COSTCO has announced a new ad network that uses previous purchases to enhance the personalized shopping experience.
The retail giant is following behind other companies, such as Walmart and Target, which are already capitalizing on customer shopping data.
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Costco has a new ad network in the works.
The ads would be built on its loyalty membership data, the shopping habits of 74.5 million members, and past purchases, according to Marketing Brew.
Ads would then be catered to customers on and off its website.
Costco’s new network is still in the works, but it signifies the retailer is moving into a massive retail media space.
This year alone, retail media will make up one-fifth of worldwide digital ad spending in 2024 and is estimated to reach $166 billion by 2025, according to eMarketer.
Mark Williamson, AVP of retail media at Costco, is behind the new initiative.
The company is currently leveraging its audience data to conduct beta tests to target users on external websites, and it plans to expand these tests to its own site shortly.
The company is currently doing beta tests using its audience data to target users on other websites, he said, and it will eventually test targeting on its own site.
“Not only will we help you reach a Costco member, we will 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 shop for because of its membership cards.
In 2022, Costco had around 66 million paid members and 119 million cardholders, according to CNN.
With its cards, the retailer can tie individual purchases to shoppers’ households, 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 being it.
LATE TO THE PARTY
Costco is late to the ad network compared to other retailers.
“It’s not incorrect to characterize Costco as 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 isn’t just a profit center…When they determined that retail media revenue could directly drive increased value for our members, that’s when they said, ‘Okay, this is something we need to get involved with.'”
In 2021, Walmart joined the ad space, naming it Walmart Connect, and partnering with The Trade Desk.
“Walmart is pioneering a new frontier in digital advertising, providing marketers with access to shopper data for the first time, in a way that both protects consumer privacy and improves the consumer experience,” Jeff Green, CEO and co-founder of The Trade Desk, said, in a Walmart press release from 2021.
What does it mean for shoppers?
Costco has announced a new ad network is in the works to better the personalized shopping experience.
The ads would be built on its loyalty membership data, the shopping habits of 74.5 million members, and past purchases, according to Marketing Brew.
With its cards, the retailer will be able to tie individual purchases to shoppers’ households, both in-store and on Costco’s e-commerce site, Mark Williamson, AVP of retail media at Costco, said.
The statistics could help advertisers reach new customers and tell them whether a customer saw an ad for a product before being it.
Costco plans to reinvest the profits from its advertising into maintaining affordable prices for consumers.
This could involve offsetting shipping costs or ensuring the chain’s well-regarded rotisserie chicken remains priced at $4.99, Williamson said.
“In doing so, marketers will be able to create much more refined, relevant, and measurable advertising campaigns, which can be adapted on the fly to changing circumstances and real-time performance. We are thrilled to be working 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’s shopping by tracking what they browse for on its site, even without making a purchase.
During the latest earnings call, Target’s chief marketing and digital officer, Cara Sylvester, also mentioned Target’s retail media network, Roundel, contributed over $1.5 billion in value to the company.
‘GREAT UPSIDE POTENTIAL’
Advertising creates high profits for businesses since running ads on websites is cheap and shoppers will still visit websites whether there are ads or not.
Costco plans to reinvest the profits from its advertising into maintaining affordable prices for consumers.
This could involve offsetting shipping costs or ensuring the chain’s well-regarded rotisserie chicken remains priced at $4.99, Williamson said.
Costco already has a budding advertising business, generating revenue through its Costco Connection magazine and basic on-site contextual ads, Williamson explained.
However, the company has just started moving towards the ad space which Williamson thinks could be because it dislikes advertising on major platforms, such as TV, which has “created a lack of expertise in the paid media space.”
He declined to give revenue estimates or expectations, but suggested that “it’s entirely possible to quadruple or more the size of our [media] revenue today, just by operating differently, by unlocking the power of the data that we have.”
However, Mike Feldman, SVP and global head of retail media at VaynerMedia, said the retailer has a big opportunity due to its membership cards.
“I believe they are leaving significant revenue on the table,” Feldman told Marketing Brew.
“When you layer on its loyalty card penetration they have, Costco could build a significant competitive advantage in the marketplace.”
Costco executives agree with this notion and see “great upside potential” in the retail media sphere.
The U.S. Sun has contacted Costco for comment.