Why Retailers Shouldn’t Charge Brands for Media Analytics

Amazon has inspired an entire industry to rethink the way it works. Its closest competitors, including Walmart, Target and Kroger, have borrowed from the Amazon playbook in order to try to get even a piece of its success. That’s led us to the boom in retail media networks, through which brands pay retailers for advertising space, promotional spots and preferred positioning in stores and online. 

But the problem with doing as Amazon does is that it’s often expensive work – very expensive – that Amazon has the unique ability to bankroll its ambitious projects with advertising and Amazon Web Services, the highly profitable cloud computing arm of the business that keeps stock prices high, reaps profits and floats other, less cash-lush part of the company. That’s something the Walmarts and Krogers of the world don’t have (and would be very hard to replicate), meaning building expensive arms of the business is going to hurt the bottom line. 

Now, Kroger and Walmart are looking for ways to make their retail media networks profitable – or to at least cover some of the costs of building and maintaining these networks – and they’re turning to the brands. Kroger recently announced that it will charge brands $120,000-$350,000 a year to get access to online and in-store sales analytics. Walmart additionally just released Luminate, a suite of data analytics tools, and is charging a hefty price tag to brands to access the advanced version, while the basic version leaves plenty to be desired. 

Simply put, this type of data and insights doesn’t warrant such high price tags for brands. Sharing Excel spreadsheets with clients and potential partners and information like affinity scores by category costs a company like Kroger very little. The $350,000 annual cost is instead funding Kroger’s own ability to stay in the retail media network business – there’s no other way around it. 

To prove that point, consider this: data like affinity scores is free to Amazon sellers, because Amazon wants to equip brands with that insight so that they spend more. Kroger and Walmart’s model has it backwards. 

What’s the incentive?

The reason Amazon gives away this kind of data for free is to compel brands to spend more on advertising. “The more you know” mindset: if brands understand where they’re performing – or underperforming – they’ll be incentivized to reallocate or spend more money to keep up results or see the new results they want. Amazon’s model is to give the data for free, knowing that it’s part of a long-term vision to build a bigger business over time where brands can’t help but invest.

The Kroger and Walmart model flips the script, telling brands to pay them in order to get access to the data – with the hope that they’ll then also pay more for ads. The incentives are off. Brands don’t want to, and are less likely to, spend money for the chance of knowing whether or not they should be investing more into a platform.

There are other limitations, even once you do get into the data. Even with good information, you need to know how to action it. Amazon gives brands tools to penetrate a certain market if they find that they’re underperforming somewhere along the way. More ad spend can’t be the only action item when you’re paying that much to access the data in the first place – but with Kroger, that’s essentially all there is. The retailer has two types of ads: in store and online. Kroger also isn’t a marketplace in the same way that Amazon is, meaning that brands don’t have the same control over their product selection as an Amazon or even Walmart’s online marketplace. There’s no problem with that, but it does clip the wings of its retail media network, how much it can grow and how much brands can get out of it.

The bottom line: retailers want to play Amazon’s game, but they’re often in a different playing field entirely. Now that it’s time to pay for that strategy, brands are falling in the crosshairs.

Damiano Ciarrocchi and Ross Walker are retail and advertising leads at Acadia.

Ross Walker and Damiano Ciarrocchi