Is Media Monetization the Key to Replacing Lost Margin?

A highly inflationary market, increasing labor costs, and unprofitable digital sales are prompting grocers to explore new revenue streams that can help heal their financial woes.

Over the past few years, consumers have flocked to digital shopping channels in droves. They explored online grocery alternatives out of pandemic-induced necessity and thanks to the convenience of these digital options they have remained a mainstay of the modern grocery shopping experience.

While digital commerce allows grocers to provide next-level service and convenience, its razor-thin margins have many grocers looking for ways to increase profitability to help offset slimming profits.

One way savvy, forward-thinking grocers are beefing up the bottom line is through retail media monetization. Successful digital grocers have active audiences on their digital platforms and are leveraging these audiences to collect advertising dollars from their consumer goods partners.

In its recently released “State of Digital Grocery: The Media Monetization Opportunity” research report, Grocery Doppio explored the current state of digital grocery, benchmarked the media monetization opportunity, and examined some of the biggest barriers of entry for those looking to turn their media platforms into revenue producers.

Current State of Digital Grocery

Grocery is a notoriously slow-growth industry, with revenues traditionally increasing by less than 3% annually. However, in 2020, fueled by pandemic-powered changes in customer behavior, sales increased by a monumental 9.5%. Digital led the charge — with a 5x increase over 2019 levels — and thanks to the stickiness of the experience solidified its place as a key component of the grocery path to purchase.

In fact, according to the Grocery Doppio research, in the first half of 2022, 13.7% of all grocery sales were digital. Unfortunately, the average digital order came with a 16-cent loss in margin for grocers, which can translate to enormous profits left on the table as digital shopping continues to scale. Digital is projected to account for 20% of total grocery sales by the middle of the decade and grocers are looking for innovative ways to offset the potential margin loss. One of the most intriguing avenues grocers are exploring is the monetization of their media platforms.

The Media Monetization Opportunity

Grocers have a wealth of information on their digital consumers’ shopping history, brand preferences, and overall behavior. This information can prove invaluable when marketing to shoppers via a grocer’s digital assets for both a grocer and its consumer goods partners.

CPG firms are looking for new and inventive ways to break through the marketing fog and connect with consumers at the point of purchase. By partnering with grocers and displaying promotions and offers on a grocer’s digital platform CPGs can not only connect with shoppers when they are making purchase decisions but leverage the power of their grocery partner’s branding to build a meaningful relationship with consumers.

Not only are CPGs looking for new ways to connect with consumers, but 88% also report that they want more accurate proof of performance for their advertising spend — which lends itself perfectly to retail media partnerships. Eighty-three percent of CPGs plan to increase their advertising spend on innovative media.

There is an undeniable opportunity for grocers to thicken their revenue stream by monetizing their media channels via CPG partnerships. In fact, 63% of retailers are actively looking to deploy a platform within the next 24 months. Seventy percent plan to build this capability through third-party partnerships, with around 30% planning to design and build their own platform.

Grocery’s Biggest Barrier

Grocers looking to start a media monetization initiative or scale their current efforts are facing a common issue — talent attraction and retention. Just like the challenges they are facing with their front-line staff, grocers are struggling to build teams capable of turning on the auxiliary profit spicket on their digital platforms.

“The core problem isn’t the platform,” Grocery Doppio says in its report. “The core problem is talent…Grocery retailers don’t have the in-house talent and experience required to understand the nuances of the media business.

“Building this will mean going head-to-head in a war for talent and having the cultural awareness to foster a very different kind of organization. Talent availability, not engineering, will determine the path (ignore, build, buy, partner) grocery retailers will take to monetize their media assets.”

For more insight on the media monetization opportunity, as well as the challenges grocers face in turning their digital assets into secondary revenue streams be sure to read the full “State of Digital Grocery: The Media Monetization Opportunity” report.