Our guest this week is Andrew Lipsman, Principal Analyst at Insider Intelligence, recorded live at the recently completed GroceryShop event in Las Vegas. We go deep into the burgeoning world of retail media networks, exploring what they are, how they work, and why they have become arguably the most exciting growth area for retailers in recent memory.
Our guest this week is Andrew Lipsman, Principal Analyst at Insider Intelligence, recorded live at the recently completed GroceryShop event in Las Vegas.
We go deep into the burgeoning world of retail media networks, exploring what they are, how they work, and why they have become arguably the most exciting growth area for retailers in recent memory. We dig into the key accelerants and enablers, how success requires a significant shift in organizational mindset, and what challenges need to be overcome to best balance the customer experience with retailers desire to chase incremental profits. And we can't pass up the opportunity to get Andrew's perspective on the holiday shopping season.
But first we give our hot-takes on the week in retail news, kicking off with our thoughts on Michelle Gass's departure from Kohl's, before moving to the stock market frenzy unleashed by better inflation numbers. We also unpack profit warnings from Capri and others ,and what to make of earnings reports from retail disruptors like Mytheresa (the good), Allbirds (the bad) and Warby Parker (the maybe). We close with a brief discussion of Amazon's reported profitability review, before dipping into the department of useless headlines.
Kohl's Retail Fight Club
Andrew Lipsman is a Principal Analyst at Insider Intelligence, focusing on retail and ecommerce. Recent coverage includes grocery ecommerce, retail media networks, D2C brands, social commerce, mobile retail apps, holiday shopping, and Amazon Prime Day.
Previously, Andrew was SVP of Marketing & Insights at comScore, covering multiple industries and overseeing the company’s global marketing insights and thought leadership initiatives.
He has specialized in several coverage areas in addition to retail, including social media, mobile, digital advertising and cross-platform marketing. Andrew has been a regular contributor to the Journal of Advertising Research and is frequently quoted by leading news organizations like the New York Times, Wall Street Journal, Advertising Age, CNN, Fortune, Reuters and Bloomberg.
Andrew holds an MBA from Northwestern’s Kellogg School of Management and his undergraduate degree from Duke University.
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:06
Welcome to Remarkable Retail podcast, Season 5, Episode 19, presented by MarketDial. I'm Michael LeBlanc.
Steve Dennis 00:12
And I'm Steve Dennis.
Michael LeBlanc 00:13
So, Steve blue check, white check. Are you just going to ask the waiter for the check and get the hell out of Twitter? How have you been feeling this week about Dr. Evil's social media empire? It's not exactly retail, (crossover talk),
Steve Dennis 00:25
Well, some of you may have seen the meme that showed up on Twitter about Kanye saying, I can't believe I ruined my career so quickly and then Elon being, hold my beer. I, it's, it's really, I don't know, I don't even know what to say,
Michael LeBlanc 00:30
It's something to watch it you know,
Steve Dennis 00:33
It is something to watch if, if you like dumpster fires, but yeah, it's, it's, it's pretty crazy. And I love that Elon said, and by love I mean, hate, apparently said in an employee meeting that bankruptcy was not out of the question, which is always you know, the great way to start like day four on the job, (crossover talk), oh, my God, you know,
Michael LeBlanc 01:03
I'm just going to throw this out. You know, I, I, I do throw this out. And it is actually connected in an interesting way to our guests. So, in this episode, a very special guest, recorded live in person at a GroceryShop in Vegas as Andrew Lipsman, Principal Analyst at Insider Intelligence. And he's got an, it's an enthusiastic and an embracing interview, fast paced, lots of focus on the retail media networks, which is probably I don't know, one of the biggest buzzes at GroceryShop, certainly in his mind big and I'm just connecting this back to Twitter. I mean, as advertisers start to pull money, or pause money away from Twitter, they're going to look for a new home for that money, right? So, this is, I think these things are connected.
Steve Dennis 01:39
For sure, I mean, there's this, there's been this big shift away from a number of the more traditional digital advertising platforms like Facebook, you know, that's been part of the narrative around why Facebook has struggled, but also away from, from Google to different places. Amazon being of course the, the big dog at the moment, but as we'll talk about with Andrew, there's, there's a lot going on, both in store and online. And Andrews got a great perspective on it. And he actually has data as opposed to strongly held opinions, which is, which is my bailiwick?
Michael LeBlanc 02:11
Well, let's get to the news and breaking news. Well, okay, it's not really breaking news. Michelle Gass departs from Kohl's now that happened this week, it didn't happen today. What say you? You know, that's, I think you commented on social media. Her expiration date may have been pending anyway. She's off to Levi Strauss, the company I used to work for and the ones who, you know, Levi's give us and taketh away right. The JC Penney, President came out of Levi's and (crossover talk) their ta-, their pulling her in from Kohl's. So, what, what think you have all this?
Steve Dennis 02:42
Well, it's not surprising to me at all that she's leaving Kohl's, either because she was going to be pushed out, or because she just realized that it's a very difficult environment. Not and maybe with your Levi's experience, you've got more to say about this, but not sure why she's a good choice for Levi's. I mean, her background is primarily Starbucks many years ago, then P&G. And even though there are lots of excuses, I guess, to why her tenure at Kohl's didn't go better. But I mean, objectively, her, the performance of calls under her tenure has been terrible. They've lost about 60% of their market value. their market share hasn't gone anyway, anywhere. You know, a lot of the stuff we talked about, on our episode with Eath-, Ethan Chernovsky, you know, what makes her the best pick to go to a brand like Levi's, I don't understand. But you know, she's getting out while the getting is good, as far as I can tell from Kohl's because, yeah, I don't think she was going to be there much longer.
Michael LeBlanc 03:49
Best, best of luck to Michelle. And so, are you getting calls? So, who do you think it's going to get a few calls to, (crossover talk) what would you do? It's an interesting question, zero calls, not to start the rumor here but,
Steve Dennis 04:02
I've gotten zero calls. It's certainly a tough position to fill because you do need, I mean, there's certainly plenty of former department store executives that in theory are well qualified to do it. I don't know that getting somebody I mean, they, they need such a bold transformation, that I think trying to find somebody who knows enough about the guts of the business that brings a real outside perspective. So, I don't know, you know, you know, I think, I think it would be interesting to bring somebody more from a luxury upscale service perspective into the mix than to necessarily bring somebody let’s say more from the value side of retail and the interim CEO and that's his background at Burlington Coat Factory.
Michael LeBlanc 04:18
Steve Dennis 04:19
)I don't think that efficiency sort of orientation, you know, that efficiency is like 5% of Kohl's issues. Their issue is how to really be surprisingly, I'm going to say remarkable and really, really standout. And that's much more about a differentiated experience, differentiated product, format, innovation and digital savvy, you know, all those kinds of things. So, that's what I would be looking for in terms of an outside hire, but I don't (crossover talk),
Michael LeBlanc 05:17
The turnaround experience, right? And then you going to have to have a (crossover talk) a good turnaround experience,
Steve Dennis 05:19
Yeah, you've got to, you know, I don't know that. I don't know that much about the cor-, Kohl's culture. So, I'm not necessarily sure that that's a huge struggle, like I have my own experience at Sears where that was a big barrier to turning the place around. I don't know how big a challenge that is. But yeah, it is a turnaround, and you have to really approach it as such.
Michael LeBlanc 05:39
Let's move on. Any big picture outlook, things that popped in this week, profit warnings? Or what do you think about inflation? Let's touch on that for a little bit.
Steve Dennis 05:48
Well, there's a, there's a big this brouhaha, in the stock market, when the more tempered inflation numbers came out in the US, you know, only seven and a half percent or something like that, and then Wall Street went crazy. I think the market was up like four or 5% that day. I mean, that's encouraging. One month does not necessarily make a powerful trend. But I'm hopeful that that means we may see significant moderation of inflation going forward. So, that's something to, continues to, to look out for. But overall, I would say most of the news we're getting, we'll talk a little bit more specifically about a few companies in a second. But there are a number of companies like Capri Fashion Holdings Company, they reported pretty good results. But they warned about the future. And that I think continues to be the pattern in the last few weeks is even some retailers that are posting objectively good results. Most of them are guiding down saying that they expect to face significant headwinds and lowering their forecast.
Michael LeBlanc 06:51
We had a wrath of digital disruptor earnings, some good, some very good actually and then some, some other things that might be good. So, talk about that.
Steve Dennis 06:59
Yeah, sort of the good, the bad and the maybe, I guess. So, on the good si-, the good side of Mytheresa, the German eCommerce luxury Germany based luxury eCommerce company reported a very good quarter. We had Michael Clinger, Kliger on the podcast a few weeks back talking about,
Michael LeBlanc 07:07
A great interview.
Steve Dennis 07:09
What is, yeah, (crossover talk) really interesting. Yeah, mainly because I was not on the podcast. But so not, not terribly surprising. But as far as you know, what is basically a pure online retailer, very few of those make money and they posted some pretty solid sales results with a good EBITDA margin. Then there were a bunch of really bad ones. Again, not too surprising, but Allbirds, The RealReal, Blue Apron, Carvana, which is not you know, a traditional retailer all had very, very significant losses, and for the most part, their stocks took a pretty big hit. There's also, I hadn't thought about these guys for a while. Do you remember Birchbox, a subscription,
Michael LeBlanc 07:57
Steve Dennis 07:58
Michael LeBlanc 08:03
They were a big, they were a big thing for a while, (crossover talk),
Steve Dennis 08:05
Yeah, they were, they were sort of hot and hot and heavy there for a few years, they got a lot of publicity. There's some rumors that they may be liquidating. I don't know if that's true or not. So, that's not earnings reports. But that's not good news. The most promising I think, in a lot of respects, was Warby Parker's earnings. Their, their sales growth was not spectacular, they still lost quite a bit of money, but their margin of loss was decreasing. And just to kind of contrast with Allbirds, a little bit, and I guess we'll, we could put a link in the notes, we did have a in depth discussion with Dan McCarthy, about the customer economics of Allbirds and Warby Parker after they both went public last November, I guess, or October. But if you look at Allbirds results, their sales growth is really flattening, despite having opened a lot of new stores, which you think would be pretty accretive to their sales performance. And their margin performance continues to be quite negative.
Steve Dennis 08:37
When you look at Warby Parker, you know, a much bigger company, it's been around longer, you know, most of the underlying metrics are quite positive. So, when you think about why they're not making money, a lot of that has to do with still being under scale in terms of their store performance. Their stores are performing well, they claim according to their model. And they actually went into a fair amount of depth on it, but they're still, the stores are still at about 85% of their sales level pre-COVID. And, you know, their belief which makes sense to me is that there's still hesitancy for people to go into stores, particularly for things like eye exams, which they've been adding to, to many of their stores. So, I, I like, you know, I don't love the fact that they're, what, 13 years old now and close to 200 stores and they're still, you know, $20 million, or something short of making money. But (crossover talk) I do think the metrics underneath, underneath are quite encouraging. And if you believe that people are slowly going to be returning more and more to their, their sort of retail, I think there's a real chance for their performance to accelerate.
Michael LeBlanc 10:18
Let's talk for a minute about Amazon. So, kind of a couple of phrases and words and sentences you don't typically hear with or associate with Amazon, which is cost cutting and, you know, profitability reviews and things. We're really seeing a big change culturally around how they're per,- how they're approaching the business. Yeah,
Steve Dennis 10:38
Yeah, we've, we've been getting glimpses of this, I think since Andy Jassy took a, sassy Jassy took over. But, you know, there was a news report that they are going through a much more comprehensive review of profitability. I mean, I guess when you lose a trillion dollars in market value, which is mind boggling, I cannot get my head around, (crossover talk) it. Yeah, they are the first company ever to lose a trillion dollars in market value. I think the stocks are down more than 50% in the last year. So, that will grab your attention. So, they're definitely going into, as you said, a really kind of different mindset and approach to just kind of going after growth for growth's sake. One of the things I thought was really interesting from the story that talked about these profitability reviews, is this little nugget, that the Alexa for Business division loses $5 billion a year. That's almost Metaverse, a Meta kind of money. Yeah. And I, I guess it hadn't, (crossover talk),
Michael LeBlanc 11:39
Like these numbers, there's just, just when I read that I'm like, where do you spend $5 billion? And is it, is it that you're making, and you must be selling the product below, like the first cost? Like when I you know, when I buy an Alexa and I'm paying X and it actually takes like are they below first cost? Like does that associate with that it's just a mind,
Steve Dennis 11:58
I, you know, I had never really thought about it. And you know, we have tried to unpack, and I had a conversation with somebody who understands Amazon's profitability much better than I do. Some of you know, but I'll be mysterious about it, because it was an off the record conversation. But we were trying to parse out some of the, the retail profitability versus the ad profitability, and all that kind of stuff. And one of the things that was brought to my attention was that Amazon writes off a lot of the NFL rights and things like that, which can make their profitability look, look a lot worse on a GAAP basis. So, I hadn't really thought about that very much. And I was like, wow, that could be a pretty big number and it makes it hard because they bundle all that stuff together. The whole device, part of the voice commerce, part of it, I hadn't even thought about as being particularly, I mean, obviously, it's a big business. But the fact that it could swing their performance that much was mind boggling to me. So, we'll see what comes out of this.
Michael LeBlanc 12:54
Last but not least, I had to laugh several times this week when I looked at some headlines. And I just, I just wish you and I were together when I was watching your reaction to looking at some of the consumers' plans to do more holiday shopping in stores and online. And just, you know, just these, you know, Shopify put out, you know, record numbers this year, and like, what did you call it, "the department of useless headlines"? (Inaudible)
Steve Dennis 13:16
Well, there's, there's two things about this one, when I saw that headline, I was like, well, the more accurate headline which I posted on social media is that consumers planned to do more holiday shopping in stores than online, "continuing unbroken record since the beginning of time". Because that, you know, it's not news, like stores do more than online, on average, everywhere every day. So, that's not news.
Michael LeBlanc 13:45
All right. Well, just before we get to hear from a great interview with Andrew Lipsman, let's hear about something you and I are up to coming up in January. Hey, Steve, are you a Frank Sinatra fan by any chance?
Steve Dennis 13:58
Well, it turns out I am.
Michael LeBlanc 14:03
Well start spreading the news that we're coming to town strapping on Vagabond shoes. I want to wake up in a city that never sleeps king of the hill, top of the heap.
Steve Dennis 14:08
Well, that's right. We're actually heading to the NRF Big Show in New York in January. In addition to meeting with and interviewing our top retail leaders in the industry in the MarketDial booth, podcasting studio, we will be onstage with Gretchen Ganc, Senior VP of Strategy and Analytics from the most remarkable Container Store. So, see us live in person, Monday, January 16. At 12:30 on Expo Level 3, Expo Stage 3, for Shift Happens. Choose remarkable or irrelevance. Brought to you by MarketDial.
Steve Dennis 14:36
Well, welcome Andrew Lipsman from Insider Intelligence, the brand I think formerly known as eMarketer are part of you. Maybe you can explain that to us. But thanks for, thanks for joining us.
Andrew Lipsman 14:54
Great to be with you, Steve.
Steve Dennis 14:55
So, let's just start out with hearing a little bit more about who you are, what you do, your personal professional journey, that kind of stuff. And then there's a lot for us to possibly talk about. I think we've got a few ideas. But we'll, we'll jump in after learning more about you.
Andrew Lipsman 15:07
Yeah, so I'm a Principal Analyst covering retail and eCommerce at Insider Intelligence or eMarketer, as many people still know it. It's kind of a sub brand. My backstory, my whole career has really been in market research. Early years were spent at NPD, working on the food side of the business. And then in 2005, actually November of 2005, I went to comScore. That was actually the week that Cyber Monday became a thing. So, you know, a lot of people don't know this, but comScore was actually founded on measuring eCommerce. So, it was the first company to really measure behavioral data for eCommerce.
Andrew Lipsman 15:32
So, eCommerce measurement has been a through line of my entire career. But over the years at comScore we saw the evolution of so many facets of digital. And I had a front row seat to watching those industry tr-, trends as they evolved, you know, advertising via, being a big part of it, as well. And then a few years ago, I went to Insider intelligence. And I've been covering retail and eCommerce ever since, but you know, also at the intersection of retail and advertising. So, today, you know, holiday is a big, big part of my coverage. That's maybe 20% of what I do with my time. And then I would say about 70% of my time is going to retail media networks, which has obviously been one of the big themes of the conference here.
Steve Dennis 16:28
One of the things I just love, (inaudible), I look at a lot of the material you put out and a lot of the analysis is just such a rich amount of data. I particularly like that you mostly agree with me, because you know, I need, you know, (crossover talk). Yeah, I need validation for my fragile male ego. But that's, that's a different podcast, but, but I just want to encourage people if they're not familiar with, with the work that Insider Intelligence does an Andrews' analysis in, in particular, it's really, really on point and interesting. But yeah, let's talk about retail media networks. I mean, that seems like and maybe I just wasn't paying enough attention to it. But I don't remember hearing very much about it even, you know, maybe 18 months ago. And then here, we're recording this at GroceryShop. It seems like I mean, not literally half the sessions, but an awful lot of the energy is around retail media networks. So, tell us maybe just even give people a quick reminder what we're talking about here. But then, what are you finding interesting, what's your take on that?
Andrew Lipsman 17:21
Yeah, I mean, retail media networks, it's, every retailer is building an ad business. Most of that is search and display ads that are on site. But increasingly, it's getting into other advertising formats. Why it's important is its super high margin. And so, all you have to do is build this small, relatively small incremental revenue stream. And you really see it improve the bottom line in significant ways. Obviously, Amazon is the juggernaut of the space, it's about three quarters of the market today. But everyone's getting into the game, a lot of retailers are building billion-dollar businesses, and it's going to start to really transform their earnings. We're just starting to see that happen. I think in the case of a Walmart, which is really ready to,
Michael LeBlanc 17:39
Andrew Lipsman 17:40
Scale in a lot of other players, it's gotten pretty far, it's a $40 billion business today, it will be $60 billion in the next two years. And it's just getting started. I mean, I would really say it's in the second or third inning. It came onto my radar when I went to eMarketer in 2018, because Amazon was emerging as the third biggest player in digital advertising. And I said, there's something interesting going on here. I follow Amazon really closely to what's going on. I first covered retail media networks in 2019, saying I think this is going to be a trend and I started to prognosticate in terms of what I thought would happen. And a lot of it started to really manifest and materialize in interesting ways. And you know, now it's finally hot.
Steve Dennis 18:22
Andrew Lipsman 18:23
Right? It's gotten really hot. But you know, I've called it the third big wave of digital advertising, the first being search, the second being social, driven by Facebook, of course, and the third, now being retail media driven by advertising. And here's where I get a little bit provocative. I'm now saying, I'm increasingly convinced that the third wave of digital advertising is destined to be the biggest. So, I think it's on a trajectory that it will overtake social media probably in the next five or so years and search is a little bit harder to catch up with, but I think that it will, it will definitely progress in that direction.
Steve Dennis 19:21
And what happened? I mean, that's super interesting and I want to come back to that. But what do you think happened to really drive such a change? I've heard, I mean, some as you know, Amazon obviously demonstrated, there's an opportunity to do that. But the idea of leveraging customer data in and of itself, and, and monetizing those relationships, like that's not a new idea. And it's not like a lot of companies, retail companies aren't in some way involved with trade advertising and those sorts of things. So, was it the privacy changes that kind of jumped to the next level?
Andrew Lipsman 19:53
There's been a lot of accelerants and enablers, but I would say it's much simpler than that. The story of digital ad markets could be told through measurement, the first dollars that really migrated online in the first place were to Google. And why was it because Google gave you closed loop measurement on those searches, I put $1 in, I got $1.50 out, it's easy to keep pushing the budget in that direction. Facebook comes along, they build a really strong measurement apparatus for different types of ads. But it was really when they moved to more performance advertising, that the business really took off. Amazon just basically ran the Google Play Book in the early days, but in a contextual environment where people are already primed to buy. And so, it made sense. Now, every other retailer is just adapting that playbook and it's working. That's, I mean, we're just in the low hanging fruit days of retail media,
Steve Dennis 20:44
Andrew Lipsman 20:35
Because it's mostly search driven. But now you have this valuable first party data that you can use to target ads, further up the funnel, and to display video connected TV. And so you're starting to see all these other ad budgets get unlocked, whether it comes from TV, or other national media, or increasingly Facebook, because the Facebook measurement has been broken in large part by Apple,
Steve Dennis 20:57
Andrew Lipsman 20:58
So, those dollars are looking for somewhere to go and they want that, (crossover talk),
Michael LeBlanc 21:17
Accountable, more accountable to go, right?
Andrew Lipsman 21:20
Michael LeBlanc 21:21
And there's a, I guess there's a big technology lift here too, with cloud and programmatic advertising, right? That, that you can now even mid-sized retailers can now operationalize at scale. I mean, it was one thing, (inaudible) I mean, Steve, you and I were talking about like Walmart had an in-store network, media network 30 years ago,
Steve Dennis 21:26
Michael LeBlanc 21:27
Where they, they were running. And that was already a piece, but you need a super big scale to run that. So, is that also, you know, it's now more accessible to mid-sized retailers.
Andrew Lipsman 21:45
The early incarnations of in-store media were very analog, and now it's getting digitized. So, the digitization of the store is a big trend. And programmatic is going to help feed that and to be able to run those campaigns in a scalable way, both locally and nationally. So, again, that's another huge potential leg of growth for, for all of these retailers.
Steve Dennis 22:06
Well, I think it's a bunch of, a bunch of questions. Can, can you help our audience understand a little bit more about the different types of advertising? Because you've got the in-store part as Michael was talking about, right. But you got the on-website, and you know, endemic, there's all these like different terminologies moving (inaudible)? Can you just maybe kind of give us a quick (inaudible) on, on ways to think about that and your prospects? I guess,
Andrew Lipsman 22:27
Yeah, so I'll break down the market. I mentioned the $40 billion market today. About 90% of that is on-site ads, so it's on your eCommerce site or app, and it's mostly search. So, most of that is just search ads, right? The ads that you see, in grid, there's more and more that move towards display and video ads on site. But then increasingly, they are partnering with third party publishers or connected TV platforms to then use that first party data to target ads in the upper funnel on other parts of the web.
Michael LeBlanc 23:01
So, as an example of that I can, I get the example of you're a retailer that sells grocery and you're going to advertise avocados because you sell avocados, but is there also this happening where you're selling a product like, like cowboy boots, and you and Ford Bronco wants to advertise to the people? Is that a piece of that as well (inaudible)? Can we subdivide that way like completely different commodities, then you sell kind of advertising?
Andrew Lipsman 23:23
So, there's endemic and non-endemic so I think the more obvious play is, listen if I have a brand and I'm Kraft macaroni and cheese, right? I also want to raise awareness and put that brand front and center to buy Kraft macaroni and cheese at Walmart. So, I can target people who might be brand purchasers or category purchasers and target them on the open web. These retailers also, because a lot of these budgets just come from shopper marketing and trade budgets, they want to get new dollars, (crossover talk) because those right, new dollars, (crossover talk).
Michael LeBlanc 23:53
Want to move money out of their flyer into this because that's a net zero, right.
Andrew Lipsman 23:57
Absolutely. So, so they're really focused on trying to get those non-endemic dollars, right, you can think of these big categories like auto, financial services, right? You go down the line, that's a little bit of a harder sell, but it can work. Now, if you think about it, let's take Amazon and Walmart, because they're great examples because they have so much purchase activity from their buyers. You could think of any customer of either of those brands and you have a pretty rich profile on people. You probably know those people who are new parents or parents of young children. If you're selling, you know, a minivan and you're an auto advertiser, would you want to target those customers? Absolutely. If you're selling life insurance, do you want to target those customers? Absolutely. So, there are endemic plays that can work. If you want to know by the way, why Amazon is getting into NFL Thursday night football. That's why those are the brands who advertise there, and this is a way for them to be able to target those audiences through high value, you know, TV shows essentially. But It's not going to be as easy for a lot of retailers. So, I get why they're after those dollars, it's just not going to be as easy of a sale. I think Amazon and Walmart have the best path to that.
Steve Dennis 25:08
You know, one of things I've heard people worry about as it comes to really going after the retail media dollars is that there's, there's this potential trade off, you'd need to make between the primary thing you're doing the customer experience of selling the merchandise and providing the service that you're, you know, at the core of your business. And then you know, wedging in putting a little bit of my, my own take on it. But you know, sort of the interruption marketing part of marketing, for what customers are not there primarily to do. Is there a lot of concern about getting that balance right, or I guess there's the concern, but how are people thinking about it, trying to get the right balance so that the customer experience is great. But you're not just sort of chasing this new easy money at the expense of your core?
Andrew Lipsman 25:57
It's a good question. If there is a concern, there should be a concern, and I think, but the, the margins of these ad dollars can be very seductive. And it's easy to look past that. Now Amazon is the most customer centric company there is started allowing ads, and not just that, you know, they, their search results are getting flooded with ads, and, and the ad loads on their site now are about nine impressions per page, whereas other retail media networks are somewhere between two, three, maybe four at most. So,
Michael LeBlanc 26:28
Retail feels like a means to an end, often when I think about some of those things from Amazon.
Andrew Lipsman 26:32
Yeah. Now what, one thing that Amazon is getting right, and I give them a lot of credit for this is they are making sure that the ads are relevant. So, where it turns away consumers is if you start just throwing up a bunch of ads, and it directs them away from the purchase that they want to make. Amazon has done and we did a study on this, they actually rated number one on ad relevance. So, as long as they are doing that correctly, I think that they are fine. We have not seen consumers really resist this. Now once you bring retail media into the store, this is I think, where the CX becomes much more of a concern, and you don't want to turn away consumers. So, I'm a big proponent of this trend, I think it is going to happen. I think there are great ways to bring high quality brand advertising into stores. But the how matters. And it has to be done in a way that is not interruptive. And it is sort of ancillary to the, the experience, the core experience.
Steve Dennis 27:29
Right? And are you seeing any? Are there particular retailers out there that you think have got it right, or technologies that you think are interesting? Or is it kind of too early to really know? Who's leading here?
Andrew Lipsman 27:38
Yeah, well, we've, we've seen retail media brought to cooler doors. So, I think that's one of the technologies Amazon apparently is pioneering a version of it. Where the digital ad is a smokescreen overlay over glass. So, that would take away some of the interruptive impact. I think you have the potential for digital and caps. I think the checkout, the checkout aisle, is a great place for these brand experiences. You know, a lot of people talk first about gas station TV, or checkout terminals. And I'm like those are not, that's not the right context. And it's really this is, it's about good brand advertising. And it does have a place in stores. You just need to figure out what and experiment with what the right versions of it are.
Michael LeBlanc 28:13
Andrew Lipsman 28:14
And I think that will get figured out. But, you know, the interesting thing is, we don't think about stores as having audiences for brand advertising. But they do and these audiences are huge. And I've just been working on a project with Ethan Chernovsky at Placer.ai. He's a friend from the show, I know.
Michael LeBlanc 28:33
Andrew Lipsman 28:35
And, he’s wrong about Kohl's, I need to point out, right. But yes, he is a, he's a friend of the show.
Michael LeBlanc 28:41
Fight Club (inaudible). First to, the first segment, we had a retail Fight Club segment. If you haven't heard the most recent episodes.
Andrew Lipsman 28:55
Oh, yeah. Well, so e-, Ethan, they, they produced audience measurement data for stores. So, how can you look at unduplicated audience reach of store audiences, not just pure foot traffic, but think of it as an audience? It turns out is that for the biggest brick and mortar retailers, they all have large, eCommerce audiences. In Walmart's case, you know, over 100 million a month. Well guess what, It's over 200 a mil-, a million a month in store,
Steve Dennis 29:28
Andrew Lipsman 29:29
Target a little bit less than 100 million online, but well over 100 million in-store. So, these audiences are large. So, if you're a retailer, you want to start, as I mentioned, bringing in new dollars. Well, where can those new dollars come from? You don't want them to come from shopper marketing or trade. They can come from national TV advertising budgets. But to do that, you need to speak the language of TV, TV audiences. So, it's about scale, it's about reach and it's about great branding experiences. So, I think this (crossover talk), Even the language you're using, right unduplicated audiences, right? That's a very media term. That's a (crossover talk) media savvy, Media Research, right and it's, is not intuitive for retailers. But I think there needs to be a shift in thinking, if you start speaking that language, you can start to make an argument for why those dollars should migrate. And by the way TV dollars, you know, it's been a very stubborn market at $70 billion for years and years, even though ratings have hemorrhaged, I mean, they're down 50%, over the last decade and the, you know, 18- to 49-year-old demographic, they're not moving because they have nowhere better to go. Well, guess what, they do have somewhere better to go, the store because that store has scale it has branding experiences. And maybe most importantly, it has the audiences that you can't reach on linear TV anymore. Guess what, young people, millennials, Gen Z, you can't find them on TV, you can find them in stores.
Steve Dennis 30:44
This is maybe a topic for a whole other podcast. But if you think about it, I mean, just in general, stepping back, you know, I've been just hammering the drum of you being away from channel centric thinking for a long time. But it also strikes me that if you think about a brand more as a platform for a bunch of different things, you have that sort of orientation, you see what the customer experience needs to be in a different way. In many cases, you see the revenue opportunities in a different way. It's as you know, it is thinking about as here's an audience that I'm trying to acquire, grow, make loyal, etc. But that's not at the core of most retailers' thinking. And I just and we were talking a little bit before we got started here about just organizationally, even what needs to change at some of these retailers. Is there, (inaudible) does that question make any sense to you? But, but more specifically, outside of, say, Walmart and Amazon. Are there any companies that you think are, like really get this and are ones we should be took-, taking a look at to try to learn from?
Andrew Lips 31:46
Yeah, well, so I'll take the first part of that question. So, there's a shift in organizational and operational thinking, to start maybe thinking about stores more as media channels. It's not intuitive. And there's a lot of issues that you have to sort through, bringing store operations in IT and marketing and brand safety. By the way, if I'm going to start letting ads, digital ads appear in my store, you better be sure that you can't get hacked, right? So, there's, there's a lot of, so it takes time. So, I, I, I see the potential at the same time, these things will take time. And we'll, we'll have to kind of progress incrementally to get to that point. You know, I think there are some retailers who, listen, they are also brands who are major advertisers. So, a lot of them have those skill sets within their organizations, they probably just need to break down the silos within the organizations to make sure that the people who have that sensibility are the ones who are also playing a role in how they start to transform stores into a media channel.
Michael LeBlanc 32:50
You know, in the beginning, you talked about how you divide your time and tradecraft of what you do. When you say 70% on media networks, 30%. on, on holiday, let's talk about holiday for a few minutes. I see two coo-, two kinds of schools of thought around the projections for holiday. Some research recently from our friend Rob Garf. at Salesforce was saying. consumers are going to buy early because they're infra-, afraid of inflation, therefore they're going to shop early. I talked to a lot of people who think the opposite, that they're reading that there's lots of inventory, I'm going to wait, what do you, what do you what do you, what's your analysis thinking? And what do you, what do you think about this, probably one of the more normal holiday seasons we've had in a couple of years?
Andrew Lipsman 33:06
Yeah, well, so for years and years, there was always this talk track about, you know, shoppers getting out and shopping earlier and earlier. And I think that came from the fact that retailers were promoting earlier and earlier. But how consumers behave isn't always in response to the promotions, right. A lot of (inaudible) most people would just take that tentpole of Thanksgiving. And that was their signal to, to get their engines revved and really start. That actually changed in the pandemic, right, the context changed so profoundly. And then in 2020, as we all know, we had Amazon Prime Day thrown in October. So, that was a real impetus to start your shopping early. At the same time, people were very concerned about supply chain issues, available inventory and then getting packages on time,
Michael LeBlanc 33;19
Andrew Lipsman 33:20
And they were sitting at home with nothing better (crossover talk),
Michael LeBlanc 33:22
Better than think about whether I can get my package on time?
Andrew Lipsman 33:26
Yeah. So, it changed that behavior in a profound way for that cycle.
Michael LeBlanc 33:28
Andrew Lipsman 33:29
Then, same thing, supply chain concerns became bigger and bigger last year, we saw rough repetition of that cycle. We didn't have the tentpole of Prime Day, but people did start earlier. So, I think that two years is enough time for it to be entrenched. So, I think that the overall pattern will start early. I don't know if it's going to be necessarily as rational or logical in thinking through all of those, those same concerns but it will kick off early and it does end up taking a little bit of the wind out of the sails of the Cyber 5 period. But still activity concentrates during those, they will be the biggest days of online shopping for sure. but they probably won't see as strong of growth rates as years past.
Michael LeBlanc 33:32
So, in all your time lately, you've got great access to data and thought leaders have surprised you?
Andrew Lipsman 33:37
It doesn't surprise me. I will say there have been a few times where I feel like I've been on an island taking a position on something. One, was that everyone had talked themselves into a full recession by May and June. And I kept saying, I'm willing to change my mind as the data changes, but I don't see it. And the reason was, everyone was looking at negative sentiment. And I said, first off, sentiment has decoupled from reality.
Steve Dennis 33:56
Right, yes, we've,
Andrew Lipsman 33:58
And it's been very politicized. I won't get too into that. But I will say, don't look too strongly at consumer sentiment, one. Two, the absolute most important variable in consumer spending patterns is how much spending people have in their pockets. And so, I look at the unemployment rate as the most important metric. And it's at three and a half percent give or take, people are employed, they have money, their dollars, not stretching as far, right. So, so mor-, so they're not getting as much and, but the growth rates are still there, we're still seeing high single digit growth rates across retail. A lot of that is going to inflation, but the spending is still there. So, don't expect that we're going to see growth fall off a cliff this year. I think overall, things are shaping up decently well, for, for the holiday season, it's definitely not going to be a disaster.
Steve Dennis 36:23
Yeah. When, I know we're coming up on time. But one kind of follow-on question from that is one of the things that Michael and I have talked about a bunch on the podcast is we haven't had this kind of inflation for a long period of time. So, I think there's a little bit of an orientation, you know, if you have a five or six sales percent-, sales increase, that's a pretty good number, except now it could be, it's still dollars in the till. But it could actually be that your customer count is lower, your transaction count is lower. And it just seems to me like that is, that is a cause for concern. But we haven't really had this kind of environment to compare to. So, part of me is, that sounds worrisome. But part of me is, I don't really know, because we haven't seen this, this pattern before, really, in my entire career. And I've been doing this for, (crossover talk),
Andrew Lipsman 37:14
I'll give both sides of the coin here. I think the top line numbers should be okay. Broadly speaking, right, some will do better than others. But the top lines I think are, are solid,
Michael LeBlanc 37:24
Partic-, particularly considering you got a consumption over consumption during COVID. So, you don't need another big screen TV, you probably, we bought so many of them, right. So, you bought four. And people are starting to travel and stuff and, you know,
Andrew Lipsman 37:34
Yeah, so it's shifting to experiences. But you know, we'll see some pretty solid growth rates overall in aggregate, cate-, shift in category may be more towards essentials. The question is what happens at bottom line performance, so retailers are much more likely to be squeezed there. But I will say this, the prospects are improving recently, because as gas prices have come down precipitously, I don't know where I live, it was over $6 A few months ago, and now it's $4.10, most recently, so $2, that helps you on the supply chain. I think a lot of the you know, the, the, the shipping rates and things that were just astronomical have come down quite a bit. So, things are improving dramatically. So, I think that starts to give retailers more margin to work with. That could be a pretty picture. But it's certainly better than where we were two months ago.
Michael LeBlanc 38:21
Yeah. Well, listen, it's been fantastic. I mean, we could probably go on for many, many hours, you're here at GroceryShop, you've been on the stage and been doing some great interviews. So, I look forward to hearing some of the output of that. So, I wanted to thank you for joining us on the Remarkable Retail podcast. Like I said, we could go on this we got to have you back on because there's so much interesting things going on, you got such access to great data. So, thanks for joining us here.
Andrew Lipsman 38:42
Yeah, thanks for inviting me. I'm happy to come back anytime.
Michael LeBlanc 38:45
If you like what you heard, please follow us on Apple, Spotify, your favorite podcast platform so you can catch up with all our great interviews, including Hal Lawton talking about Tractor Supply's remarkable Life Out Here growth story. New episodes of season 5, presented by MarketDial will show up each and every Tuesday. And be sure to tell your friends and colleagues in the retail industry, all about us.
Steve Dennis 39:06
And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.
Michael LeBlanc 39:18
And I am Michael LeBlanc, Consumer Retail Growth Consultant, keynote speaker and producer and host of a series of retail trade podcasts including this one. You can learn even more about me on LinkedIn, and you can catch up with Steve and I in person at the NRF Big Show in New York, January 16th on the stage talking about what it takes to be remarkable with The Container Store SVP Gretchen Ganc.
See you in New York, everyone.
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