Optimizing Ad Spend is Important — But Retailers Ignore Bigger Picture Monetization Strategies at Their Peril

Retailers are on a quest to improve margins. Given an environment of unprecedented competition, inflation, economic uncertainty, excess inventory and constant supply chain disruptions, that quest is now a business imperative for all — and for many, an existential battle.

As a result, we’re seeing a lot of headlines about the industry doubling down on retail media spend and optimization, including a flurry of announcements from major retailers such as Dollar General and Walmart. Ad optimization is a legitimate and necessary effort.

However, too many retailers are ignoring the elephant in the grocery aisle: a lack of strategy, focus and discipline around bigger picture monetization strategies that hold far greater potential to improve profit margins.

Retailers are sitting on a mountain of valuable data residing in their point-of-sale, loyalty, and e-commerce systems — a trove that has only grown since the pandemic began driving consumers to e-commerce as never before. Allied Market Research analyzed the data monetization market across every major vertical, and estimates that the retail and e-commerce segment will see CAGR of 27.0 percent from 2021 to 2030. Coresight Research estimates that “retailers can generate up to 1.0 percent of total sales in data revenue, depending on the volume and uniqueness of the data.”

However, turning all of that data into insights that can be monetized and leveraged to improve internal decision making across retail operations is no small feat. Some of the world’s largest retailers have made huge strides in cracking the code. In an earnings call last year, Kroger CEO Rodney McMullen said, “Many retailers have transactional data, but no one has the customer data and the insights that Kroger has.” In fact, Kroger recognized publicly a forecast to generate $150 million in alternate revenue, driven largely by data monetization efforts.

That’s great for Kroger (for which, in full disclosure, I once served as head of e-commerce operations), but too many other retailers have barely started down the monetization path. If you’re a “retail monetization laggard,” you need to do a 180° on monetization. Here’s how, based on some of the best practices from the pioneers.

C-Suite Sponsorship

As Kroger’s quarterly reports demonstrate, successful monetization strategies begin at the top, with leaders who understand that the benefits of monetization cut across the entire organization. The C-suite must prioritize monetization by appointing and empowering a senior leader who can formulate and implement a companywide strategy.

Focus

Successful organizations set up a dedicated monetization department because they understand that anything less will result in fragmented efforts that fail to fully capitalize on the opportunity. Walmart has Luminate, which is seeing rapid growth “harnessing the power of data science to give brands … rich customer insights.” Kroger has 84.51°.

Infrastructure

Historically, the CapEx requirements for data capture, analysis and monetization have been prohibitive for many. The good news is that advances in data capture techniques, artificial intelligence, cloud-based analytics and other foundational technologies have drastically reduced the need for massive capital outlays. A trend towards greater industry collaboration also provides an opportunity for more retailers to move faster, at less cost.

There are also new, highly lucrative frontiers on the horizon that go beyond POS, loyalty and e-commerce data, with in-store inventory data at the forefront. Technology leaders large and small “are prioritizing major investments in product innovations and R&D of robust solutions facilitating robust in-store inventory management.”

Historically, there were many valid reasons why robust monetization programs were out-of-reach for so many retailers. That was yesterday. As the barriers come down, retailers that lack a monetization strategy need to set a new course. Starting today.

Mark Abernathy is head of retail at Pensa Systems, a syndicated data solution that drives growth for CPG brands and retailers through accurate and actionable shelf visibility.