Convenience Store Chains Bet on Retail Media: Opportunities and Concerns in 2023

This story is the second in a series of reports on key trends impacting the convenience store industry in 2023.

A few years ago, when the advertising landscape was changing rapidly, Art Sebastian and his digital marketing team were not caught off guard. As consumers shopped online more frequently and data privacy became increasingly important, third-party cookies were gradually phased out.

"It's not surprising that brands are seeking advertising opportunities with higher return on investment," said Sebastian, vice president of digital experience at Casey's General Stores.

More than two years later, after building adigital ordering experience, implementing customer-facing experiences, and even using artificial intelligence to enhance shopper insights, Casey's launchedits retail media networkthis year. It is the second convenience store chain in the U.S. to do so, following 7-Eleven.

The network, called Casey's Access, opens Casey's first-party customer data to CPG companies and other suppliers. Similar to7-Eleven's retail media network, suppliers participating in the program can use this data to create and target relevant promotions, offers, and other marketing content to reach customers through the network.

For many convenience store operators, retail media networks may still be a mystery. But Emarketer estimates that by 2024,more than $61 billionin digital advertising will flow through retail media networks.

"Retail media is a massive, long-term trend in marketing. Depending on which analyst firm you believe, it's either the fastest-growing or second-fastest-growing channel in all marketing budgets," said Michael Greene, senior vice president of global vertical strategy at Criteo, a commerce media company. "You're reaching consumers at the most critical moment of their shopping journey—when they're about to make a purchase."

Retail media networks are poised to become one of the shiniest new toys for convenience store operators in 2023, bringing a wealth of new growth and opportunities. But experts say that with the potential rewards come challenges and risks.

High-frequency visits and impulse purchases

Compared to other retail media focus industries such as grocery and big-box stores, convenience store operators have several advantages. One is the visit frequency of core customers.

"In the grocery industry, you'd be happy if customers came in to stock up every 7 to 10 days," said Sebastian, who spent two decades working for grocers like Jewel Osco, Albertsons, and Meijer before joining Casey's in 2018. In contrast, the best convenience store customers visit multiple times a week, he said, "which means there's a high frequency in the relationship between the customer and the brand."

Sebastian noted that this frequency means convenience stores are more likely than other retailers to frequently show ads to customers and engage with them.

"I think that's very unique to our channel," he said.

Consumers visiting convenience stores are often prone to impulse purchases. This can also be an advantage for the industry in retail media, said Jordan Berke, founder and CEO of Tomorrow Retail Consulting.

Berke pointed out that since convenience stores focus on immediate consumption, advertisers can drive high margins because customers are likely to visit a convenience store within hours of seeing a product ad. He suggested that convenience store-based retail media should give advertisers the opportunity to promote products that benefit from this "instant top-of-mind thinking."

"This isn't planned purchasing," he said. "It's 'I need it right now.'"

Berke also mentioned that fuel is another touchpoint convenience store retailers can leverage in their retail media efforts.

Casey's is already tapping into the potential of fuel trips with Casey's Access, having installed video screens at fuel pumps years ago, Sebastian said.

"We did that intentionally because we knew that at some point, we'd want to light up those screens with personalized content," he said.

Sebastian emphasized the importance of convenience store retailers combining the dwell time generated by fuel trips with in-store media.

"If your tank is empty, you start the pump and begin fueling, we have a captive audience, and they're already on our property," he said. "Delivering the right content is a huge opportunity to drive conversion from the forecourt to the store."

Paul Brenner is president and chief strategy officer of Vibenomics, which provides in-store audio services to businesses as part of their retail media networks. He also sees fuel as a major opportunity for convenience store retail media. But he acknowledged that retailers must better connect forecourt entertainment and advertising with in-store products, calling the forecourt a "programmatic clearinghouse."

"If you want to use the pump, you have to take more creative measures to get people into the store," he said. "It has to be a continuation of the experience."

A shallow talent pool

In such a nascent field, convenience stores rely on a mix of internal marketing staff and external talent to manage their retail media networks. Brenner said he has never seen a retailer build a retail media network without partnering with a third-party service.

While some of these third-party companies offer white-label services that may give retailers more control over their programs, the work involving coding and "connecting the dots and moving parts" goes beyond the retailer's expertise, he said. Brenner noted that even in media sales—where retailers may be more qualified—they still need to seek out third-party vendors.

To help with Casey's Access, Casey's chose third-party vendor CitrusAd, whose "best practices and implementation team" has been helpful, Sebastian said. CitrusAd has also developed retail media networks forHy-Vee, ShopRite, Lowe's, Kohl's, AT&T, Bed Bath & Beyond, and others.

But that doesn't mean Casey's doesn't have its own employees involved in the Casey's Access program.

"We manage our own paid media, so we have people who understand that space," Sebastian said. "We have employees from digital merchandising backgrounds, so there's a mix of talent internally that we can draw on."

Casey's having employees with experience in certain aspects of retail media seems to put them a step ahead. Greene said that historically, when companies ventured into retail media, internal marketing or merchandising teams were often "thrown" into new roles or given new responsibilities and then told to "figure it out."

"That was experimental," he said. "It was like 'go find someone who's eager to do this, understands the business, understands the relationships, and see what they can do.'"

But as more retailers venture into retail media, some are beginning to realize the need to "professionalize" their workforce, Greene said. Retailers are increasingly looking to hire people with digital media backgrounds, even poaching from major tech companies like Google, Greene said.

Bringing in such specialized talent is necessary for convenience stores to scale their retail media businesses, he said.

"This can't be a side project," he said. "It requires retailers to hire with specialized skills to help build this business."

Tougher for smaller players

At a basic level, convenience store operators will face challenges because retail media is vastly different from the traditional retail business they're used to, Berke said.

He noted that bridging this gap requires "a lot of learning and investment," which favors larger operators because they may have the capital to invest and the time to learn, acquire, and build retail media capabilities.

Meanwhile, smaller operators need to be more strategic. Berke suggested that such operators join forces with other independent or regional brands to form retail media networks, since advertisers will only work with a limited number of platforms at a time.

"Advertisers can't handle thousands of small ad channels," he said. "You have to find a way to make yourself relevant, with enough reach, data, and trust to compete."

Brenner agreed that smaller retailers with fewer assets will face greater difficulty in launching retail media networks. He noted that many of Vibenomics' convenience store clients—some of which own hundreds of stores—are struggling to scale for the same reason.

"Convenience stores have to see a lot of support from many small groups to get the attention they want in retail media," he said.

Another challenge convenience store operators face is that, compared to other industries like restaurants and grocery,loyalty member engagement is lower. Since first-party loyalty data is directly tied to retail media programs, improving loyalty engagement should be a top priority for any convenience store creating a retail media program, Brenner said.

"The only value of retail media is that you have first-party data about individuals," he said. "I need to know that (the customer) is someone who comes in twice a week and buys these things."

Beyond investment, loyalty, and scale challenges, retail media networks also pose risks to convenience store operators. One is the potential to fundamentally harm their core business by disrupting the shopping experience, Greene said. He noted that even testing retail media programs is a "leap of faith" for many retailers.

Avoiding this risk is a "balancing act" involving a lot of trial and error, Greene said. That's why he recommends operators enter the space gradually, so as not to do anything that undermines their core mission and alienates shoppers.

"You want to acquire that customer and retain that customer," Greene said. "I think that's an area every retailer, including convenience stores, needs to be mindful of."

It's for these reasons that Casey's spent two years developing its retail media network before launching it, Sebastian said.

"For something like this, you have to take your time, and that's why we've been very methodical," he said.

Innovation in data and advertising

For convenience store operators whose retail media networks are already implemented and generating profit, what does innovation look like?

Greene said that as networks evolve, he sees retailers investing in new, higher-value ad formats that create incremental expansion opportunities for brands.

"We're seeing many retailers try adding video ad units to their websites," Greene said. "Two years ago, that was unimaginable."

Additionally, Greene sees retailers focusing more on data monetization as their retail media networks evolve, meaning applying loyalty data to social channels or even connected TV (CTV)—a form of digital advertising in streaming content. Beyond that, he also sees retailers offering brands new shopper insights that go beyond transactional media purchase data.

A non-convenience store retailer at this stage is Walmart. Greene mentionedWalmart's Luminate product, which uses advanced data science to synthesize insights across its omnichannel offerings.

"How do we use our data to influence the planning process of brands or agencies?" he said. "How do we go beyond audience data to bring in things like shelf data programmatically?"

Despite being creative with loyalty data usage, Brenner believes innovation in retail media comes down to one thing.

"Deliver results for advertisers—just deliver results," he said.

Correction: An earlier version of this story misspelled Michael Greene's last name.