Advertising is coming to the grocery aisle

Ads are coming soon to a Walmart grocery aisle near you, according to a CNBC report published yesterday.

And the retailer’s not alone in this strategy. As venture capitalist and entrepreneur Marc Andreessen puts it: “Software advertising is eating the world.”

🤔 What’s behind the move?... Typical brick-and-mortar retailers operate off razor-thin margins. For example, a grocery store’s net profit margin usually falls between 1%–3%. But when it comes to selling advertising, the margins are much higher. Which means Walmart should be able to increase its profit without significantly altering normal operations.

The company plans to ramp up in-store ads by selling product sample stations, leveraging the ~170,000 digital screens it already has across its locations to show commercials, and offering 30-second radio spots.

And given the company’s massive reach – about 240 million people visit its stores weekly – the revenue it generates from advertising could become significant.

• Walmart’s ads business brought in $2.7 billion in revenue last fiscal year. And while that represents less than 1% of the retailer’s total annual revenue, its growth prospects are strong.
• The company’s global ads revenue grew ~30% last year, compared to an ~7% increase in its total revenue and US net sales during the period.

📈 Big picture: Other retailers – including Kroger, Target, and Walgreens – are also experimenting with in-store ads. The retail media industry, which refers to third-party ads sold by retailers, is on track to generate $45 billion in revenue in 2023, up 20% from the prior year, according to Insider Intelligence.