S2 E23 T44 - EMARKETER - Sarah Marzano Introduction and Greetings Tom: [00:00:00] I. Tom: Hey Todd, how are you? Todd: Hello. I'm good. Insights from Sarah Marzano Todd: It's, it's another exciting chat that we just had with, with a, an amazing, um, analyst from the space. Tom: Yeah, so we had a chat with Tom: Sarah Tom: Sarah Marzano, I. Tom: she's been in her role for a year or so. Um, but you know, one of the things that we really like is that she came from being a buyer at Lord and Taylor and Macy's. And so she's got that practitioner's lens and she's really sort of trying to figure out, okay, why isn't, like, I've heard that in-store is the next big thing. Tom: Why isn't it happening? Like really, like right now? Todd: And it is [00:01:00] a really good perspective. You know her and she makes this comment like, it's great that Kroger's is doing this cool new in-store launch, but it's two stores. Tom: Yeah, we got really excited about what they are doing in the Todd: Oh, and it's wicked cool, right? Looking at it, all of it's awesome and I can't wait to see it in all 2300 stores. And I think that's the unlock. Like we gotta go from two to 2300 and not have it take 20 years. The Future of In-Store Retail Media Todd: Like that to me is, is I think the critical question in front of all of us in retail media is how do we unlock in-store? Todd: 'cause it's such a critical aspect of what the value of retailers. And if you think about it and, and one of the interesting discussion points with her is, is this concept of time spent. Like we talked about how digital advertising. Was gonna grow like a weed. Because in terms of time spent over the last, you know, this was a Mary Meer kind of comment. Todd: For years, the percentage of ad spend versus time spent was way lower. It was disproportionately low. And I think if we're gonna look at retailers, is the amount of, even as e-commerce has grown. Time [00:02:00] spent in stores hasn't changed. It's still right. It's still this incredibly meaningful amount of time and it is woefully under monetized. Todd: Like it is. The big unlock from retailer standpoint is unique. It's something , the big platforms can't compete with, and it's a meaningful audience and so it's hugely valuable and it's gonna be awesome to see retailers unlock it. Todd: And it's how do we do it faster and how do we help retailers justify doing it faster from, you know, not in 20 years, but we can do it in three to five. I think we could see this tidal wave happen and it could really be one of the things that helps unlock this full funnel, full buying experience with regards to retail media and, and really connect the dots between merchandising and trade and retail media Tom: I think it's finally crystallizing for me. This is when I was back at Quotient. The next horizon was CTV. And I think for Walmart buying Vizio, Amazon having prime video for them it is CTV because it's very easy for them to leverage that channel with their scale, et cetera. Tom: Um, but [00:03:00] for their other 15%, for Albertsons, for Kroger, for, you know, now even Best Buy. Um. It's imperative and, and Sarah's gonna show us some data that shows why it's imperative for these retailers that have a bigger in-store presence than they have e-comm. Um, and she goes through, you know, where it is in the country and like there are real spots where you can really light this up and make in-store, um, really be the promise of full funnel media for retailers and especially grocery electronics. Tom: It. It really is something that should happen. So to your point, how do we get this to happen in and a half to three years? I think that would be great. Todd: No, it'd be ideal. Challenges and Opportunities in Retail Media Todd: And, and the other thing, I think she also touches on a topic we've also talked about for the last year about the organizational challenges on the vendor side, right? Sales versus marketing. Who controls the budgets, who controls brand budgets? Where does sale? And, and it just, there's so much cool. Todd: Stuff you can unlock when that gets [00:04:00] figured out. Full funnel campaigns, there's a lot of creative ideas that you can take advantage of. The cool thing in terms of targeting that you can do within retail media is legit and is real and if we can unlock some of these formats and creativity, it's gonna be amazing. Todd: And just like we saw with, with digital like 15 years ago, it was like, oh, we could do the amazing things we could do with digital. Just the right people on the buy side showed up. We could really do that. I think we're at that point with retail media is, it kind of reminds me of digital, maybe, you know, call it twenty twelve, twenty fifteen, we finally kind of started seeing those in locks and some cool campaigns happening. Todd: Now we we're still gonna have to figure out, which is how do we pull in the brand agencies? How do we get them in the loop in terms of retail media? That's still in unlock. We've had some other, guests, um, uh, on this topic. Todd: I think what we're doing is how do we unlock that 15%? And again, it won't be cutting down the spend on Amazon, but how do we grow substantially that 15%, so if 15 becomes 30 and or 40 or 50? Because when you look at some of those in-store stats and you look at their traffic and you look at their revenue, Amazon's total percent of retail [00:05:00] sales is a couple of points in terms of the total landscape. Todd: And when you add up all that 15% of retail media spend, their spend in terms of of consumer spend is much higher. And so there's still huge opportunities there. Tom: Yeah, and we're gonna link to Sarah's report in, in the show notes. Anybody who reads this will get as excited as Todd is about this. It's, it's a pretty long one, so buckle up. Todd: Super knowledgeable. Awesome. Listen. Sarah Marzano's Background and Expertise Tom: Welcome to the Middlemen podcast. We are here with Sarah Marzano, who is that e-marketer. Um, you probably have seen her on LinkedIn. She always writes great reports about retail, but she started as a buyer for Lord and Taylor and Macy's. Um, and, and then she had a stint at Circana, and a Gartner. In the short amount of time I've gotten to know you, it's been great to hear your perspective as somebody who's a practitioner, as well as an analyst, um, because of the feel that you have for, you know, what are the brands , and the retailers really trying to accomplish. Tom: So we're really excited to have you on today to bring, some of [00:06:00] the latest reports that you have on in-store media, on the impact of Gen ai. So Tell us a little bit more about yourself. Sarah Marzano: Yeah, no, thank you so much for having me. Um, you covered sort of the, the gist of it, but I, you know, I studied merchandising at FIT and I started my career. I spent the first five years as a buyer, first at Macy's and then at Lord and Taylor. And I think even though. That was a while ago. At this point, like it sort of inherently shapes my perspective to how I cover the retail and e-commerce industry as an analyst. Sarah Marzano: And particularly, um, in my current role where I'm really focused on retail media, I sort of can't help but apply that retail first lens to how this industry is unfolding, um, and developing. Todd: What's your perspective on retail media from a merchandising standpoint? I think that's one of the, the interesting things is that, as Tom and I, right, I've got sort of an ad tech MarTech Tom's got some buyer experience, he's been at a CPG company as, a brand manager. Todd: And so one of the [00:07:00] things like neither one of us has been a merchandiser in a store. And you know, I think one of the real questions is how do you think most merchandisers think about retail media and have we been missing the boat in terms of how merchandising and retail media should be thinking about each other and potentially working together? Sarah Marzano: Yeah, no, I'm glad you brought that up. And I think, you know, one thing that I noticed when I first started covering retail media about two years ago as an analyst is like when I started the, the loudest voices were all media voices and media background, and it really felt like Todd: We're loud. Sarah Marzano: yes. Todd: We, we Media people are loud, Sarah Marzano: It felt like the, the slogan or the motto was like, retail media is media. Sarah Marzano: Like that was like the thing everyone was saying, and I sort of get it because it sounds catchy, but like, I felt like I was sort of sitting in the back being like, no, wait a second. Like it's merchandising. And I, and I still believe that like when it's on a retailer's owned and operated property, whether that's in a physical store. Sarah Marzano: Or on a website, it's merchandising, right? It's about showing the customer what is hopefully the most contextually [00:08:00] relevant product to fit their needs, right? And so back when I was at Macy's and Lord and Taylor, like retail media wasn't a thing, but a lot of the tactics that I used on our websites to make sure that we were showing the right products and highlighting the right things, sort of. Sarah Marzano: Mimic what's happening, hopefully when retail media goes well. Right. Um, but I think that that's created, the fact that there is like this sort of like overlap in capability or goal has created some unnecessary tension and conflict between sort of historic retail media, or sorry, historic merchandising teams at retailers and the retail media teams. Todd: Is that because you think in part the merchandisers had trade dollar budgets and now there's this other team selling things too, and are they seeing, you know, you likely as competitive. Is that something we can surmount? Is there like it ultimately, I think what we're trying to understand a little bit too, in terms of the rise [00:09:00] of retail media. Todd: Is a how do retailers do a better job here and Todd: how do we think about the Todd: future and, you know, a future I think that we all agree and we'll talk about, which is, that's being underserved. It it, as we start moving into in-store and, and in real world activities and is, it may be fundamentally that what's holding back some of that future we're, we wanna talk about is , this dynamic between merchandising teams and the retail media teams. Sarah Marzano: Yeah, no, I think there's a few pieces. I think one is that, some of the budget that gets, used for retail media ad buys is. Reallocated trade budget. Right. And I don't know if there's like necessarily a lot of awareness about how money flowed from brands to retailers, right. And how that's been happening , since the beginning of retail. Sarah Marzano: So trade funds going to support things like promotions or markdowns or. End cap displays all these levers that, brands use with their retailers, right, to help drive product. And the reality is that a [00:10:00] good portion of the budgets that go to retail media are simply reallocated, right? Sarah Marzano: And for the brand or the advertiser, they see it as like, okay, I'm sending money into this channel in order to drive product, right? And however I can do that the best. But until the incentive structures are aligned within the retailer, then you can end up, and I think we do end up in a situation where the success of a retail media team might be coming at what looks like the expense of the success of the merchant team, right? Sarah Marzano: Because all of those trade activities go towards supporting, uh, inventory sell through. And meeting margin goals, right? And those pieces being really important to the bottom line and the bonuses of these merchandising folks. So I think that's, you know, a huge piece of the, um, tension and the conflict. Sarah Marzano: And I think the other thing is just simply. You know, when I think through, back to when I was a buyer, I was a buyer at macy's dot com and the top fold of the page was my storefront, right? And so that's where my [00:11:00] merchandising took place. And that happened either for me manually locking things to the top of the page or working with my site merchandising team to ensure that our. Sarah Marzano: Algorithm was set up correctly based on what part of the season we were in, what promotional we event we were in, and really aligned back to the goals I had. Whether those goals were highlighting the newest products that we're still selling at full price or churning through older, marked down inventory where we have a lot of on hand. Sarah Marzano: And anytime you're sort of messing with that really valuable territory it needs to make. Sense, not just for the customer, it needs to not just feel really contextually relevant for the customer. That's a huge part of it, but it also needs to make sense for the broader, retailer's goals, right? And there are instances where ads are being shown, you know, uh, in really valuable slots that don't align with what the merchant team's goals are, and that's gonna create conflict as well. Tom: I think that's totally fair, and works toward sort of mix [00:12:00] of, of where the products are on the page. But to some extent, there's been a big success on the retail media team side where they've been able to bring sponsored products in and they figured out how to at least manage relevance to some extent. Tom: But. Usually that doesn't have a lot of coordination what's with what's happening in the store. Tom: And you just put out a report about, um, how in-store media is moving and it, I, I think it was delayed. It was supposed to be a billion dollars. Um, you know, by, what was it? 20 Sarah Marzano: 2028. Sarah Marzano: Yeah And now Tom: Now it's not until 2029, which would only be 1% of all what retail media. Sarah Marzano: Mm-hmm. Tom: So, so tell us about that and, and you know, you're based in New York. Uh, how easy is it to find retail media in store in the wild? Sarah Marzano: Yeah. Okay. So lots to unpack there. So, um, yes, I just wrote, I write an in-store retail media report every year. Like it's an important topic and I think what I really wanted to do this year was sort of get away [00:13:00] from this, um. This inclination sort of wax poetic around like this massive potential, right? Sarah Marzano: Because I, I think that's sort of been well established that there's a ton of potential if we can only get in store to, uh, scale, right? , We all have heard that the stat that more than 80% of sales happen in physical stores ad nauseam. I'll probably say it a couple more times on this episode, but I wanted to get away from that. Sarah Marzano: And really focus on sort of what is the holdup here, what are the barriers to scale and what could realistically be done to solve them. Um, and there are sort of a bunch of things that, that sort of I came across that I think are, are hopefully sort of useful. And I think one of them is just the, um, comparison of really the difference of the retail landscape in e-commerce versus the, the retail landscape at a, at a total or at a physical retail level. Sarah Marzano: And the fact is that retail media. I think seems a lot more mature than it actually is because most of the spend is online and most of it goes to [00:14:00] Amazon. Right? And Amazon can do that. They're good at what they do, but one of the best things that they have going for them is their scale. They drive about 40% of all of, uh, e-commerce retail in the United States. Sarah Marzano: Right? And so really in e-commerce, only Amazon has to do well for retail media to look really impressive. Tom: Yeah Sarah Marzano: Um, because they have that scale and that reach that's really appealing to advertisers. I pulled some data around the, uh, market share of, of the top retailers within total retail and found that it is a lot more fragmented. Sarah Marzano: Essentially, there isn't an Amazon equivalent in the physical Todd: Not even close like Walmart as one of the largest ones is what, like 5% of in-store. Like it's small compared to what you see with e-commerce and Amazon. Sarah Marzano: Yeah, that's right. And so what that means is that it's gonna take. Many players finding success, right? For us to start building scale and momentum that, uh, feels meaningful relative to the total share of, of retail media ad spend. I think to that [00:15:00] point, because we're seeing this. Develop in sort of a, a slower and, piecemeal way. Sarah Marzano: Um, I live in Brooklyn and I sort of, because of, I work in retail, I sort of joke sometimes that it feels like I don't even live in America. Like I don't have a lot of big box stores close to me. Um, I don't have a car. Um, and so I like, one of the things I've been doing, both for the report I wrote and also just because, you know, I care about in-store retail media beyond the report is pushing myself to go. Sarah Marzano: Find retailers where things are, are activated and actually experience it in person. Right? Um, and I've had to go to New Jersey to do Tom: Oh wow. Crazy. Todd: Poor, poor, you. Um, I, I, before moving to Seattle, uh, many years ago, I lived in, in New Jersey, so, um, I can appreciate the, the comment though, even, but it's not even going to New Jersey. For in-store Tom: Yeah Tom: you Tom: gotta gotta Tom: goe. Todd: see Kroger's Todd: new right You gotta go to the two stores in Ohio that they've got set up and you know best Buy deprecated all their original first gen systems that Keith set up Um you know now they're relaunching other things God knows where those are [00:16:00] gonna be So I think it's like it's not New Jersey it's it's Ohio it's it's the south it's everywhere Sarah Marzano: No, I know. I just don't have any budget. Todd: Yeah exactly Tom: but, but got, Sarah Marzano: yeah, so I think just talking about like the regional differences, like one of the things I was sort of thinking through and trying to solve for was I feel like on one end of the spectrum with in-store, you get into this. Sort of what I would call like a testing trap almost, where, um, a retailer will put all of their effort, um, and innovation in like one center of excellence or a few test stores, right? Sarah Marzano: And they'll have all the flashiest solutions there, and it makes for. A great press release. And it, and it does make for a great testing environment, right, to see how the media performs and um, how the consumers who are shopping in the store, um, respond to new technology or new or new formats. But at the end of the day, it doesn't do what is so compelling about in-store for advertisers, which is provide that reach. Sarah Marzano: Right. But on the other end of the spectrum, like. So we'll use Albertsons as an example. I think they have [00:17:00] 2300 stores across their banners, and the thought of scaling new formats across their entire footprint likely feels like a, like a, like such a huge undertaking, almost impossible, right? And so I was thinking through like, what's the middle ground, you know, here that could be, could be reached. Sarah Marzano: And I think I'll acknowledge like retailers have all different kinds of ways that they could analyze their. Store footprint to their fleet of stores to sort of figure out a prioritization. Sarah Marzano: But I used, um, some data from Placer ai. They looked at, uh, Walmart's, uh, stores by geography and just found that, for example, in the northeast. Sarah Marzano: Walmart really overindexes on e-commerce and digital traffic, whereas in other regions in the south, they overindex on store traffic. Right? And so it makes sense to me to use things like your traffic to your stores versus your website. Sort of think through like where are we prioritizing our efforts? Sarah Marzano: And again, I think there's a lot of different ways retailers could look at doing that. Um, but I think it's a key component of saying like, let's not get stuck in [00:18:00] this place where we've got. Just one store in, you know, whatever location, uh, that's got all the bells and Sarah Marzano: okay. Tom: But you've got the data. And so you had a great graph in the, uh, in the report that showed that, I don't know, it was either the Southwest or, you know, some other parts of the country where e-commerce penetration is lower, has a much better in-store, balance and, and where the purchases happen. Tom: I think you put Amazon versus Albertsons and like, tell me like what that comparison means. Sarah Marzano: Yeah, so when you bring up the Amazon Albertsons comparison, one of the things I was trying to sort of visualize there is how there's so much more potential for retailers who aren't Amazon. Sarah Marzano: If we can nail things like offsite and in-store. So what I did was I compared Amazon and Albertsons from the perspective of site traffic. And you can imagine like I, I used like the dots that like represented the size. Like Amazon is huge compared to Albertsons is about 500 times larger from the site traffic perspective. Sarah Marzano: But then I took their loyalty program and Albertson's loyalty program data is about a quarter the size [00:19:00] of Amazon. So we're getting closer here. And then I looked at their store footprints. Amazon has about 600 stores that's including Whole Foods while Albertson's companies has 2300. Right. So now Albertson's is actually much larger. Sarah Marzano: Than Amazon from that comparison. Right. And I think that's an exciting way to sort of illustrate the weight that other retailers can carry in this space if we can only get away from this fixation of monetizing owned and operated websites. Right. Which, especially in grocery is, is quite a small part, um, of the entire. Todd: Well I think that's fascinating point of view here in terms of you know Tom and I have Have worked with some retailers and made sort of the same point like you your your store is unique the Environment is unique It is not digital It allows you to Todd: do something Todd: that you otherwise wouldn't do And by the way when you talk to the marketers at brands they're desperate to have these human touchpoint Todd: interactions Todd: And now you the problem is from retail media are you talking to or the merchandisers are talking to salespeople not the marketers and [00:20:00] it becomes sort of a Venus and Mars situation When you look at the Look at it from the vendor standpoint like the organizational Oh right So the merchandiser is selling to the salespeople but the brand people on the marketing side are the ones who control the retail media budget And they're you know Sam's not talking to Jill and Oh crap And but the store like the traffic piece of it is to your point like like if the retailers looked at it and said where are we unique Where do we really compete well with Amazon And we are beating them with in-store traffic Sarah Marzano: Hmm. Todd: And that is something that that if they started looking at that stat realizing oh right let's lean into where we're different and unique and have scale like the amount of if you we put the amount of Americans going inside of of Amazon Uh sorry Um uh Albertson sorry Completely everything got stuck in my brain Albertson stores right That's probably a hundred million people every month That a huge number right And dwarfs their six and a half million website visitors so it just screams that there's this opportunity And then if you think about this [00:21:00] from a um we we always talked about digital for the longest time about if you looked at time spent online its share of media dollars was woefully low And eventually it should normalize and it has The next next Tom: you have do what Mary, you have, you have to do what Mary Meeker, uh, did for the internet. I guess Andrew has done some of that, uh, uh, before you, um, Sarah Marzano: Bill. Tom: yeah. Todd: but Right Todd: What the biggest point is is just to say it succinctly is the do the right as a percentage of dollars spent versus time spent in-store time spent is probably the most under monetized Traffic we could be about Right And I think in terms of time spent and that's where I think why Tom and I have been excited about it we haven't quite crystallized it in the same way till we saw your report So everyone should go sign up re marketer and and um read your report there It's it's great And I think this is kind of the direction that we can all be thinking about which is right These retailers are seeing on a gold mine Sarah Marzano: Yeah. Todd: monetized goldmine in terms of their in-store traffic And they [00:22:00] thought about oh right how do we maximize the value of that Traffic in addition to just sales from a media standpoint Tom: Yeah. Tom: and think. Todd: do something Tom: I think you make the case that grocery, it's really an imper for grocery because of the, the high frequency, you know, people are going to the grocery store every week. Um, but you also have this situation where they are not, uh, you know, teaming with screens. They don't have screens on every aisle. Tom: And that's why I thought that the new, arm n update from Best Buy was very interesting because part of, you know, it was really at the end of their presentation. They were showing that they are gonna leverage the laptops, the TV walls, all the things that make what we would've thought, like, you know, Todd mentioned earlier, you know, best Buy originally started on this path, but maybe it was too early. Tom: Um, but if you could leverage all the screens that are in an electronics retailer, oh my God, you have so many opportunities for media. So do you think it'll happen faster there than the grocery world? The Importance of Grocery Transactions Sarah Marzano: Yeah, I mean, I think for me, the reason I [00:23:00] fixated on groceries so much is that they are a big reason for that. 80% of transactions still happen in physical stores. Like they're a huge category. They're nearly, nearly 20% food and beverage is nearly 20% of all retail, and something like 92.5% of it still happens in physical stores. Sarah Marzano: Right. So monetizing grocery online is not. Quite as, uh, ineffective as like a tree falling in the forest with no one around to hear it. But it's only gonna get these folks so far. Right? You have other categories that have much more meaningful share of their transactions happening in e-commerce, right? Sarah Marzano: And so the idea of like. Spending a little bit more time saying we're gonna keep optimizing onsite. Makes sense. Right. Challenges in In-Store Merchandising Sarah Marzano: Um, but you know, I think the, the, the, the, the fact of the existing sort of inventory, which the, the, the merchandising provides with an electronics retailer is definitely, um, interesting and compelling Tom: I think there's definitely two strands of, of where the marketing needs to happen or the merchandising actually needs to happen Tom: there which is[00:24:00] Tom: you know, am I going into a Best Buy to pick up, you know, I lost my headphones and I need to replace them. Um, or am I trying to understand how to buy a 3D printer or buy a, you know, a very expensive TV and I need to be educated? Tom: And I think are totally different merchandising challenges. Sarah Marzano: No, and I think that's, you know, that, that brings up a great point, which is that one of the things that's really exciting about in-store as an analyst, but it's probably very daunting as a retailer, is that the formats are really diverse, right? It's not like online, onsite retail media where we're talking about. Sarah Marzano: Sponsored product ads. Sponsored search ads and some display because there's a sort of homogenous way that consumers peruse a retailer's website of the category. Um, but in physical stores, like the formats that are gonna lend themselves well to success in something like an electronics retailer are probably gonna be pretty different. Sarah Marzano: And the content as well then something that's gonna work in grocery. Right. And so that creates a lot of complexity as well. And you just mentioned a few of the different. Sort of purposes that could be [00:25:00] behind a trip into a Best Buy. I think a lot about some of those higher consideration product categories and the need to have content that educates customers and helps them build that confidence to purchase and how that's gonna be more immersive content. Sarah Marzano: It's going to probably be a bit more interactive than you would need in a grocery. Tom: Yeah, I got a, an IKEA store within a store to teach you sort of how you're supposed to be laying your house out and like, those are the types of things where it takes much more, you know, obviously at some point the web will figure out how to do this, but it's gonna be a while. Todd: I'll I'll push back on both of you a little bit there which is that um and and I think you've seen Kroger's approach In terms of creative support with their rollout Again sadly and we don't mean this in a negative way two stores like I wish it were 20 stores and wait till it's you know 200 stores Kroger execs please go faster Um not retail media You people are doing great Todd: I'm trying Todd: to you sell your bosses and do more Tom: may need, we may need to go back out there and visit and see how they're doing. Innovations in Retail Media Todd: And um but what where our my [00:26:00] point is I think that I agree with you different content and and grocery is different but I think what's happening and it's kind of a call out to agentic ai which is your ability to produce video snippets is gonna be so much easier and less expensive than it ever was And you can put those screens and we know right We know how to serve video ads we know how to target video ads we know how to do addressability Like there's a ton of stuff like the plumbing will work works fantastically You can be targeting based upon you know expected audience footprint in a store and all sorts of cool stuff And I think the missing layer historically has been right Only the biggest CPG brands had video assets So only like 1 of the products in a grocery store had a video Creative attached to it but now with the agentic ai everyone can Sarah Marzano: Yep. Todd: and maybe that's the un maybe one of the unlocks here is we've talked about creative is like that might be kind of a missing piece which is and I think video does well for helping highlight you know in 15 seconds like we the good thing is around social is it's helped figure out six [00:27:00] to 15 second Video ads and that type of format could work as you're going down an aisle and that might catch your eye and cause you to pull something out of a grocery or c-store or something else But I think agentic ai starts being you know help solving the chicken and the egg chicken being demand and creatives the the egg being supply and and screens Sarah Marzano: I think that's a huge part of it. And I think just being able to produce content and produce really personalized content, right? Whether that's by, um, geography or, or time of year or time of day, um, and just being able to have more content at, at the, the sort of fingertips that sort of ready made for the environment. Sarah Marzano: And it, it brings up a good point, like, so when I was writing my report, another thing I tried to do is I tried to think through like. Which formats make sense in which contexts, and I'll take an example, like smart carts, which I are great. I went out to, um, a ShopRite and I, they have um, uh, caper carts from Instacart and I test drove one. Sarah Marzano: Um, and it was fun and it was great. And I'm a big fan and I think it makes a lot of sense in a grocery store. Right. Um, in a grocery store [00:28:00] that's not in Brooklyn, because we don't have room for smart cards here. Um, but I think it makes a lot of sense to have, Todd: for sure Sarah Marzano: you know, I'm picking up a lot of things. Um, I, it self checkout's been around for long enough to where I know how to scan them. Sarah Marzano: And I am in a mindset where maybe I sort of know overall what I want, but I don't know exactly what I'm gonna buy. So if I'm scanning oat milk and then you tell me that like the oat milk is two for one, like I might make a purchase decision Todd: Yep But is that two for one Historically that was trade spend not retail media which gets back to organization and and retailers and vendors merge these things for god's sakes It's one thing Sarah Marzano: That's a, an entire, like, I feel like we could have an entire podcast on, on just that piece of Todd: Oh abso it's a good follow up Todd: We can get into Todd: the organizational design and how it's holding us all back gosh forbid everyone finally figures it out that it's one thing Sarah Marzano: Um, and I'm doing some survey work surveys of retail media networks to hopefully highlight like how much of a mess this all is. Like, that's my job. I'll point out what a mess it's, and then everyone Todd: and it's unintentional and [00:29:00] we get the historical issues and all that but people bring it all together By the way the smart cart is a great example I think there's other thing Tom and I get super excited about is the technology is getting is like the screen technology is getting so diverse and less expensive There's so much cool innovation that's coming out right Whether it's the the E tags you mentioned we hadn't even talked about smart carts like oh fricking like Wegmans has been experimenting with that too and so it's fascinating to kind of imagine I absolutely agree Like that is as a media guy I go oh that I can imagine some really cool stuff I could do with that screen Right Like oh yeah I could that's a great call I hadn't even thought about that Like and then as a buyer like what's funny is in the media side people are always trying to do new things and try new things and target new things Like that's at every RFP For those who aren't media people there's always this section of like basically pitch me on something new right In in a media budget as part of these there's always dollars set aside for the new innovative things Because people are just sick and tired of just buying the same old same old every single time Like I'm buying this banner I'm buying [00:30:00] that sponsored search result whatever Show me something new and cool Like I agree Like a a video ad as I'm walking down the aisle talking about what's like if I'm on the chip aisle getting ads related to that would make a ton of sense Sarah Marzano: but I think that's one of the things is that like smart cards aren't gonna make sense in every retailer. Sarah Marzano: you Sarah Marzano: You Sarah Marzano: know, sponsored product ads make sense for every website, but like smart cards don't make sense within every. Physical setting. Right. Um, so the, the formats are really diverse, which means there's not a playbook. Sarah Marzano: There's not like, okay, I wanna do in for media, so I'm gonna do X, Y, and Z. And I think I could make an argument for digital screens in almost any retailer setting as long as they're done right with a content. Um, but something like a smart cart, something like in-store audio, something like sampling something like a, um, scan and go within your mobile Todd: Totally. It's awesome, I'm imagining the media plan in my head, like, this is really cool stuff. And, and you know what occurred to me as I was listening to this, this actually kind of points out another organizational problem, which is [00:31:00] agencies aren't buying retail media. They're the ones who are really good at planning these full scale end-to-end customer journey media plans. Todd: And so right now you have the RMN people basically filling in, in that role, and you have the buy side. But the agencies have been a part of that, and that's what they're really good at is, is. Right. Building out these multi-stage, multi-component complex campaigns, what's actually one of the benefits of all this complexity is it really speaks for the need as we talk about programmatic and has kind of killed a lot of media buying and creativity. Todd: Like this is the stuff where human, for at least the time being no agentic anything, is gonna be able to map these out because they're new and innovative. Like there's a lot actually of value I can see coming to the different players and got, let's get those. Like the agencies, please come and solve for this because these are some cool concepts that we're riffing on right now, that if I'm a CMO, like I would find that pretty cool, right? Todd: I could really do buyer journey from TV to online, to [00:32:00] in-store different components. Like there's some fun, cool, interesting stuff. So if you are, you're a creative at which most media people are the marketers on the vendor side are. Like this is cool stuff to be thinking about or imagining or wanting to do, at least in my mind. Sarah Marzano: No, I completely agree. And I think as, as retail media pushes into being more of like a, not to use the busiest word ever, but like a full funnel marketing lever, like some of the, the, the big challenges lie on the fact that. Uh, we need a more cohesive way to pull budgets, right? Because retail can do so many different things. Sarah Marzano: It can hit so many different objectives, but it's really sad in this like lower funnel bucket for so long that tapping into those national and those brand budgets is a huge challenge because each brand that can stick to the brands, not necessarily the agencies, is gonna be siloed and have different organization structures. Sarah Marzano: And I think that's like a key component as well. To scaling the spend, because I think while we know advertisers are desperate to, or eager to reach audiences at the scale of physical stores, that [00:33:00] doesn't mean they're also sitting on like a pile of money that they're sort of waiting to spend. Sarah Marzano: If only there were digital screens to, to do that in, right. These budgets are gonna have to pull from somewhere in order to get this thing started. And so breaking down those, those silos and those historic ways of doing things is gonna be crucial. Todd: Well, maybe the opportunities, and again, up as the media guy here, so as, as linear TV dies and those, like those budgets, maybe that's the money that has to show up and has to move over. And again, agencies want to still manage that. Like to me it's like. Sarah Marzano: Yep Todd: And Miss Agency, here you go. Here's an opportunity to set, really create some really interesting and effective campaigns. Todd: Now again, the lack of scale and in store is a bit of a problem on this side, which is just so painful to all of us who want this all to take off and imagine so much cool stuff and see, you know, the pictures of the two Kroger stores and the cool screens they built out and some of the, the pictures from the Best Buy and, and we've seen some others. Todd: You know of, of InProcess things and there's a lot of cool stuff, but it's again, one or two stores [00:34:00] and can't wait for it to be everywhere and anywhere and can imagine a lot of really fun, interesting things that are going to emerge. Oh, if only Tom: All right. All right. I think, I think we got, we got rant out. Um, I think that there we went as far as we could with in-store, but I, I also wanna make sure we have a little bit of time left for talking about another report that you let us see, which was around. The Role of AI in Shopping Tom: Um, not the generative AI that, uh, Todd was talking about in terms of creative capabilities, but instead sort of what the consumers are potentially looking at now, which is instead of Google, they might be looking at chat GPT and they might be, you know, in my case, not looking at New York Times cooking as much anymore. Tom: And, you know, just looking at my fridge and saying, Hey, I, I have asparagus. Tell me what I'm making and then I run to the grocery store and pick up what I, the missing things. Sarah Marzano: Yep. Tom: So, Your former colleague Andrew Lipsman, was on Eric Seufert show mobile dev memo . They were very harsh on this use [00:35:00] case, uh, turning into an agent commerce capability where, you what, what you should buy and. Tom: Uh, agents, go and buy it for you. I would say that their description of it sounded to me like, just subscribe and save. Like it was, oh, it's gonna buy you salt and you don't need salt. And it's like, you know, my experience has been that it comes back and gives you suggestions and if you want to do it, you know, you, you, you say yes. Tom: What do you see as, the opportunities for retailers to be involved in this whole change in user behavior? Sarah Marzano: Yeah, no, absolutely. And I think I will go ahead and admit that I also fall on the side of skeptic when it comes to like truly autonomous agentic right? Maybe it'll happen. It, I guess it like the tech is capable of it. Um, I don't necessarily think that consumers are asking for Tom: Well, I, I think you as a merchandiser know, like if it's something I truly don't care about buying, like, you [00:36:00] know, uh, dog food that I buy the same every time. Then Sure. Sarah Marzano: Yeah. Yeah, Tom: Paper towels. Sure. But if there's an a merchandising opportunity for me. Sarah Marzano: And I think that's the thing. I think like, that's like, there's, there's so many sort of facets of, of this, um, agentic AI thing, like whatever we wanna call it that are all sort of playing out. And autonomous agentic shopping is a really buzzy, flashy, like, fun one to talk about. Um, I think the more immediate. Sort of, uh, evolution that's happening is around the fact that these universal LLMs, these, these, these AI shopping assistants are having a really meaningful impact for the consumers who use them sort of earlier in their purchase journey, right? During their research and their consideration phases. And I think this is an arena where the technology is solving a pain point. Sarah Marzano: It is solving a problem, right? Because it's making it. Um, more sort of, uh, contextually sort of personalized, um, distilling a [00:37:00] lot of complex, uh, information and allowing consumers to talk like human beings, right? When they're trying to sort of figure out the best place to buy something or, you know, you mentioned recipes. Sarah Marzano: I use it for things for my toddler all the time. I'm like, I've got one banana, so give me a recipe for banana muffins that I can send to daycare. Right? Um, and it's able to, to really personalize those. And Adobe put out some data, like right, they have, they've got insight into referral traffic to retailers websites and they can start to sort Sarah Marzano: of infer Tom: that's because basically retailers all sort of outsource their websites to Adobe or IBM or, yeah, Sarah Marzano: yep. Todd: Well, Adobe Analytics too, is a part So they don't, they don't use Google and. Analytics for competitive reasons, they use Adobe Analytics for that. That's where it's coming from. Sarah Marzano: Um, and so they looked at like over a trillion retailer websites and were able to look at the user behavior from AI referral traffic, um, which is a really small part of retailers total traffic. But it gives us some like early reads on like, what's sort of happening here and how retailers should think about this. Sarah Marzano: And, and they found some [00:38:00] stuff that I think is like good news, right? Which is, uh, referral traffic from AI sources, um, has a much lower bounce rate. It was like 23%, uh, lower. Um, on average they spend more time on a retailer's website and they look at more pages, right? So it's like an acquisition tool. It's a, a really compelling, right, in terms of bringing in engaged audiences who are sort of primed for discovery. Sarah Marzano: Um. And that same study did find that conversion lagged. I think it was 9% lower. Um, it's important to note that that gap is closing 'cause they looked at the same data from a year prior and I think the conversion gap was like 43%. So the gap is closing. Um, but to me that sort of tells me like potentially these aren't customers who are primed to buy and in a bind buy mindset. Sarah Marzano: They're using these tools as part of, again, their discovery and their, and their research. Right. Um, so. Todd: means it doesn't replace the need for retail media and merchandising and convincing and all of that still that we're talking about. It's not, [00:39:00] that's not going away. I think the bigger point is all the things and the purpose for retail media. It's not going to die tomorrow. Sarah Marzano: So, that's exactly right, and I think we have precedent for new surfaces emerging where. We know, uh, are influencing the path to purchase, like social media, right? Is a huge, plays a huge role in, in many consumers' path to purchase and even drives some commerce Now, whether that's directly like within the apps, within the checkout or by sending out to a retailer's website, um, to complete that checkout, but that hasn't killed e-commerce, right? Sarah Marzano: The trick is that it's another arena, another place for retailers and brands sort of adapt and think through like. How do we show up on these channels, right? How do we make sure that we are present, where our consumers are spending time that we're primed to, to fulfill that transaction, however they wanna do it. Sarah Marzano: So I think that's like sort of the closest precedent that we have for what's happening here. Um, Todd: and I think an extension of that is, that. And a lot of times the new thing doesn't replace it. It [00:40:00] expands it. Like in-store traffic hasn't declined. What's happened is e-commerce traffic has shown up and added to, and so even as e-commerce has exploded in-store retail still growing. Todd: It, it hasn't. And so I think that's the other thing is that we just assume, oh, it's going away. No, no, no. It's, it's getting, it's, it's additive. In-store traffic. And you've got some great charts that we'll we'll show here on the screen for the people watching in video about how in-store shopping preferences aren't changing it, it they're static at worst and growing and still you're seeing increased in-store visits. Todd: So even as people become more digital, they're still doing things like going to the store, Sarah Marzano: That's absolutely right. And we saw the same thing with mobile commerce, not, uh, getting rid of desktop commerce with social commerce, not eating e-commerce. Right. Not even if these things are making a meaningful difference. Right. And factoring in, in a large way to how consumers shop and they're. They're increasing their share. Sarah Marzano: Like the pie is getting bigger. Right? And we're not [00:41:00] seeing the predecessing channel go away. Right? so retail still needs to be really good at retail. Like we can't abandon that just to focus on cracking. Tom: yeah, let's, let's think of that world where things are still additive and, and, you know, there's potentially more time spent on site. The Adobe, uh, stats say that, right? So if you're a retailer, where are you investing? Um, or if you're a marketplace, potentially, you know, are there, do you need to make the, we were talking about this in our last episode. Tom: The brands probably need to invest more in the PDPs and more in potentially the in-store media and things like that. Future of Retail and Loyalty Programs Tom: Um, and maybe the LLMs are gonna pick up on that in some you had an interesting part of your report talking about, um, what is the role of loyalty in that new world? Sarah Marzano: Yeah, absolutely. And I think loyalty is some, it's an opportunity for retailers in this new world, but it's not a new opportunity. Right. And I think loyalty programs have gotten. Stale, they've gotten overly complex. [00:42:00] Uh, they've become not fun for customers to figure out, right? I think every loyalty program I sign up for promises me exclusive and personalized rewards, and I don't. Sarah Marzano: Remember the last time I ever got one of those. Um, right. And so I think there is an opportunity that has always existed for retailers to make their loyalty programs better, and perhaps that opportunity has some new urgency behind it. If we're thinking about a meaningful new surface that's gonna sit between the consumer and the end retailer, that might create some disintermediation in terms of that end relationship. Sarah Marzano: But I think. The fact is that the majority of retail is still going to happen on a retailer's website or in their physical stores. And those are the moments to create those relationships with your customers, uh, and to reinforce that value and reinforce force that brand love, um, and that loyalty that causes a consumer to, in the future say, I'm gonna pick this retailer, right, for these reasons, right? Sarah Marzano: It's either the rewards they get from their loyalty program or. The value alignment, [00:43:00] um, that is more sort of purpose driven that I know this retailer kind of stands for. And so I Sarah Marzano: think Tom: but in your, in your report, you're saying. You know, this is, this could be scary if the, if the loyalty data from the retailer somehow gets in the hands of the LLMs, the retailers could be in some way disintermediated. Maybe they're still fulfilling, but. Sarah Marzano: No, I think, and I think that is the case if your loyalty program is just about giving a customer the best price, if that's. All you're doing, then it's really easy. Um, in this new world where you have tools that can help consumers sort of navigate and game the system and figure out exactly where they can get the best price, it's really easy to become completely disintermediated, right? Sarah Marzano: And so I think retailers who have been like lazy about their loyalty programs until now, right? There is a real risk, right? If that's the way this plays out and if we're competing on price alone. Um, in, we did a, an event last week with eMarketer where one of the. Retailers I pointed to was REI. They [00:44:00] have a purpose-driven loyalty program. Sarah Marzano: It's a co-op, they obviously pay to be a part of, but um. They contribute to causes that, uh, they align with and that their customer base align with. And they create a situation where I could really see saying, no, I'm gonna buy this national brand from REI, like no matter what. Right? Even if it's available at a different retailer, even maybe in the case where I could get it at a better price from another retailer. Sarah Marzano: And so that's what really, really like retailers and brands need to be focusing on and thinking about. Tom: That sounds great. Well, I want to thank you for, for joining us. We, we had a great discussion. Um, and is there anything that you'd like us to, to let the viewers know about how to find y