously in-store when they register can save significant time and frustration.
Simplicity is the key in eCommerce grocery. It's a convenience-oriented experience, so you can ultimately drive the greatest convenience by providing customers with the quickest path to locating items of interest, allowing them to easily build their basket, and check out quickly.
3. Go big on Fresh. Shoppers are keen to do their full weekly shop, so fresh is the key category. It needs special care and attention in terms of picking and delivery routines, as well as the right shopping cues for Shoppers such as date codes, provenance, seasonality, and ease of choosing the right quantities and weights.
4. Focus on reliability – late deliveries, missing items, poor substitutes are the most common reason for leaving or switching service. Set outstanding operational metrics on these and improve functionalities such as integrating substitutability science into picking and ordering routines. Services such as reminders for forgotten items and amending your order before delivery also make a big difference to service satisfaction.
With out-of-stock challenges retailers need to be proactive with easy options for Shoppers to pre-select preferred substitutes and have a reactive approach to substitutes with great data supplied to personal shoppers for when the Shopper hasn't selected their preferred substitute.
5. Personalising the shopping experience – online enables many things that just aren't possible in-store. Relevant product recommendations, personalised merchandising of associated products or specific ingredients, displaying the most relevant promotions, help improve the experience and the basket size by 10-20%.
Improving the customer economics
Making the online service drive incremental value to the business is key to success.
Many retailers make the mistake of treating eCommerce like an IT project. Simply standing up a nice looking front-end eCommerce experience, while simultaneously ignoring all of the major operational considerations and many nuances of eCommerce grocery, will lead to failure. Collectively, these considerations can make or break the success of an eCommerce grocery business. Just like grocery retailers obsess over the details in their physical stores, they must do the same with their eCommerce business in order to drive profitability and ultimately sustainability.
This requires continued choiceful investment and focus in the following 4 areas:
1. Track customer value not just channel performance.
Having a cross channel view of shopper impact is key for right investment decisions. In most cases online sales at 70% incremental driven by existing shoppers spending more and attracting brand new shoppers to the business.
It's important for retailers to cultivate multichannel shoppers by augmenting an integrated digital experience with promotions that drive in-store customers to shop online and online shoppers to shop in-store. This ultimately will lead to increased visits, improved loyalty, and greater share of wallet.
2. Maximise basket size and frequency.
Whilst already 3-4 times higher than the store continuously growing average Shopping basket is essential for bottom line profitability. Dynamic product recommendations, forgotten item reminders, and delivery subscriptions are a few examples of activities to have in place.
Making "sale items" immediately accessible as a distinct category with filtering options (i.e.; past purchases, dietary preference, brand preference, etc) is helping drive basket size. This is an area where eCommerce is simply 10x more efficient than the store as you can essentially browse all promotional items of interest in a matter of a few clicks vs. traveling to the store and walking each aisle.
3. Drive operational efficiency.
Expanding current capacity is clearly important but equally reviewing ways to maximise pick per hour rates and delivery rates is key. Systematic reviews of picking by zone, planogram mapping, labour scheduling, dynamic routing of delivery orders are necessary.
One way GrocerKey is driving efficiency is by creating incremental staging capacity via temperature controlled totes. This is far less expensive than adding freezers / coolers – so there's major capex savings, more efficient from a space allocation standpoint, growth can be handled in a modular fashion, and the retailer can then promote never breaking the chill chain because the product is kept at the appropriate temperature from the time it's picked until it's in the customers hands.
4. Provide suppliers a combined data asset across offline and online.
Multichannel insights and activation that enable brands to grow the channel with you through highly personalised digital onsite and offsite media will be very beneficial to the economics of and profitability of your service.
The tipping point for online grocery is underway and retailers need to be ready to make the most of this opportunity.
Facing rising costs and shrinking margins, finding new revenue streams should be an urgent priority for grocery retailers the world over. Blessed with volumes of valuable customer data and a rich menu of owned media, this unbeatable combination provides enormous scope for creating sustainable growth. Yet so many grocery retailers are struggling to make this a reality.
To better understand why so many retailers aren't taking advantage of new revenue streams while improving the shopping experience for their customers, we commissioned a global study with Forrester Consulting. Download your complimentary copy of Forrester's research to learn about the barriers holding retailers back from revenue generation and the recommendations to overcome the challenges.
- 85% of grocery retailers have identified creation of new revenue streams as a priority for 2020
- Despite high levels of confidence in their data strategies, only 15% of retailers have the right capabilities, people, technology, and processes to improve customer experience and monetize their data.
- Most are also missing out on lucrative revenue through monetizing their media. Challenges with data, technology, expertise, and culture are the greatest barriers to progress.
- Retailers who are able to successfully utilise data insights, are reaping benefits with 61% seeing an improvement in the customer experience and 56% seeing growth in existing revenues and revenue streams.