How Coles and Woolworths are changing this $1b ad market

The global boss of the world’s largest advertising group said brands could end up paying twice for the same exposure, as major retailers such as Coles and Woolworths battle for hundreds of millions of dollars in revenue from their suppliers by selling targeted ads.

Mark Read, the chief executive of advertising giant WPP, said the emerging “retail media” sector – which is estimated to have taken $1 billion from the Australian ad market in 2022 – is splitting how companies measure and manage their promotional campaigns.

Woolworths, through its Cartology division, and Coles, through Coles 360, are leading the market locally. Retailers use their loyalty schemes and internal shopping data to target ads to customers while they shop in-store or online.
Traditionally, there was a difference between the advertising planned outside of stores and the placement of ads and promotions in-store. Mr Read said that division was breaking down.

WPP spends $US60 billion ($89 billion) a year on behalf of clients such as fast-moving consumer goods (FMCG) giants Unilever and Nestlé, and Mr Read said the more successful consumer goods brands are merging traditionally separate trade and consumer advertising budgets to take advantage of the rise of retailers as advertising companies.

“The clients that bring those budgets together can deploy them more effectively across platforms and understand what part of retail media builds brands or what part of retail media drives sales and get to the right allocation,” Mr Read said.

“I think that gives us access to a whole growth opportunity … we can really help them make sure that they’re not paying twice for something they used to pay for once. I think there’s opportunity for clients to get more value from their trade budgets because they can activate them better.”

Combining the trade and sales budgets would mean an agency like WPP would have more access and visibility over what its clients spend, which would mean more potential revenue.

“We’re very good value,” Mr Read said when asked whether it means clients would pay their agencies more to work on retail media.

“Increasingly, actually, we’re seeing collaboration between the media parts of our business and the retail parts of our business to bring those different skills together.”

PwC has estimated the market for retailer media in Australia is worth about $1 billion, which could triple by 2026. The sector was pioneered by Amazon, which became a media giant by selling sponsored search results on its e-commerce store. Last year, it reported $US37.7 billion in revenue from advertising: sponsored, digital display and video.

In the US, retail media was worth more than $US30 billion in 2021, while McKinsey & Co estimated that such networks were growing by more than 10 per cent year-on-year in the UK.

Locally, Woolworths’ Cartology has been shoring up its $150 million acquisition of outdoor advertising company Shopper Media, which takes its network of digital ad screens beyond its stores.


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