Why Retail Media Networks Are Key for Grocery Success: Inside the $8.5B Grocery Media Evolution

As the grocery sector becomes increasingly intertwined with digital innovation, retail media networks (RMNs) have emerged as a pivotal $8.5 billion opportunity that’s reshaping both revenue generation and customer engagement. For grocers, RMNs are more than just an additional revenue stream; they represent a strategic pathway to meet evolving shopper expectations, deliver personalized experiences, and retain direct customer relationships amid rising competition from third-party platforms. As grocers weigh options between building and buying RMNs, they also face heightened demands from CPG brands for precise measurement and targeted advertising capabilities. In this article, we explore how RMNs evolved from a novel idea into a strategic necessity, and how grocers can leverage them to build a sustainable competitive advantage in an increasingly digital-first marketplace.

The Digital Shift and the Rise of Retail Media Networks

In grocery retail, digital growth has historically been slow, but the pandemic acted as a catalyst, elevating online grocery sales and underscoring the importance of digital interaction. This shift laid the foundation for retail media networks (RMNs), with grocers beginning to view their digital spaces as valuable advertising real estate. By 2024, with digital sales comprising 13% of total grocery revenue and expected to reach 20% by 2025, 88% of grocery executives now see media monetization as a strategic priority. As consumers increasingly expect personalized, digital touchpoints throughout their shopping journey, RMNs have become a critical revenue driver, enabling brands to connect with shoppers at exactly the right moment to influence purchasing decisions. This rise in RMNs aligns closely with evolving shopper expectations for a seamlessly integrated, digital shopping experience that adds value at every step.

Changing Shopper Context: From Novelty to Necessity

Today’s shoppers have moved beyond seeing digital touchpoints as novel; they now expect them. Strategic screen placement in high-traffic areas, such as aisles and checkout counters, turns the shopping journey into a seamless digital experience. Engaging, personalized content like recipe suggestions, meal-planning tips, and exclusive offers can increase dwell time and drive conversions.

Why Personalization Matters: With 93% of shoppers preferring relevant offers and 73% actively engaging with personalized ads, there is clear evidence that shoppers respond positively to well-targeted, contextual content. Personalized offers not only increase engagement but also create a cohesive digital experience, keeping the shopper connected to the store.

Strategic Takeaway: Starting with in-store media allows grocers to enhance digital engagement at key points in the shopper journey, setting the stage for deeper personalization as infrastructure capabilities mature. However, despite these benefits, only 4% of grocers have managed to implement advanced personalization due to the complexities of data integration and real-time processing requirements.

Building vs. Buying: The Shift Toward Third-Party Solutions

As shoppers increasingly expect a tailored, digital-first experience in-store, grocers face the challenge of implementing the infrastructure necessary to deliver these personalized touchpoints effectively. Building a retail media network (RMN) in-house could offer complete control over the shopper journey, allowing grocers to develop a deeply integrated, customized experience. However, the complexities of scaling personalization and real-time engagement often require advanced capabilities that are time-intensive and costly to develop internally.

Initially, many grocers planned to build their own RMNs, with 63% aiming to create in-house solutions in 2022. By 2024, however, this approach shifted, with 97% opting for white-label or third-party solutions to reduce time-to-market and avoid the complexities of platform development. This shift enables grocers to focus on their core business strategies while leveraging proven technologies from trusted partners, ensuring that they can quickly respond to shopper expectations without the resource-intensive demands of building from scratch.

Navigating the Competitive Landscape with Third-Party Platforms

Third-party platforms reshaped the grocery landscape as the pandemic catalyzed digital adoption, accounting for 28.4% of all digital grocery sales in early 2022. Fast-forward to 2024, and while third-party platforms’ share has decreased to 14.2%, certain players, like Instacart, continue to gain traction, with an increase of 2.3% in Q3 2024 compared to the previous quarter. This ongoing competition underscores grocers' early concerns: in 2022, 83% of grocers viewed third-party platforms as direct competitors, with 69% fearing a loss of direct connection with their shoppers.

However, grocers recognize that this period of competition for advertising dollars presents a unique opportunity. By leveraging their own digital and in-store real estate for targeted advertising, grocers can create a direct channel to engage their customers and mitigate reliance on third-party platforms. This strategic shift is evident as 70% of grocers plan in-store retail media deployments over the next 18 months, bridging the gap between online and offline channels and enhancing their omnichannel capabilities. This approach not only fortifies customer relationships but positions grocers to capture a greater share of advertising dollars in a quickly evolving market.

CPG Ad Spend and the Push for Measurement Accuracy

CPG brands have increasingly tight budgets for retail media. In 2023, only 11% of CPG firms had a significant budget for grocery media, and by 2024, this dropped to just 3%. Despite these constraints, CPG brands remain invested in grocery media due to its targeting potential; 88% of CPGs demanded improved measurement accuracy in 2022, rising to 89% by 2024. For grocers, this demand for transparency represents both a challenge and an opportunity. By providing robust performance insights, grocers can attract CPG ad spend, even in a tight budget environment. Grocers who can offer precise metrics for campaign success stand to build stronger partnerships with CPGs, demonstrating the direct value of each advertising dollar spent.

Strategic Takeaway: Measurement accuracy is essential for attracting CPG ad spend in today’s budget-sensitive environment. Grocers who invest in analytics can differentiate their RMNs by providing CPGs with the actionable data they need to justify continued investment.

The Road Ahead: Maximizing Opportunities in Retail Media Networks

Looking ahead, the scope of retail media networks (RMNs) is set for explosive growth, with each stakeholder—from grocers to marketers—seizing the opportunity to maximize value. Grocers who invest early in RMNs will benefit from an additional revenue stream and foster stronger customer loyalty. For marketers, RMNs offer access to first-party data, enabling the creation of tailored offers that enhance the omnichannel experience. And for shoppers, RMNs promise a more personalized and convenient customer journey. However, while the potential of RMNs is vast, challenges remain. Successful implementation requires careful integration, robust data infrastructure, and a well-planned go-to-market strategy.

Download Grocery Doppio’s Comprehensive Report

For more in-depth analysis and strategic insights, download Grocery Doppio's report, "State of Digital Grocery: In-Store Media Monetization," to help you refine your approach and leverage a digital-first strategy effectively.