Publishing its annual results, Kingfisher Group – owner of Screwfix and B&Q – has pledged to grow its retail media network (RMN) income to around 3% of its ecommerce business off the back of very strong growth in its core online business and its new marketplace offering. It also plans to grow its ecommerce business to 30% of group sales – a third of which from said marketplace.
The company, which logged revenues of £13bn and total ecommerce sales of £2.3bn and B2C and B2B banners in the UK, Ireland, France, Poland, Romania and the Iberian Peninsula, says in its results report that it’s AI and retail media initiatives are “delivering positive results and we are accelerating their rollout to drive incremental revenue, profit and cash. For example, we have successfully implemented AI-powered product recommendation and personalisation engines in the UK, France and Romania and deployed data and AI-driven tools to optimise markdowns and clearance. “
Further, it adds: “Our retail media offering is rapidly building momentum and is now live in France and at B&Q. Over time, we see the potential for retail media revenues to reach up to 3% of the Group’s total e-commerce sales”.
This is being driven by stellar growth in visits to its ecommerce propositions. According to the company: “with circa 1 billion customer visits per annum across our e-commerce touchpoints, we believe that many of our suppliers – including leading national and international home improvement brands – could become advertisers. Over time, we see the potential for retail media revenues to reach up to 3% of the Group’s total e-commerce sales”.
According to retail media expert Colin Lewis, “If you combined [Kingfisher’s] ‘ambition for ecommerce to reach 30% sales penetration, one third of which represents high margin marketplace gross sales’, this means they are creating the core requirements for a substantial retail media business. What is [its] goal with Retail Media? Again, back to [its] annual report: the ambition for retail media revenues to reach up to 3% of the Group’s total eCommerce sales.
He says: “Latest numbers in Q12024 say that online sales came in now 18.8% of Group sales (Q1 23/24: 16.9%), means that Kingfisher will have around £250m in pure ecommerce revenues in 2024. However, if we take [Kingfisher’s] ambition for retail media to be 3% of the total ecommerce sales, and it is able to deliver that penetration rate of 3% today, then Kingfisher is saying that it could do around £7.5m in retail media revenues.” This seems low as a gross revenue business for such a large business.
What do similar businesses in the US claim to do?
The Home Depot is the largest DIY chain in the US with 2300 stores and recently relaunched its retail media business its retail media network as Orange Apron Media, writes Colin Lewis. The Orange Apron Media network allows suppliers to buy ads on top-of-the-page banners, sponsored product carousels, ad spots in promotional emails.
It claims to have a few thousand suppliers that advertise in its retail media network. Over the next few years, the chain has the goal of doubling that number by adding a few thousand more. In 100 Home Depot Stores, suppliers can buy ads on TV screens located instore.
Kingfisher are very clearly in the early stages of the retail media journey, if it is talking about ambitions purely around what it can do onsite.
For all retailers setting up RMNs, there is always a challenge: there is only so much inventory onsite. Retailers run out of inventory very quickly as they have to think of the customer experience and the potential fill rate from any ad unit.
Once onsite is addressed properly, the next phase of a RMN’s journey is offsite – inventory target using first party data from the retailer appearing on social or on the open web.
The final part of develop is instore screens – always much later and harder to activate due to cost and logistics. This Onsite -> Offsite -> Instore model is the only way to grow a retail media business beyond its initial online only phase.
Thus, Kingfisher’s ambition for retail media income to reach 3% of the group’s total ecommerce sales seems to be on the light side and perhaps lacking in ambition. Let’s see how this pans out over the next few years, but one does not need to have Madam Zelda’s crystal ball to work out how quickly ambitions might change for the group.
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