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First Insights: Retail Media at Rewe

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The Insight

As the retail media advertising trend continues to pick up speed, it offers enormous potential for manufacturers and retailers. Rewe, a German supermarket chain, has joined the trend with customized online advertising that is available to select users of the online store. We were one of the first agencies to test the new format. We’ve determined that Rewe’s feature is promising, but we also see room for improvement when it comes to the details.

Retailers and manufacturers have Amazon to thank for hype around retail media in the marketing world: when the largest global online retailer invented the modern equivalent of the advertising allowance (WKZ), brands were able to rely on data instead of their gut instinct. Amazon’s approach doesn’t distribute ads at random, but instead targets search terms or interests. You only pay when someone clicks on or sees the ad, and, like Google Ads, the price per click is determined through bidding.

How it Works

As a result, advertisers can very clearly see which advertising costs have generated which additional revenue, and retailers can earn significantly more money with their advertising spaces. Let’s take an example in which an electronics retailer only shows the ads of the household appliance manufacturer Miele to people who are looking for a household appliance, instead of to all customers. The number of clicks on the Miele ads are unlikely to change, but the retailer can then fill the remaining ad spaces for all other search terms, from smartphones to digital cameras, with more suitable brands.

Rewe’s approach also uses CitrusAd, an approach similar to Amazon’s which is used by other retailers such as Tesco in the UK. The system allows manufacturers to advertise on two types of pages. The first are category pages – e.g., “baby food” – and the second are pages that list search results – e.g., for the search term “diapers size 5”. The price is determined by auction and the minimum bid per click is 50 cents.

Utilizing this feature makes sense for almost all brands that want to increase their sales with Rewe and give their products more visibility. Since Rewe does not allow competitor keywords (for example, “Nutella” or “Nusspli”), brands should focus on generic keywords (such as “chocolate creme”). It is not necessary to include your own brand as a keyword, since no competitors are able to bid on it.

Additionally, the feature is interesting for companies that want to to gain experience using CitrusAd early on, while there is minimal competition. For example, if a brand wants to offer the most successful chocolate Santa in Rewe’s online store at the end of 2023, now is the right time to gain initial experience by running ads for chocolate Easter bunnies or Valentine’s Day products. Retail media is also an exciting channel for new products in a segment – for example, when marketing a yogurt with a new flavor, it’s possible to reach everyone interested in yogurt just as they are looking to choose a flavor.

As an agency, we were among the very first testers of the feature. We worked with Unilever Germany and Campari Germany to advertise for brands such as Ouzo, Campari, Cinzano, Aperol, Bulldog and Skyy. The results were promising: the ads were displayed very prominently, and the click rate and conversion rate – i.e. the number of purchases in relation to the number of placements – performed well as a result.

We, however, do see potential for optimization in the creation of the campaigns, especially with regards to keywords. On other platforms, we have had positive experiences with synonyms and near-synonyms. For example, a certain sparkling wine should ideally also be found when searching for “Prosecco,” and spelling errors (e.g. “Seckt” or “Prosseco”) should not prevent customers from finding a product. Rewe’s feature is still lagging behind in this aspect.

Additionally, for many brands on many platforms, we found that customers don’t even wait to see the search results page before making a selection: instead, they type a few letters into the search box and select the product from the suggestions below the search window. To continue with our example, it would be best if users could see the advertised prosecco product in the input suggestions, eve when they’ve only typed “pros” into the search. Currently, you have to save partial words such as “pros” as a keyword, but an integrated technical solution would be a better solution.

Furthermore, advertisers are only allowed to use keywords that are very close to the product are currently possible, but a bit more leeway would make sense when selecting applicable terms.

Looking Ahead

In addition to keyword recommendations, we would like to see improvements in a few other areas. We believe that new ad formats such as cross-selling and upselling options would bring additional value. For example, you could advertise a tonic water on the page of a gin, or advertise limes for tequila products. We would also like to see more flexibility regarding the minimum bids per click. For many products, a minimum bid of 50 cents per click is okay – but for products that themselves cost only one euro, it is rarely worth it.

Another improvement, which would go beyond the limits of Rewe’s digital platform, would be the possibility of creating a connection to brick and mortar shopping. The Rewe online store has a strong performance as the 22nd largest online store in Germany, but German consumers still have more frequent touchpoints with in-person storefronts in their everyday lives.

How could a connection to brick and mortar work? Setting up digital retail media as a multichannel application could offer a tangible “platform” for advertisers.

Because the online share in the food sector is still manageable, now would be an ideal time to implement such an approach. Retailers who develop good solutions early on have the chance to profit to the maximum from the potential of digital forms of advertising.

All in all, Retail Media at Rewe is a good step forward in its current form, and we see it as definitely worth testing for all brands available in the Rewe online store. If brands use not only Rewe but also the corresponding offers from retailers such as MediaMarkt, Douglas and Co., they should consider leveraging these platforms in the long term to build up complementary channels to advertising on Amazon.