Convenience stores are the new frontier of retail media

The latest evolution in the retail media economy has begun. At the end of January, Co-op launched its integrated retail media network (RMN) to deliver a new proposition within convenience shopping.

As the second most visited grocer in the country, Co-op is surprisingly late to the party. GroupM forecast RMNs were expected to reach $119.4bn in revenues in 2023. They are now forecast to grow a further 8.3% in 2024, thanks to a new retailer taking advantage of the expanded market every week. The ever-increasing revenue potential and excellent margins make retail media a hugely attractive opportunity in a highly competitive sector. So it’s no surprise Co-op has now followed suit.

Nevertheless, its investment in retail media does signify an evolution in the market. It is the first to unlock new retail media capabilities solely within the convenience sector. There is a nuance in the customer journey within a convenience grocer versus a supermarket, including the customer’s shopping mindset, time spent browsing and basket size. This move, therefore, will certainly pique the interest of CPG brands looking to capitalise on moments of impulse in that journey.

Though shopping journeys differ, the intention of all RMNs remains the same. As the third-party cookie heads towards its demise, collecting and selling first-party data through loyalty programmes will be a money-maker. CPG brands will be looking for solutions that allow them to unlock new avenues for hyper-localised targeting and increased resonance with customers.

Co-op abandoned its monetary rewards scheme in favour of the more widely adopted and recent trend for membership pricing, to create a richer and more measurable ecosystem. The hope is that it will also drive significantly more members to its loyalty scheme, and therefore have more consumer insights to sell.

I expect other convenience grocers to follow suit, and there are two approaches they can take to drive scale. They can either follow in the steps of retailers like Co-op by working with a retail media operator to get to market faster, or they can take the path of many of the larger supermarkets and US grocers by developing the technology, infrastructure and operations internally. The latter can often be more desirable, as it allows retailers to deliver greater profit margins in the long term.

Ultimately, the winners will be those that are most flexible in adapting to the needs of advertisers in terms of data access, scale, and improved measurement. Fragmentation and over-complexity make it a heavy lift for advertisers looking to drive the most value. Convenience retailers, if positioned correctly, are uniquely primed to offer unique access to consumers and build strategies that address these problems, not accelerate them.

RMNs are on a journey. Retailers, especially those with loyalty schemes, are sitting on a treasure trove of data and are set to entirely disrupt the landscape for ad revenue. Convenience grocers in the UK are at the start of this journey as they begin to comprehend the financial opportunity. Co-op may have been first to make its move, but it won’t be the last.