Outside the stores of Tesco, Sainsbury’s, Morrisons, Waitrose, and many others, digital screens display brand advertisements, strategically catching shoppers’ attention just when they are about to purchase. Supermarkets are a significant part of retail media networks (RMNs) – platforms where retailers sell advertising space on their physical and digital touchpoints – including websites, mobile, email, in-store screens, and delivery apps – to brands.
RMNs are expanding rapidly in the U.K., attracting ad spending worth £3.4 billion in 2024 – a figure that is projected to grow 21 percent annually through 2028. Supermarkets, ecommerce platforms and other retailers are monetising their millions of shopper visits and first-party data by acting as publishers, earning huge (70 percent plus) margins on advertising revenues.
In this win-win opportunity, retailers gain a substantial new revenue stream and strong brand partnerships, while marketers are able to target consumers at peak purchase moments with hyper-personalised advertisements that directly drive sales. For their part, consumers enjoy relevant offers, seamless phygital experiences and greater loyalty rewards. All this is possible thanks to a range of digital technologies, AI in particular, enabling everything from data management to precise ad targeting to sales measurement and attribution.
First-party data platforms are the foundation of RMNs, gathering and managing massive data – consumer demographics, purchase history, browsing behavior, and so on – to accurately segment the audience and personalise advertising while respecting data privacy and security regulations.
Demand-side and supply-side platforms, respectively, allow brands and agencies to programmatically buy advertising space on RNMs and retailers to list and sell their ad slots to the highest bidders. Ad servers deliver advertisements to various retail media channels and also collect performance data.
Omnichannel integration tools connect online and offline experiences, while measurement and attribution platforms enable brands to correlate advertising spending to actual sales and precisely measure return on investment.
Coming to AI and machine learning algorithms, they analyse first party and other data to deliver highly personalised product suggestions and promotional messaging to every customer. They also automate activities such as ad placement, dynamic bidding and campaign management. For example, Sainsbury’s unified retail media platform offers audience insights, media planning and activation services, and optimisation and measurement capabilities in one place, enabling brand marketers to optimise their campaigns quickly and easily.
Predictive AI tools fuel retail media through demand sensing and forecasting: they analyse past sales, market trends, consumer behaviour, weather, social media happenings and promotions to project demand more accurately than traditional methods. Intelligent supply chain optimisation solutions ensure that stores are stocked with the right products in the right quantities to fulfil consumer demand and avoid both loss of sales due to stockouts and wasteful overstocking.
By creating highly targeted product recommendations and advertisements, AI enhances campaign relevance and conversion rates. When a North American retailer modernised its fragmented legacy environment – multiple systems, including underperforming manual targeting solutions – with an AI-powered RMN, the ROAS (return on ad spend) for 60+ partner brands improved by 160 percent. Also, the company’s advertising revenue from its brand partners grew by 43 percent.
Other benefits include efficiencies accruing from automation of media buying and budget allocation (for brands), and (for retailers) profit maximisation through dynamic price adjustments in real-time based on demand, ad inventory etc. For example, Ocado Ads, the RNM of online grocer Ocado Retail, has a full funnel retail media offering comprising onsite, offsite, social media and connected TV advertising. It also offers a menu of tools and features for managing retail media campaigns, a self-serve insights and measurement platform, and an option for advertisers to leverage its first-party purchase data to build custom audiences, target them with relevant campaigns, and measure effectiveness across different platforms.
Given the potential of RMNs, it is no surprise that U.K. retailers are diving right in. However, they need to be prepared for certain challenges, including the difficulty of preparing, cleaning and integrating messy data fragmented across multiple systems, substantial technology costs, and explainability, and trust issues in AI models. Organisations may also struggle to find the required AI expertise, and to integrate RMN outputs with inventory management systems etc. Here, the support of a trusted technology partner who can integrate supply chain, demand sensing and retail media capabilities on a single platform can prove invaluable. Synergising key elements like these would also enable retailers to deliver superior outcomes to partner brands by connecting real-time inventory with targeted advertising.
