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"If you're a brand manufacturer, what you need to figure out — because all these products are unique and the categories are unique on the path [to purchase] — you have to figure out, 'OK, let's understand our consumer. How are they going to use Kroger differently than Walmart? Differently than Target, differently from Amazon?'"
— Russ Dieringer, Executive Director of the Ecommerce Council at Cleveland Research
While retailer websites have typically been a destination for shoppers to spend money, the same can't be said for the marketing dollars of advertisers or brand manufacturers. Online behemoth Amazon is transforming that reality aggressively.
Traditional retailers are taking notice. Leading retailers like Walmart, Albertsons, Target, The Home Depot, Costco, and others are rapidly investing in their own media strategies — and, in some cases, launching their own advertising platforms.
Russ Dieringer, executive director of the Ecommerce Council at Cleveland Research, shared his insights on retailer advertising platform strategy on the Unpacking the Digital Shelf podcast episode “Retailer Ad Platforms: Why, How, and Where to Invest.”
Russ Dieringer stressed that retailers are making this shift mostly to offset losses from ecommerce, challenge Amazon’s $14.1 billion advertising business — which grew 40% in 2019 and continues to explode — and maintain support among their brand manufacturers who are increasingly shifting their budgets to Amazon.
“Unfortunately, for Walmart and other traditional retailers, the capital markets don’t have the patience with them like they do for Amazon to lose money, and so they have to find a way to offset what is a difficult economic proposition with ecommerce,” Dieringer said. “Retailers have to monetize their data and real estate to make ecommerce a viable thing.”
Dieringer adds that while smaller and mid-sized chains will face more of a challenge competing in this space, behemoths like Walmart, Target, and Kroger won’t.
“I certainly think they have enough traffic and enough customers to where they could put together a viable search and media operation,” Dieringer said.
Dieringer is bullish on retailer advertising platforms and what brand manufacturers need to consider before investing their marketing dollars with them.
Walmart launched its own self-serve advertising platform earlier this year, allowing advertisers to buy sponsored products ads and directly buy placements within search results on Walmart.com.
Kroger launched its own marketing division and a similar self-serve platform, which places ads for big brands like Unilever and General Mills. The grocery chain recently introduced an attribution feature intended to give advertisers more visibility into their spending and the return on investment (ROI) they're getting by placing ads on Kroger's websites and mobile app.
Albertsons also has launched its own platform, which has executed 300 campaigns for 150 CPGs, including big names like PepsiCo. Albertsons' platform is delivering as high as double the return on advertising spend compared to Nielsen benchmarks for CPG companies.
"We've done some studies on this topic, and — for the most part — whether it's Walmart or Target or even The Home Depot, a lot of their role on the path to purchase is very close to the point when the shopper wants to buy," Dieringer said.
"Maybe [consumers] start looking around at different sites to compare final prices and ultimately are going to pull the trigger when they find the best price," he said. "Well, if that's the case, then the type of advertising business that those retailers should create should primarily be around helping convert at that sort of moment when they're ready to purchase (i.e., search)."
Brand manufacturers need to consider all these factors before deciding when, where, and how to invest their budgets with retailer advertising platforms.
Though the media and brand building opportunity may not be as big on a traditional retailer's online and mobile channels as they are on Amazon, retailer advertising platforms may offer brand manufacturers several advantages — as long as they have the right strategy.
"If you're a brand manufacturer, what you need to figure out — because all these products are unique and the categories are unique on the path [to purchase] — you have to figure out, 'OK, let's understand our consumer. How are they going to use Kroger differently than Walmart? Differently than Target, differently from Amazon?'" Dieringer said.
"That's going to help you make certain allocation decisions when you need to figure out, 'Hey, this next dollar spend, where are we going to put that dollar?'" he said.
More competition in the market benefits brand manufacturers because they can diversify where they sell and promote their products, rather than putting everything into Amazon.
Retailer advertising platforms are trying to compete with the innovative product advertising tools Amazon offers. Therefore, brand manufacturers will also benefit from more compelling search and media offerings traditional retailers are developing to better compete with Amazon's advertising operation.
"I think a lot of that money was going over to Amazon in the absence of a compelling alternative at these other sites," Dieringer said. "Now, as they develop these alternatives, I think we're going to see some of that slowdown.”
“Instead of spending $50,000 on an endcap program or something, maybe you spend $50,000 on WMG [Walmart Media Group],” Dieringer said. “If you're Walmart, that's a pretty good trade-off because you probably would have lost those funds if you didn't have that digital offer."
The key for brand manufacturers to get more value from retailer advertising platforms will be if Walmart, Albertsons, Target, and others can connect their advertising spend with in-store sales, Dieringer said.
Albertsons already has this capability. CPGs who use its platform are running local and national campaigns to target consumers with in-store promotions and branded messages before they come into the store and while they're actually shopping.
"They're saying, 'We have a great pool of information to target consumers. And oh — by the way — unlike Amazon, we can tie this stuff to in-store,'" Dieringer said. "That's going to be a big angle that they take to try to differentiate themselves from Amazon."
But most traditional retailers still face a significant challenge in this area, Dieringer adds, because of closed-loop reporting that doesn't give them or their customers complete visibility into the impact online advertising spend has on in-store sales.
Case in point: When Walmart launched its advertising platform in January 2020, its retail and audience data wasn’t available for ad targeting. Instead, advertisers bid for keywords for better positioning on Walmart’s search results page.
That’s a missed opportunity, considering that 90% of American consumers shop at Walmart annually and that 160 million visitors come to its stores and website every week.
They also need insight into how marketing investments are actually driving an omnichannel shopping experience.
Brand manufacturers also have some work to do on their end to optimize these potential buys. This could mean restructuring their marketing organizations to bridge silos between different marketing and advertising teams. It could also mean putting together an acceleration team or centers of excellence to understand better what ad units are available on various platforms, whether it's searches or media buys.
Dieringer said it's critical for brand manufacturers to figure out where they can place "that next incremental dollar of ad spend."
"I think it's going to be difficult to answer that question unless you devote some dedicated capacity to it," he said.
While brand manufacturers ramp up these efforts, they can’t delay investing in retailer advertising platforms because more nimble competitors certainly will.
It’s clear that ecommerce marketing is changing and that Walmart and others want to play an even more pivotal role in driving this transformation — and in driving dollars away from Amazon and into their own coffers while strengthening their relationships with brand manufacturers.
The space is still evolving, but for brand manufacturers, these platforms offer an invaluable opportunity to build their brands and drive sales without staking their entire future on Amazon.
Listen to the full podcast episode to hear Dieringer share new research on how to evaluate and execute a strategy in the world of rapidly evolving retailer ad platforms.
