Retail media is one of the fastest growing advertising channels, helping brands reach consumers with highly relevant ads at the point of purchase, which in turn allows retailers to leverage this channel as a new revenue stream. Retailers have mastered the online channel, but extending it to the in-store experience faces challenges. However, AI is becoming a powerful tool that can help brick-and-mortar retailers expand their retail media networks without sacrificing relevancy, reach, and customer experience.
Major retailers and convenience stores like 7-Eleven are tapping into the vast potential of physical retail media, and it’s clear this shift is accelerating. In fact, in-store retail media growth is expected to accelerate through 2025. This shift provides the opportunity to reach customers at key points of purchase, closer to the bottom of the funnel.
With 85% of sales still taking place in physical stores, retailers must develop strategies to effectively drive sales and engage in-store audiences to remain competitive, and AI is already showing promise in these areas as well as in measurement and efficiency.
Targeting AI for retail media outcomes
For retail media strategies to be successful, they need to prioritize driving sales and customer experience. Retailers exist to sell products, and retail media can boost sales by leveraging first-party data to deliver relevant content that guides shoppers toward purchases. While online retailers have seen the transformative power of artificial intelligence, brick-and-mortar retailers are now eager to achieve the same success in-store.
Here are three key areas for deploying artificial intelligence to improve customer engagement and boost sales:
1. Large-scale content creation and advertising
For retailers operating multiple locations, building the right retail media mix is just the first step. The real challenge is scaling it efficiently across a broad network while tailoring it to shopper needs. Artificial intelligence can streamline content creation and ad serving across a retailer’s store network.
By analyzing data in real time, AI can identify which products resonate with local shoppers and adjust ad content to match those preferences. Recent data found that 52% of marketers predict that AI will enable highly personalized shopping experiences, demonstrating the growing influence of AI in delivering customized content.
AI-driven algorithms can also help retailers determine the most effective in-store advertising placements. These systems can then use data such as shopping behavior, time of day and inventory levels to reach customers, delivering the right message at the right time for maximum impact. For example, if a store experiences a traffic surge due to a local sports game, AI can adjust content in real time to promote relevant products or special offers to maximize sales opportunities. Businesses that leverage artificial intelligence and machine learning (ML) to personalize ads experience a 1.3x increase in incremental return on ad spend.
2. Measurement and Attribution
In-store retail media presents a unique challenge: accurately measuring and attributing the impact of advertising on sales. While tracking an online customer’s journey from ad exposure to purchase is relatively simple, measuring the success of marketing campaigns and in-store sales can be more complex. While the industry is taking steps to standardize in-store retail media measurement, AI can bridge this gap by combining and analyzing data from a variety of sources, such as point-of-sale systems, loyalty programs, and in-store sensors.
Using artificial intelligence, retailers can track how customers interact with in-store media and understand how those interactions influence purchasing decisions. For example, a digital display might show an ad for a specific product, and AI could help determine whether sales of that item increased accordingly during a specific time frame.
AI also helps increase transparency in retail media measurement by detecting patterns of fraudulent activity with unparalleled speed and accuracy. This is especially important for in-store audio advertising, which is becoming a top three channel for retailers. Once considered a secondary channel due to its intangible nature, audio advertising has quickly become a valuable investment for online and brick-and-mortar retailers.
But a big challenge with in-store audio is ensuring ads can actually be played and heard. In busy retail environments, employees may unplug traditional media players to play personal music or turn off the sound entirely. In high-traffic or noisy areas, manually adjusting the volume becomes almost unmanageable, resulting in ads being drowned out. Artificial intelligence can prevent this type of audio ad fraud by automatically adjusting the volume based on ambient noise levels, ensuring the audio is clear and audible. AI can also timestamp ads, providing additional verification and improving measurement accuracy.
3. Continuous learning and optimization in the store
By leveraging AI, retailers can continually refine their strategies and run more effective advertising campaigns in physical stores. AI-driven solutions evolve with every customer interaction, collecting data that allows them to identify patterns and preferences that inform future campaigns. For example, AI might help a retailer discover that a specific energy drink works better during an afternoon sale, or that certain messages resonate more with specific groups of people.
This process of continuous optimization extends beyond a single marketing campaign. With more data on purchasing behavior and time spent in-store, retailers can gain a deeper understanding of customer engagement to inform key decisions about store layout, product placement and promotional strategies.
With these data-driven insights, retailers can fine-tune their overall in-store media strategy and reallocate resources to the most successful strategies. The result is a dynamic, adaptive approach that not only enhances the customer experience but drives continued sales growth. A recent GroceryTV study found that in-store retail media campaigns continue to drive double-digit sales growth in brick-and-mortar stores.
The future of AI-powered in-store retail media
As the retail industry recognizes the need to activate and standardize retail media within brick-and-mortar stores, AI’s ability to expand content, measure results and continuously optimize strategies makes it a key ally in the future of in-store retail. By embracing AI-driven solutions, retailers can gain an edge in an increasingly competitive environment and rediscover the power of in-store interactions in driving customer satisfaction and revenue growth.
The expansion of retail media into physical stores marks a new chapter in the evolution of customer experience. With the help of artificial intelligence, retailers have the tools to turn every in-store visit into an opportunity to deliver a customized experience that increases sales. As the lines between digital and physical continue to blur, retailers that leverage artificial intelligence to bring the two worlds together will be at the forefront of retail innovation.
