If you’ve stepped inside a store recently, maybe a Target or Kroger, you might have noticed digital in-store advertising — an upgraded rendition of the traditional grocery flyer or hanging banners. These advertisements are about to become more commonplace as brands and retailers seek additional avenues to showcase their products.
Retail media is poised to reach $45 billion this year, a 20% increase year over year, and is anticipated to hit about $106 billion by 2027.
As retailers introduce more in-store ads, they face challenges related to privacy concerns and negative reactions from shoppers who see these ads as unattractive or distracting.
This scenario has already unfolded at Walgreens, which deployed digital smart screens ads on refrigerator doors in U.S. locations. Several shoppers took to TikTok and Twitter, saying these screens made it hard to find frozen items like ice cream or pizza.
Kroger and Giant Eagle have adopted the same technology.
Back in March, during a virtual summit, Rich Lehrfeld, senior vice president and general manager at Walmart Connect, said the majority of sales actually occur within brick-and-mortar stores. The retailer identified an untapped potential: the enhancement of the in-store experience. Walmart has been working on approaches to connect with consumers, including demonstrations, events, interactive in-store displays, and the recent addition of in-store advertising.
Read also: Retailers Give In-Store Media an Interactive Twist to Boost Basket Size
Walmart is actively seeking third-party ads for in-store displays, including its self-checkout lanes and television aisles. There will also be promotional messages on the stores’ radio system (now being tested) and product sampling at demonstration stations.
Third-party advertising at Walmart reaches a huge audience. Walmart has nearly 4,700 stores in the U.S. About 90% of Americans live within 10 miles of a Walmart. Each week around 139 million Americans shop at Walmart’s brick-and-mortar stores, website or app.
The company aims to use about 170,000 digital screens across its locations, and introduce 30-second radio segments in the upcoming year.
Walmart’s approach includes selling the demo stations to advertisers and integrating them with other advertising formats that can be executed simultaneously. QR codes on the demo tables will link to online shopping options, meal recommendations, or seasonal information.
Advertisements still make up a relatively small segment of Walmart’s revenue. In the most recent fiscal year, ending in January, the global advertising division of the company generated $2.7 billion. This amount represents less than 1% of Walmart’s total annual revenue.
Nonetheless, it’s becoming a catalyst for Walmart’s growth. Earlier this year, CEO Doug McMillon said he expects the company’s profits will surpass the rate of sales growth in the upcoming five years. This projection is fueled, in part, by more lucrative sectors, advertising among them.
In the most recent fiscal year, revenue from Walmart’s global advertising division surged 30%, and its U.S.-based advertising arm, Walmart Connect, soared about 40%. This compared to the roughly 7% upswing in Walmart’s overall revenue and U.S. net sales during the same period.
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