Amazon plans to sell digital ads in its physical stores

  • Amazon’s brick-and-mortar stores are under pressure to become more financially self-sufficient.
  • Stores like Amazon Fresh are “dependent on advertising” to make a profit and grow, according to an internal document.
  • Amazon is considering targeted ad placements on Dash Carts and other in-store displays, according to the document.

Amazon plans to sell digital advertising on the plethora of screens in its physical stores to increase the profitability of those stores, according to internal documents obtained by Insider and conversations with people familiar with the matter.

According to a project management document seen by Insider, Amazon plans to roll out digital signage ads in physical stores during the second quarter. Other ideas being discussed include personalized ads on the screens of its smart shopping cart, called Dash Cart, and payment kiosks, as well as smokescreen ads that display on the front of glass refrigerator doors, according to documents and a person familiar with the subject.

The idea of ​​rolling out in-store ad placements has gained traction in recent months as physical Amazon stores have come under pressure to become more financially self-sufficient, according to a person familiar with the matter. Since most of Amazon’s brick-and-mortar stores are in the notoriously low-margin grocery business, selling ads can create a significant profit channel for stores.

One of the documents, for example, noted that “store lines like Amazon Fresh have ad-dependent business models and expansion plans that contribute significantly to their financial bottom line.”

An Amazon spokesperson did not respond to a request for comment.

Amazon’s brick-and-mortar retail effort has encountered obstacles. The company originally planned to open hundreds of cashier-less Amazon Fresh grocery stores by 2023; so far, it has only opened one in the United States, Insider previously reported. And Amazon’s internet-connected Dash Carts have proven less popular than expected.

The company’s willingness to sell ads in its brick-and-mortar stores can potentially help offset the high cost issues of running its growing network of brick-and-mortar stores. It also underscores Amazon’s growing advertising ambitions, which has become one of the company’s most dynamic growth areas. Amazon presents advertisers with treasure troves of shopping data, and its move to in-store ads could help prove to advertisers that its ads have a direct impact on sales.

Amazon’s advertising business already supports some of the company’s less profitable segments. For the first time last quarter, Amazon advertised on a separate line from federal securities filings. Those documents showed ad revenue hit $31 billion in 2021, up 32% year-over-year.

The documents note that Amazon will sell the new in-store ad placements through its demand-side platform that advertisers use to buy programmatic ads that appear in connected TV apps and on publisher websites. The bulk of Amazon’s ad revenue comes from search ads, but Amazon has invested heavily in its demand-side platform to woo the big ad budgets that marketers spend on brand advertising.

Dash Cart screens are one location where Amazon aims to place advertisements, as per the guidelines. Once customers connect their shopping carts to their Amazon accounts, the documents note, Amazon could “deliver more value with relevant advertising” on promotional offers.

The document suggests that Amazon is also looking to place ads in other parts of stores – such as aisle ends, exit signs and other in-store displays.

“Across all types of stores … there are opportunities to leverage existing sign types for more engaging advertising content,” one of the documents notes. “There are opportunities to connect with Amazon’s ecosystem of advertising formats, from sponsored products to store visit ads or informational content like sponsored recipes.”

Consumer products companies like Procter & Gamble and Unilever have long bought ads from retailers like Walmart, Target and Kroger under major distribution deals. Unlike other retailers, Amazon’s attempt to sell in-store ads includes granular data about what people are buying, which could in theory show advertisers if someone bought a product after seeing an ad. said an ad agency executive who spoke on condition of anonymity due to close relationships with Amazon.

The executive added that brands are spending more advertising money on Amazon and other big online retailers like Walmart and Target to compensate for the death of third-party cookies that advertisers use to target and measure ads.

“The biggest story is that everyone is talking about first-party data. Big brands will never have it, but every retailer finds out they have it,” the executive said. Amazon, for example, has already offered advertisers some data from its stores, such as the ability to target ads to reach Whole Foods shoppers.

For the in-store ads initiative, Amazon’s brick-and-mortar store team worked with the company’s New York-based advertising team, a person familiar with the matter said. The team struggled to measure in-store advertising performance, such as ad impressions and engagements, which made it difficult to gain management support, the person said. Additionally, Whole Foods’ lack of interest in placing in-store ads and monetizing its brand has been a source of frustration for Amazon, which wanted to expand its in-store advertising program beyond the few dozen branded stores. Amazon, they said.

Privacy concerns could complicate Amazon’s attempts to sell targeted digital ads in its physical stores. More personalized advertising offers of the type sold on Amazon.com, based on customer purchase history and other interactions with Amazon products, do not easily translate to large in-store screens or other areas that can be seen by another buyer, two employees. in Amazon’s advertising division said. For example, Amazon has discussed internally whether to target ads for sensitive items, such as medical or sexual wellness products, one of the people said.

“It doesn’t take long to think about the creep factor of digital ads,” this person said.


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