In an era where data is the new currency, Britain's largest supermarkets are undergoing a profound transformation. No longer just purveyors of groceries, chains like Tesco and Sainsbury's are leveraging their vast troves of customer information to build formidable media empires, fundamentally changing the relationship between retailer and shopper.
The Data Goldmine: Knowing Customers Better Than They Know Themselves
The shift to online shopping and the ubiquity of loyalty schemes have created an unprecedented reservoir of consumer data. Retailers now possess intimate knowledge of life changes often before a customer's own family is aware. As Clive Black, a retail analyst at Shore Capital, starkly puts it: "Supermarkets are the first to know if you're having a baby. They know whether you've just got a dog. They know whether you've got a penchant for vodka and all the rest of it."
This insight is gleaned from subtle shifts in purchasing behaviour: the addition of prenatal vitamins, a sudden switch to alcohol-free beverages, or a new recurring purchase of pet food. This data endowment allows retailers to predict intentions, from New Year's health resolutions to when they might be abandoned.
From Checkouts to Ad Platforms: The Retail Media Boom
This proprietary data has birthed the high-margin business of 'retail media'. It encompasses everything from selling targeted digital ad space on apps and emails to brands, to deploying in-store screens and personalised promotions at self-checkout scanners. For advertisers, the pitch is powerfully simple.
"We can get to your customers more efficiently than you can with general advertisers," explains Black, summarising the supermarket proposition. "We know when our shoppers buy your product – by store, by time of day, all the rest of it – and this is proprietary information."
This enables 'closed-loop measurement', a holy grail for marketers. Where a TV ad's direct impact on sales is nebulous, retail media can definitively link an ad exposure on a supermarket's platform to a product being scanned at the till.
Profits and Projections: A Multi-Billion Pound Industry
The financial stakes are enormous and investors are now taking serious note. In their recent Christmas trading updates, both Tesco and Sainsbury's highlighted unprecedented progress in this arena.
Tesco celebrated an "expanded retail media offer", including new screens in Booker wholesalers and video ads, which helped it win a Media Brand of the Year award. Analyst Clive Black estimates Tesco is on track to generate a staggering £300 million in profit from this venture.
Sainsbury's devoted more space to its media business than to updates on the transformation of its £4.1bn Argos portfolio. It plans to double its in-store screen network by the end of the next financial year and is ahead of schedule on a target to make £100 million in profit by 2027.
The sector's growth is explosive. Claire Holubowskyj of Enders Analysis notes, "It's one of those really interesting areas that flew under the radar for slightly too long." The industry is expected to be worth over £5 billion in the UK this year alone.
As Paolo Pescatore, an independent media analyst, confirms, the combination of first-party loyalty data and measurable sales impact makes retail media irresistibly attractive to brands. For supermarkets, this high-margin advertising revenue is becoming as crucial to their business models as selling affordable groceries. The quiet data revolution at the checkout is now a central pillar of modern retail strategy, and it's clear this new frontier is only just beginning to be explored.
