Tesco is one of the European food retailers best positioned to increase its profits thanks to retail media. According to a recent report from JP Morganthe supermarket chain is in a position to earn more if it takes advantage of the Retail Media: “The increase in online traffic on food delivery platforms has opened the doors for grocery stores to do the same”.
In the words of JP Morgan analysts collected by bagmania«food retailers can also take advantage of proprietary databases that provide consumer purchasing patternsthe key for any marketer, especially after the depreciation of third-party cookies ». In addition, they emphasize that “the irregular performance of 2023 could be a margin enhancement opportunity that underpins industry profitability”.
“Over the next five years, Retail Media is expected to increase at a compound annual growth rate (CAGR) greater than 10% globally, compared with 4%-5% of the total ad market, capturing at least 25% of all digital ad spend”highlights JP Morgan, pointing out that “larger grocery stores could have a estimated market share of 5 to 7% within the Retail Media in their home countries and yet remain marginal players (<1% share) within the total ad market”.
Although total return potential is conjecture at this time, JP Morgan notes that supermarkets’ targets for Retail media benefits imply an EBIT margin of 80% on incremental revenuewhich translates to a 7-10% increase in profit estimates.
Finally, they point out that, in their opinion, the cannibalization of existing advertising relationships between suppliers and grocery stores, the possible delay in investments in Retail Media platforms due to more pressing problems in the midst of the cost of living crisis , and the launch of similar platforms by other industries, will be the key debates when talking about Retail Media.
Retail Media, a safe advertising bet
2022 was «the year of Retail Media«, with a projected expense, according to eMarketerthat exceeds 40,000 million dollars in the United States alone. In a relatively short period, the networks of retail media They have established themselves as a safe advertising bet for retailers. A report made by the Association of National Advertisers (ANA) reveals that around 58% of retailers used Retail Media networks in the past year and it is expected that advertising investment in Retail Media increases by 20.5% this 2023.
He retail media it is not a “transient trend”. In fact, for years, we have been able to see how Amazon has opted for this discipline. With WalmartConnectis positioned as one of the main Retail Media networks in the US market.
Braving the slowdown advertising investment which continues to grow, but at a slower rate, the retail media It is positioned as one of the most attractive proposals for advertisers. Currently, it is the 4th largest media outlet by ad spend with total global spend of $110.7bn in 2022 and it is expected to reach 121,900 million dollars this 2023.
