Retail Media: State of the Industry Report 2022 - REPORT - Dunnhumby (2024)

REPORTRetail Media:State of the Industry Report 2022

Contents 1 Explaining the rise (and rise) of retail media 2 Mapping the new media networks 3 A channel-by-channel guide to retail media in 2022 4 Why retail media needs to put the customer first 5 Building a winning media proposition2 | © 2022 dunnhumby / All rights reserved

Explaining the rise(and rise) of retail mediaAround the world, money is pouring into the grocery Instead, we see four key trends behind retail media’ssector – and not a penny of it from shoppers. gathering momentum:Retail media is enjoying an unprecedented surge ininvestment right now. In 2021, marketers were projected to A more challenging commercialhave upped their spending on retail websites and apps by environment for retailersaround 55% in EMEA1, and between 28%2 and 38%3 in theUnited States. In the latter territory alone, that’s equivalentto some $31.49 billion spent just on retail media4. An evolution in the needs of CPGsThis year looks to be no different, either. By the end of2022, the global industry could be worth around $50bnaccording to Forrester5. For consultancy firm BCG, thelong-term value will top out closer to $100bn per year6.Should that latter estimate prove to be correct, retail A changing advertising landscapemedia would be generating advertising revenues wortharound four times that of YouTube7.A substantial amount of this income is – and will continue The short – and long – termto be – generated through sales to consumer packaged implications of Covidgoods (CPG) companies. While Amazon attracts adrevenues from a wide variety of sources, the majorityof grocery media revenues are driven by CPG brands, Many issues here overlap, and many retailers and CPGsunderstandably keen to reach out to shoppers in as are undoubtedly facing a different future to the one theymany ways as possible as they move through their retail were planning for two years ago. That said, understandingjourneys. the specifics of each of these four areas also helps usThose journeys, of course, have changed dramatically understand retail media’s skyward trajectory.over the past two years. Covid has had a fundamental,and in many cases lasting, impact on the way that weshop. But while much has been made of the link between By the end of 2022, the globalthe pandemic’s spread and retail media’s growth, a closer industry could be worth aroundlook reveals that there’s more afoot than simply a shift incustomer behaviours. $50bn according to Forrester3 | © 2022 dunnhumby / All rights reserved

A more challenging commercialenvironment for retailersTo the casual observer, the past two years may have As well as helpinglooked like a golden period for grocery. The market grew to drive sales andby 8.5% in the UK in 20208, 6.7% in China9, and 12% in theUS10. The reality, of course, is much more complicated. satisfaction throughGrocery stores operate on incredibly slim margins, relevance andbetween 1 and 2% in most instances11. As a result, even personalisation, retailthe slightest change to the balance sheet can have a hugeimpact on profitability – and the impact of Covid was media can also offeranything but slight. margins in the region of 80% For grocers in the US, total expenses accounted for 31% of sales in 2020 – an increase from 28.9% in 2019 – with pandemic-related costs reaching $24bnFor grocers in the US, total expenses accounted for 31%of sales in 2020 – an increase from 28.9% in 2019 – withpandemic-related costs reaching $24bn12. Expandedpayroll, benefit, and incentive programmes all played a rolehere, as did additional sanitation and personal protectiveequipment costs. In the UK, in spite of 8.1% growth in like-for-like sales Sainsbury’s saw a £261m pre-tax loss, drivenheavily by its £485m spend on Covid response13.Rather than helping to offset these losses, the explosivegrowth of online only served to deepen them. The averagepicking cost for an online shop is somewhere between€12 and €14, equating to a -15% margin on those ordersand something that not even a delivery fee of €6 cancounterbalance14. Even with the ramping up of deliveryinfrastructure, more online orders means more cost forthe majority of grocery retailers today.While rising costs haven’t driven the rise of retail mediaper se, they do help to explain why it will have started tolook like a more compelling proposition to retailers overthe course of the past 24 months. As well as helpingto drive sales and satisfaction through relevance andpersonalisation, retail media can also offer margins in theregion of 80%15– a step change in profitability comparedwith the traditional grocery model.4 | © 2022 dunnhumby / All rights reserved

An evolution in the needs of CPGs Part of the challenge here is that, compared to their retail counterparts at least, CPGs are relatively poor when itRetailers aren’t facing these challenges alone. CPGs have comes to customer data. Other than a select number ofendured a similarly disruptive couple of years, bookending brands that sell direct to consumer, CPGs are naturallywhat has been an already turbulent decade. disintermediated from shoppers. As a result, while theEven before the pandemic, CPGs were struggling to grow. world’s 10 largest packaged goods brands spend aroundAggregate revenue growth across the US’ largest food and $800m on advertising per year, their customer database isdrink suppliers was just 1.9% in 2019, down from 4.3% in around 90% smaller than the retailers they sell through21.201816. The long-term trajectory was similarly troubling. Unaddressed, that situation is unlikely to improve. 80%Between 2000 and 2009, the sector’s profit growth of the information that CPGs do have goes unmined,averaged 10.4% per year; over the next 10 years, that meaning that valuable insights are being missed22.figure dropped to 3.2%17. Perhaps worse, more than half of those businesses say that their retail partners don’t share their customers’ behavioural data with them23. In a market where every cent, penny, or jiao counts, many brands still don’t have a firm grasp on what shoppers really want. All of this goes some way to explaining why retail media has become such an attractive option for brands, even beyond the Covid-related reasons noted above. As well as being a highly accountable form of advertising, with many retail media programmes able to provide a direct link between marketing spend and sales, campaigns tend to be planned using a combination of retailer loyalty and purchasing data. 80% of the information that CPGs do have goes unmined, meaning that valuable insights are being missed The net result for brands is threefold:Against this backdrop, CPG priorities have begun to 1. They can formulate highly specific, objective-basedchange – with deep implications for their marketing campaigns around real shoppers.teams. A Gartner survey published in July last year 2. They can target those shoppers using a variety ofrevealed that marketing budgets have reached their touchpoints, all the way from sofa to store.lowest levels in recent history, at just 6.4% of a company’srevenues on average18. One year earlier, an IPA Bellwether 3. They can say with a high degree of certainty that theirreport posited that the pandemic was proving more marketing investments made a direct contribution todestructive to marketing spend than the 2008 recession sales.did19. This winning combination almost certainly underpinsWith funding falling fast, it’s only logical that practices the dramatic shift in CPG budgets. Kearney analysis oflike zero-based budgeting (ZBB) have begun to take hold. Cadent’s Marketing Spending Industry Study for 2020-21ZBB is hardly a new concept, but it is one that is uniquely notes a six point rise in digital marketing investment atattuned to the realities of a mid-pandemic economy. the expense of a five point drop in trade equivalents24.Around a quarter of CEOs around the world say they’re With the lines between shopper and brand marketingeither planning on, or are already, employing ZBB to help continuing to blur, there’s little doubt that retail mediawith their recovery20. accounts for a large portion of that reallocated spend.5 | © 2022 dunnhumby / All rights reserved

A changing advertising landscape The short – and long – termThe cookie has crumbled – or soon will, at least. While implications of CovidGoogle’s temporary reprieve on cookies from third-party All three of the trends above are set against the veryadvertisers has given the marketing industry a little specific backdrop of a global pandemic, of course – onemore time to plot its path forward, that extra year means which has caused its own share of changes.relatively little in the grand scheme of things. Firstly, Covid sparked a huge shift in buying habits, withWhen the search giant does bring that order into effect customers stocking up and substituting social activitiesin 2023, advertisers will no longer be able to implement like dining out with “moments at home” – cooking fromaudience targeting on around 99% of Chrome users (or, scratch and experimenting with new lines. Aroundtwo-thirds of the world’s internet users based on current three-quarters of shoppers in the US tried out a newbrowser trends25). product during 2020, for instance29. Value also became aThat has huge implications for advertisers, of course, significant driver, with many shoppers looking for dealsmany of whom rely on that data to plan their online and promotions wherever available.campaigns effectively. 44% say that they’d need to spend Secondly, the curfew on out-of-home activity had amore to achieve the same results that they did in 2021 crippling effect on a large part of the global advertisingwhen cookie blocking does finally go through26. industry. In the US, outdoor advertising revenue decreasedEqually relevant today is the concept of brand safety, a by more than 30% in the fourth quarter of 2020 as com-vital protective measure for those who advertise online. In pared to the previous year30. Average monthly spendingprinciple, brand safety in the UK declined bytechnology is meant to 80% between April “protect marketers from and July31, advertisershaving their campaigns 51% of retailers with premium loyalty understandably keenrun on sites that feature programs consider programme to reallocate fundsunsavoury – or even members to be at least four times as elsewhere.contextually inappropri- valuable as non-members2 Then, of course, there’sate – content. online. Ecommerce-In practice, that doesn’t based grocery salesalways work. The pro- soared to new heightsliferation of mysterious in 2020, driven primarilyad banners filled with by shoppers seeking toblue and white clouds limit their exposure toon some of North America’s biggest news sites in 2021 others. Online accounted for almost nine percent of allwas actually revealed to be brand safety tech working grocery sales in the UK at the end of 202032, and grewovertime, seeking to protect advertisers from mentions of by a staggering 54% in the US33. In China and Korea,the word “virus”27. Acceptable content can change dramat- meanwhile, more than half of all shopping trips made byically during a global pandemic, it turns out. respondents to dunnhumby’s Consumer Pulse survey in October 2020 were made online34.As a marketing tactic, retail media offers a way to navigateboth of those challenges. With data coming direct from For retail media, this environment was the veritable per-retailers, brands have a direct route to communicate with fect storm. Grocery stores suddenly became one of thereal shoppers at a crucial moment on their buying journey. only effective ways to reach shoppers away from home.And from a brand safety perspective, grocery websites The surge in online grocery presented brands with arepresent some of the most trusted digital properties on gigantic audience, many of them new to the channel. Andthe market28. all the while, those same customers were on the lookout for inspiration, deals, and helpful, useful communications. With data from retailers, With the world gradually beginning to reopen, the impact brands have a direct of some of these trends is dwindling. Shopping behav- iours have largely normalised, and spend is flowing back route to communicate into out-of-home. In other areas though, particularly with shoppers at a crucial online, we’re past the tipping point – which means that so too is the scale of the media opportunity. moment6 | © 2022 dunnhumby / All rights reserved

Setting up for the futureAs easy as it may be to chalk the recent surge in retail media activity up as a response to the pandemic, the truth is thatCovid has been little more than a catalyst for a much bigger shift in the marketing landscape.As more retailers and brands begin to experiment with the inherent possibilities of retail media, the growth we’ve seenin the past two years will only continue to snowball – bringing about new ideas, greater collaboration, and a betterexperience for customers.It might not be the new kid on the block anymore, but in terms of what’s possible, retail media’s just getting started.1 Who’s really driving the increase in retail media? – The Drum, 26th April Coronavirus pandemic drives record decline in marketing budgets – 192021 Marketing Week, 15th July 20202 Retail Media Advertising 2021 – eMarketer, 22nd September 2021 20 Companies Turn to Zero-Based Budgeting to Cut Costs During the Pandemic3 Growth rate for ad spending on e-commerce sites will max out in 2020,eMarketer finds – Marketing Dive, 23rd October 2021 21 Maximizing the Value of Data for CPG Marketers – Boston Consulting Group, 27th August 20204 US retail media ad spending will reach $31.49 billion in 2021, up 53.4%from 2020 – eMarketer, 17th November 2021 22 Customer Data Analytics and Insights Key to Post-Pandemic CPG Success – Treasure, 27th August 2020Predictions 2022: Advertisers Lean Into Retail Media Momentum, New5Modes, And, Yes, The Metaverse - Forrester Blog, 28th October 2021 23 How can consumer products companies stay relevant and be future- ready with analytics? – Deloitte, 12th June 20206 The $100 Billion Media Opportunity for Retailers – BCG, 19th May 2021 Retail media is hot, but retailers are still leaving money on the table - 247 Worldwide advertising revenues of YouTube as of 3rd quarter 2021 - KearneyStatista The end of third-party cookies: How it will affect advertisers and 258 UK retail food and grocery market growth to slow sharply in the short publishers – Marketing Tech, 20th April 2021term, according to latest IGD market forecasts - IGD The Death of the Third-Party Cookie: What Marketers Need to Know 269 Market size of fresh groceries and daily necessities retail in China from About Google’s 2022 Phase-Out2016 to 2020 with estimates until 2025 - Statista 27 The Importance Of Brand Safety In Digital Advertising—It’s Not What10 The state of grocery in North America – McKinsey & Co You Think – Forbes, 19th June 202011 What Is the Profit Margin for a Supermarket? – AZ Central Grocers gain trust from consumers as online shopping grows in 28 FMI sizes up pandemic’s financial impact on food retailers –12 popularitySupermarket News, 16th September 2021 US consumer sentiment and behaviors during the coronavirus crisis – 2913 Sainsbury’s: Cost of Covid has been high – BBC, 28th April 2021 McKinsey & Co14 Why supermarkets are struggling to profit from the online grocery Has COVID-19 Changed the Impact of Out-of-Home (OOH) 30boom – The Financial Times, 23rd July 2020 Advertising? – American Express The $100 Billion Media Opportunity for Retailers – BCG, 19th May15 31 COVID-19’s effect on out of home advertising – All Response Media2021 32 Pandemic year brings about huge growth for online grocery - AHDB16 The true cost of upheaval: the OC&C Top 150 Supplier Index 2020 33 In 2021, online grocery sales will surpass $100 billion – Insiderreport – The Grocer, 26th October 2020 Intelligence What got us here won’t get us there: A new model for the consumer17 34 Consumer Pulse Wave 4 - dunnhumbygoods industry – McKinsey, 30th July 2020 Marketing Budgets Drop to Lowest Levels in Recent History – Gartner,1820th July 20217 | © 2022 dunnhumby / All rights reserved

Mapping the new media networksOver the past year, a number of retailers have announced the launch of their own dedicated retail media networks.These range from proprietary, “from the ground up” platforms built by internal teams through to hybrid solutionsthat combine multiple products from some of the many retail media vendors on the market.In this section, we look at some of the most notable recent launches. In the interests of full disclosure, two of theseplatforms – Tesco and Éxito – are powered by products and solutions from dunnhumby’s own portfolio. and targeted listings, as well as sponsored product listing “boosts”. Additional campaign opportunities exist for influencer marketing (including Instagram, Twitter, and real-world events), ads that run across the open web, and loyalty-based programmes that employ the retailer’sTesco Media and Insight Platform direct-to-consumer communications channels.While retail media is not new to Tesco, having been In October 2021, Kroger launched its Private Marketplace.helping brands understand shopper behaviour through This programmatic advertising marketplace allowscustomer insight for over 20 years, they continue to evolve marketers to utilise Kroger data via demand-side platformtheir offering with the launch in November 2021 of Tesco’s (DSP) of their choice36.Media & Insight Platform.Fuelled by insights generated from the 20 million-strongbase of Clubcard holders35, the platform helps brandswith category development, new product innovation, andmulti-media measurement. In the case of the latter, thisextends beyond Tesco’s own media portfolio and includes“walled garden” sites and social media. Walmart ConnectCovering broadcast, digital and in-store channels, the While Walmart Connect technically launched in JanuaryTesco Media and Insight Platform offers a range of 2021, in truth it represents an evolution of the US giant’ssolutions for onsite and offsite media (including display existing Walmart Media Group. Walmart serves moreadvertising, sponsored search and sampling), as well as than 90% of US households, providing advertisers with theTesco magazine, direct mail, coupon-at-till, and connected opportunity to reach shoppers at enormous scale.store opportunities like point-of-sale and radio. A focus Leveraging data from 150 million weekly shoppers,on closed-loop measurement enables advertisers to Walmart Connect presents advertisers with mediaconnect the dots between media exposure and customer opportunities across search, display, in-store, and brandbehaviour, to understand the full impact of their marketing interactions – bespoke content featuring “top influencersactivities on sales. and A-list talent” designed to drive shopper engagement. One of the key selling points is Walmart’s ability to corre- late online ads with actual purchases as the company’s network of 4,700+ stores37. In August last year, the platform expanded with the launch of Walmart DSP. Unlike Kroger’s DSP solution, WalmartKroger Precision Marketing DSP is a standalone platform built in partnership with adtech vendor The Trade Desk. Combining Walmart dataKroger’s media platform provides advertising opportuni- with inventory including display, streaming video, mobile,ties across the retailer’s own media channels, as well as audio and CTV, the DSP offering is designed to helpthe ability to target the store’s customers across the web advertisers “engage with customers wherever they arewith co-branded digital campaigns. and bring them back to the Walmart ecosystem”38.Kroger-focused products within the platform includeemail, digital coupons, brand pages on kroger.com, static8 | © 2022 dunnhumby / All rights reserved

Carrefour LinksA more hybridised model than the platforms discussed above, Carrefour Links was co-developed with vendors includingCriteo, Google, and LiveRamp. Each of those companies plays to its specialist strengths, with Criteo assisting on theadtech front, Google with cloud, and LiveRamp in terms of data collaboration and analytics.The platform is the result of a major digital transformation programme by the French retailer, and the culmination ofthree years of work that saw it hire hundreds of data scientists while transitioning 25% of its software applications to thecloud.Links is built around a “Four Cs” proposition – capture, convert, converse, and comprehend. Carrefour touts the platformas being able to help brands find new and prospective customers, increase the likelihood of them making a purchase,build a relationship with those shoppers, and understand their retail journeys39.Notable mentions: Services within the DGMN include offsite media, onsite media (including apps), digital offers, programmatic digital out of home, instore signage, and smart shelf tags. The network served more than 14 billion ad impressions in 2020, and boasts a 17,000-strong bricks and mortarNectar 360 footprint that sees a Dollar General store located withinNectar is a UK-based loyalty scheme. Run by grocery five miles of 75% of the US population40.retailer Sainsbury’s, the scheme extends to multiple othercompanies including Argos, British Airways, Esso, andeBay, allowing cardholders to earn and redeem loyaltypoints with a number of non-grocery businesses (as wellas Sainsbury’s itself).In February 2020, the existing loyalty programme wasmerged with B2B marketing agency i2C under the new Éxito Media powered by dunnhumbyname of Nectar 360. The expanded offering allows the Dating back to October 2020, Grupo Éxito’s Éxito Mediacompany to offer insights and data-driven marketing platform is one of the earliest examples of a retailerservices to its 400 business partners. As well as in-store “productising” its media offering to the market. Éxitocampaigns, Nectar 360 provides brands with the ability to Media provides access to the largest addressablerun targeted social media campaigns. audience in Colombia, giving advertisers access to more than 8 million known shoppers across the group’s physical and digital storefronts41. Éxito Media builds on a longstanding relationship between Grupo Éxito and dunnhumby, with the platform built using both our data science capabilities and a selection ofDG Media Network our retail media products. As with the Tesco Insight andLaunched in April 2021, Dollar General’s DG Media Media platform, the Éxito Media offering extends beyondNetwork (DGMN) employs a similar model to Carrefour the retailer’s own media inventory and allows advertisersLinks in that it utilises services from Quotient, Inmar, to reach out to shoppers across the open web.and Vestcom. The platform focuses on Dollar GeneralMarketable Profiles – “known Dollar General shopperswho can be reached via paid media.”9 | © 2022 dunnhumby / All rights reserved

Albertsons Media Collective wag – Walgreens Advertising GroupDeveloped in partnership with CitrusAd and Merkle, Leveraging data from 9,000 stores and 100+ millionAlbertsons Media Collective will act as a replacement for loyalty members, wag is described by parent companythe outgoing Albertsons Performance Media platform. Walgreens as a “full-service, personalization-drivenTechnically launched in November 2021, campaigns advertising offering”. Analytics, personalisation,delivered through the new network will begin running in measurement, and a range of channel-based mediaFebruary this year. solutions are included.Albertsons Media Collective enables advertisers to In November 2020, just a few weeks before the launchreach out to 100 million customers, 27 million of whom of wag, Walgreens also introduced myWalgreens – aare members of the company’s Just for U loyalty reinvention of the company’s health and wellbeing-programme42. Key aspects of the platform are said focused loyalty programme. As a result, wag offersto include local advertising opportunities for CPGs, what Walgreens describes as “unparalleled insight intopartnerships with connected TV and video companies, consumers’ needs and shopping preferences when itand a desire to include non-grocery brands such as car comes to health and wellness items and everyday needs”.manufacturers43. 35 Tesco launches the UK’s largest closed loop grocery Media and Insight platform, powered by dunnhumby – tescoplc.com, 30th November 2021 36 Kroger Launches Private Marketplace to Connect Brands With Consumers – Winsight Grocery Business, 20th October 2021Roundel https://www.walmartconnect.com/content/wmg/home/solutions. 37Roundel is Target’s in-house media company – a part of htmlthe business that has been in operation since 2016, but 38 Walmart Connect Launches Its New Demand-Side Platform, Walmartwas relaunched with updated branding in the spring of DSP, To Expand Its Off-Site Media Offerings at Scale – walmart.com, 25th August 20212019. With data from 30m+ weekly in-store shoppers (and The Carrefour Group launches its new data and retail media strategy 39“even more” online), Roundel offers a variety of media with the Carrefour Links platform – carrefour.com, 15th June 2021solutions spanning social, search, programmatic, display, 40 https://dgmedianetwork.com/and connected TV. https://exitomedia.co/ 41Naturally, this means that campaigns booked through the Albertsons Companies Unveils New Retail Media Network – Business 42company can run on third-party sites away from Target’s Wire, 11th November 2021own properties – something that Roundel addresses with Albertsons launches its own retail media network – Grocery Dive, 15th 43the guarantee of “brand-positive environments”. As with November 2021Kroger’s offering, Roundel enables users to connect theDSP of their choice to its programmatic offering.10 | © 2022 dunnhumby / All rights reserved

A channel-by-channel guideto retail media in 2022While the exact nature of the opportunities on offer can vary from retailer to retailer and platform to platform, mostretail media networks tend to offer a selection of the following channels. Digital Digital onsite media Digital personalisation Digital onsite typically refers to any web-based One of the key advantages of retail media is property owned directly by the retailer. This can that it allows brands and agencies to engage include websites and apps, and may extend to with customers based on their prior shopping cover multiple banners in the case of broader behaviours. That can make it a great way to get “group” offerings. the right product in front of the right person at the right time, something that can be done in real Key examples: time via the use of digital personalisation. • Banner ads – placed in key locations such Key examples: as the homepage, product listings, and checkout. • Recommendations – relevant product suggestions that can be surfaced within • Video ads – usually featured as part of a search results. wider marketing campaign (see Co-brand campaigns below). • Complements – sponsored listings for products that go well with items that a • Carousels – these can be used to display shopper has already added to their basket. multiple products or a variety of information on a single SKU • Reminders – a final nudge for customers to add a regular item to their basket, typically delivered at checkout. Digital offsite media Offsite media uses first-party data to deliver targeted digital advertising delivered away from the retailer’s own properties. This can include news or entertainment websites, or social media sites like Facebook, Instagram and YouTube. Sites tend to be pre-curated, ensuring brand safety for retailers and advertisers alike. Specific placements and formats vary from site to site, but banner and video ads are amongst the most commonly employed.11 | © 2022 dunnhumby / All rights reserved

Physical Store media Multichannel The oldest form of retail media is still a hugely Direct-to-customer (DTC) effective way to reach out to shoppers, even Activities here can be spread across multiple with the growth of online grocery. One of the key formats, stretching from printed materials sent to benefits of store media is its sheer versatility, the customer’s home through to digital coupons stretching from printed and digital signage and vouchers delivered through an app. While through to sampling, experiential, and more.. untargeted, mass market campaigns to continue Key examples: to dominate in some markets, many DTC campaigns now use loyalty data to ensure that • Aisle fins – printed dividers that are fitted shoppers receive relevant offers and promotions. to shelves, typically used to highlight a new product or offer. Key examples: • Interactive screens – for use in everything • Direct mail – usually in the form of from store navigation and personalised reward vouchers or coupons tailored to a offers through to recycling and recipe customer’s purchasing history. inspiration. • Coupon-at-till – generated on checkout, • Radio – in-house radio channels provide providing a discount on future purchases. the opportunity to deliver key messages to • App notifications – sent direct to a customers throughout the store. shopper’s mobile device to encourage them to go online or visit a store. Co-brand campaigns The past few years have seen a growing number of retailers embark on co-branded campaigns in partnership with suppliers. These tend to take the shape of inspirational content programmes, providing customers with new ideas or helpful advice on a range of grocery-related topics. Key examples: • Recipe ideas – featuring products from a brand sponsor. • Meal planners – particularly relevant for convenience or wellbeing-focused brands. • Lifestyle guides – coaching shoppers towards a specific goal with expert advice from a brand partner.12 | © 2022 dunnhumby / All rights reserved

The trends shaping future innovations Retail media is anything but static. As a growing number of retailers and brands begin to explore its potential, we’re seeing new ideas begin to spring up around the world. Here are a few that we think have the potential to shape the future of retail media. Data expands beyond the grocery channel The customer data that retailers hold isn’t just useful for grocery-based advertising. As evidenced by the new partnership between Kroger and Roku, there’s an increasing opportunity for retailers to monetise their data away from their own platform. Going forwards, marketers running campaigns via Roku’s TV platform will be able to use Kroger’s shopper data “for targeting and closed-loop attribution to measure campaign performance”44. We wouldn’t be surprised to see more retailers bridge the gap between the data they own and other forms of media. Interactive video goes mainstream Shoppable ads have been part of the wider retail landscape for some time now, helping to engage customers with interactive videos that allow them to view specific items featured in the reel. While ads of this kind are yet to proliferate in the grocery space, that could change quite rapidly. Walmart and interactive video firm eko recently partnered on the creation of Walmart Cookshop – an interactive site that features celebrity guests and brand-sponsored videos that showcase products and ingredients as part of a recipe. The beta version of the site generated an 8.7% click-through rate according to Walmart45. Data clean rooms become commonplace Retail media is powered by first-party data, which can be used to gain deep insights into the behaviours of actual shoppers. While this real-world element is one the things that makes retail media so successful, it also has obvious implications from a privacy point of view – and customer anonymity is key. Companies like Infosum and Habu offer data “clean rooms” – privacy-first environments which allow marketers to use that real-world data in a safe and compliant way. New clean room companies are springing up all the time, speaking to the growing demand for audience targeting that adheres to increasingly strict regulation.44 Roku Announces New Shopper Data Program; Kroger Named Launch Partner – Business Wire, 8th June 202045 ‘The returns are impressive’: How eko’s partnership with Walmart is making interactive video more mainstream – Digiday, 1st March 202113 | © 2022 dunnhumby / All rights reserved

Why retail media needsto put the customer firstWith its ability to drive sales, generate ad revenues for retailers, and give brands a way to speak to high-intentshoppers, retail media presents a clear commercial opportunity. At the same time, there’s much more to retailmedia than money; done right, it can also deliver huge improvements to the quality of the customer experience.Today, the majority of commercialised retail media offerings are powered by first-party data. When you combine thatwith the omnichannel nature of a grocery retailer’s media portfolio, you have everything you need to reach out tocustomers with highly-personalised content at multiple points on their shopping journey. That’s one of the main reasonsthat retail media is as effective as it is.As important as that is in terms of advertising performance, however, retail media also presents the opportunity tocreate a truly additive experience for customers – one that delivers greater value, convenience, and inspiration.Value Convenience InspirationValue – or the perception thereof Whether they’re online or in-store, Cooking at home was one of the– has become an increasingly grocery shoppers usually want to major trends to emerge during thecrucial matter for shoppers over get what they came for as quickly height of the pandemic, even inthe past two years. dunnhumby’s and easily as they can. As a result, countries where eating out is usuallyCustomer Pulse, a global research anything that retailers can do to a significant cultural norm. As aprogramme designed to track make the shopping experience as result, many customers were lookingchanging behaviours in the wake of convenient as possible is likely to for extra inspiration in their shop,the pandemic, has shown a growing go a long way towards meeting something intensified by the shift totrend towards “value seeking” expectations. online.strategies during that time. Both online and off, retail media Here too, personalisedWhile retail media isn’t linked directly provides abundant opportunities to recommendations have presentedto price, it can still play a key role improve the flow of a visit. Smart retailers and brands with a wayin helping customers get more use of in-store assets can be used to to aid product discovery whilevalue from their shop. As well as improve navigation and callout deals simultaneously helping to providehighlighting cost saving opportunities and offers, ensuring that shoppers a better service to customers.more generally, retail media can also can manoeuvre around a branch Complementary product suggestions,be used to deliver personalised offers as quickly as they want. From a based on what similar shoppers haveand discounts tailored specifically to digital point of view, personalised added to their baskets, offer anotherthe products that shoppers actually recommendations, substitutes, and opportunity to inspire.buy on a regular basis. favourites can all help a customer get to the checkout faster.14 | © 2022 dunnhumby / All rights reserved

The importance of making retail media a customer-centric endeavour can’t be underestimated. While shoppers tend tobe more willing to share their data with grocery retailers than others46, that doesn’t make them any less conscious thattheir experience should improve as a result.More than anything, a customer first approach to retail media ensures its sustainability over the long term. So longas shoppers continue to receive a genuine benefit from the communications they receive – whether in terms of time,money, or anything else – they’re that much more likely to remain receptive to the messages they’re presented with. Ifthat dynamic changes, retailers risk the entire operation coming undone.46 The consumer data give and take – Deloitte, 2020Building a winningmedia propositionThe proliferation of data science and retail media technologies means that retailers are no longer faced with thedaunting prospect of building their entire offering from scratch. Core competencies can be complemented withthird-party products and services, helping retailers build next-generation media platforms without needing todevelop the skills and software required to run them.Even with that being the case, there are still some key considerations to take into account when building – orexpanding – a retail media platform: Reimagine the aisle to improve the shopper experience. The more expansive your retail media offering becomes, the more advertising technology you’ll need in order to power it. Sometimes, this can be simple – with one vendor managing everything from data through to each of the channel-specific applications that form your portfolio. When multiple solutions from different third-parties are involved however, that diversity can quickly translate into complexity. If your own platform incorporates a range of technologies from different vendors, it’s important to en- sure that they all tap into the same, consistent data source. That’s as vital to audience identification as it is campaign measurement, and should be one of the major priorities no matter how large your retail media offering grows. Maintain Customer First principles Some commentators have suggested that retail media fatigue may be something to watch for in the future, with shoppers struggling to engage with ads due to oversaturation. We maintain that this won’t be a problem so long as retailers – and their brand partners – adhere to Customer First principles. At dunnhumby, we advocate for the use of retail media as an additive tool in the shopping experience. Can it boost sales and generate revenues? Of course. But with the right sentiment, and by using data to understand which actions are of the greatest benefit to customers, retail media can also play a role in loyalty, satisfaction, and engagement. Ensuring that every decision is taken with the customer’s best interests in mind, and that the content they see is relevant, helpful, and contextually appropriate, will help to ensure that a retail media plat- form delivers long-lasting benefit to all.15 | © 2022 dunnhumby / All rights reserved

dunnhumby is the global leader in Customer Data Science, empowering businesses everywhere to compete and thrive in the modern data-driven economy. We always put the Customer First. Our mission: to enable businesses to grow and reimagine themselves by becoming advocates and champions for their Customers. With deep heritage and expertise in retail — one of the world’s most competitive markets, with a deluge of multi- dimensional data — dunnhumby today enables businesses all over the world, across industries, to be Customer First. The dunnhumby Customer Science Platform is our unique mix of technology, software and consulting enablingbusinesses to increase revenue and profits by delivering exceptional experiences for their Customers – in-store, offline and online. dunnhumby employs over 2,000 experts in offices throughout Europe, Asia, Africa, and the Americas working for transformative, iconic brands such as Tesco, Coca-Cola, Meijer, Procter & Gamble, Raley’s, L’Oreal and Monoprix. Connect with us to start the conversation dunnhumby.com