COSTCO announced a new ad network that uses past purchases to enhance the personalized shopping experience.
The retail giant trails other companies, such as Walmart and Target, that are already capitalizing on customer purchasing data.
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Costco has a new ad network in the works.
The ads would be based on member loyalty data, purchasing habits of 74.5 million members and past purchases, according to Marketing beer.
The ads would then be served to customers on and off your website.
Costco’s new chain is still in the works, but it means the retailer is entering a huge retail media space.
This year alone, retail media will account for a fifth of global digital advertising spending in 2024 and is estimated to reach $166 billion by 2025, according to electronic merchant.
Mark Williamson, vice president of retail media at Costco, is behind the new initiative.
The company is currently leveraging its audience data to conduct user-targeted beta tests on external sites and plans to expand these tests to its own site soon.
The company is currently beta testing using its audience data to target users on other sites, he said, and will eventually test the targeting on its own site.
“Not only will we help you reach a Costco member, but we will also help you reach the right members in the right context based on past behavior,” Williamson told Marketing Brew.
The company has a slight advantage when it comes to understanding what its customers buy because of their membership cards.
As of 2021, Costco has about 66 million paying members and 119 million cardholders, according to CNN.
With its cards, the retailer can link individual purchases to shoppers’ families, both in-store and on Costco’s e-commerce site, Williamson said.
These statistics could help advertisers reach new customers and tell them whether a customer saw an ad for a product before selling it.
LATE TO THE PARTY
Costco is late to the ad network compared to other retailers.
“It is not incorrect to characterize Costco as lagging behind the rest of the industry in retail media,” Williamson said.
He also added, “When it became clear to the leadership team here that retail media is not just a profit center… When they determined that revenue from retail media could directly drive increased value for our members, it was when they said, ‘Okay, this is something we need to get involved with.'”
In 2021, Walmart joined the advertising space, naming it Walmart Connect and partnering with The Trade Desk.
“Walmart is pioneering a new frontier in digital advertising, giving marketers access to shopper data for the first time, in a way that protects consumer privacy and improves the consumer experience,” Jeff Green, CEO and Co-Founder from The Trade Desk, said, in a Walmart Press release 2021.
What does this mean for buyers?
Costco announced that a new ad network is in development to improve the personalized shopping experience.
The ads would be based on member loyalty data, purchasing habits of 74.5 million members and past purchases, according to Marketing beer.
With its cards, the retailer will be able to link individual purchases to shoppers’ families, both in-store and on Costco’s e-commerce site, said Mark Williamson, vice president of retail media at Costco.
Statistics could help advertisers reach new customers and tell them whether a customer saw an ad for a product before selling it.
Costco plans to reinvest profits from its advertising into maintaining affordable prices for consumers.
That could involve offsetting shipping costs or ensuring the chain’s highly regarded rotisserie chicken remains $4.99, Williamson said.
“By doing so, marketers will be able to create much more refined, relevant and measurable advertising campaigns that can quickly adapt to changing circumstances and real-time performance. We are excited to work with Walmart to bring this vision to life.”
Last year, the company’s global advertising business, including its retail media network, generated $3.4 billion in revenue, according to the company’s FY23 earnings report, per Marketing Brew.
The retailer also recently introduced a new way to track customer purchases, tracking what they search for on its website without even making a purchase.
During the last earnings call, Target’s chief marketing and digital officer, Cara Sylvester, also mentioned that Target’s retail media network, Roundel, contributed more than $1.5 billion in value to the company.
‘GREAT ADVANTAGE POTENTIAL’
Advertising generates high profits for businesses since running ads on websites is cheap and buyers will still visit websites whether there are advertisements or not.
Costco plans to reinvest profits from its advertising into maintaining affordable prices for consumers.
That could involve offsetting shipping costs or ensuring the chain’s highly regarded rotisserie chicken remains $4.99, Williamson said.
Costco already has an emerging advertising business, generating revenue through the Costco Connection magazine and basic on-site contextual ads, Williamson explained.
However, the company has only just begun to move into the advertising space that Williamson thinks it could be because it doesn’t like advertising on big platforms like TV, which has “created a lack of experience in the paid media space.”
He declined to provide revenue estimates or expectations, but suggested that “it is entirely possible to quadruple or more the size of our country.” [media] revenue today, just by operating differently, unlocking the power of the data we have.”
However, Mike Feldman, senior vice president and global head of retail media at VaynerMedia, said the retailer has a big opportunity because of its membership cards.
“I believe they are leaving significant revenue on the table,” Feldman told Marketing Brew.
“When you leverage the loyalty card penetration they have, Costco can build a significant competitive advantage in the market.”
Costco executives agree with this notion and see “great upside potential” in the retail media sphere.
The US Sun has reached out to Costco for comment.
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