Coles has joined arch-rival Woolworths and their global retail peers to create high-margin media units in the race to compete with Amazon, Google and Facebook’s lucrative advertising platforms.
Industry observers say Woolworths has plans to extract up to $100 million more from supplier trade marketing budgets through an in-store and online media unit called Cartology.
Coles, meanwhile, has been trialling a self-service advertising platform for three months via its online shopping service which delivers advertising and sponsored “product listings” similar to Amazon’s advertising business in the US, which is storming Facebook and Google’s search service for advertising market share. eMarketer estimates Amazon’s advertising revenues will hit $15 billion next year, up from $3.3 billion in 2017. Most of it comes directly from Google’s search service and Facebook.
Walmart and Target in the US are also moving quickly into the sector – Walmart acquired San Francisco-based adtech start-up, Polymorph Labs, in April as it expands its Walmart Media Group.
US advertisers are flocking to Amazon’s media unit because they can link marketing activity directly to consumer transactions. Retailers, with a wealth of customers searching and purchasing data from e-commerce and loyalty programs, have realised they have greenfield revenue opportunities.
“This is marketing 3.0 and it’s going to change the game drastically for retail,” said Brad Moran, CEO of Australian performance marketing platform Citrus, which Coles has just deployed. Citrus is already being used by the world’s biggest online grocery retailer, UK-based Ocado. Coles announced an agreement with Ocado in March in which it will use its technology suite for e-commerce, fulfillment and delivery services.
Mr Moran said the opportunity for retailers was to take tactical marketing and advertising budgets - called performance marketing - that are currently going to Google and Facebook.
"Google and Facebook are no longer the most interesting places to play. The retailers are the most interesting places to play."
- Brad Moran
“We’ve seen a lot of movement of money from TV and print into digital and now this is just the next extension of digital,” Mr Moran said. “Google and Facebook are no longer the most interesting places to play. The retailers are the most interesting places to play, particularly for fast-moving consumer goods. If we take a dozen brands we work with here locally, we know for a fact that at least half of them just switched money straight from those platforms [Google and Facebook] into our platform. It might not be billions yet but it’s a trend that’s starting to move very quickly towards retail.”
Mr Moran said the figures Citrus was seeing across its platform through retailers like Ocado and Coles was 6-10 per cent click-through rates from ads and sponsored product listings with conversion rates to purchase of 65 per cent. “It’s pretty staggering when you’re thinking about where to spend your money,” he said. “Other industries aren’t as impressive - fashion tends to be half that, so it depends on the type of retailer. But across the board our conversion rates tend to be a lot higher, somewhere in the vicinity of 20 to 30 per cent higher.”
While traditional grocery trade marketing budgets are where retailers have focused their attention for decades – in-store shelf promotions and loadings for premium shelf space at eye-level – their e-commerce and loyalty programs mean retailers are turning to additional revenues they can extract from digital media.
"Retailers have one shopper ID and they’ve realised they have so much customer data now ... they have what Google and Facebook want."
- Brad Moran
Some of the world's biggest media buying groups like WPP, Omnicom, Publicis and IPG have set up specialist online retail divisions to capitalise on the trend, a move Mr Moran said Citrus was also seeing with its business.
“It’s becoming a huge focus for media agencies because it’s performance-based media but it’s at the point of purchase,” he said. "It’s becoming a central focus for people now.”
Mr Moran said Citrus’ technology allowed retailer growth opportunities from suppliers beyond the large portfolio groups like Unilever, Procter & Gamble and Nestle because smaller brands and suppliers could compete with the biggest multinationals via a self-service advertising platform similar to the runaway success of those built by Google, Amazon and Facebook. Instead of manual trade negotiations with supermarket buyers, smaller companies like the Byron Bay Cookie Company could bid for ads and product listings when a customer searches a category like biscuits or snacks and be served those messages in real time.
“Australia is a little behind other countries but it’s going to move very, very quickly,” Mr Moran said. "Retailers are bringing the online and offline worlds together. They have one shopper ID and they’ve realised they have so much data now across so many customers that they have the holy grail that Google and Facebook want. The retailers have it. Now it’s just whether retailers can monetise it as well as Google and Facebook have monetised their platforms.”