Kingfisher Group plans to increase the share of fledgling retail media sales to 3% of e-commerce sales – isn’t that a bit low?

In publishing its annual results, Kingfisher Group – the owner of Screwfix and B&Q – pledged to increase revenues for its retail media network (RMN) to around 3% of its e-commerce business thanks to very strong growth in its core online business and new market offerings. It also plans to develop e-commerce activities to 30% of the group’s sales, one third of which comes from the mentioned market.

The company, which reported revenues of £13 billion and total e-commerce sales of £2.3 billion and B2C and B2B banners in the UK, Ireland, France, Poland, Romania and the Iberian Peninsula, says in its results report , that it is initiatives related to artificial intelligence and retail media. “are delivering positive results and we are accelerating their implementation to increase revenues, profits and cash. For example, we have successfully deployed AI-powered product recommendation and personalization engines in the UK, France and Romania, and deployed data and AI-driven tools to optimize markdowns and sales. “

He further adds: “Our retail media offering is rapidly gaining momentum and is now available in France and B&Q. We see that over time, retail media revenues could reach up to 3% of the Group’s total e-commerce sales.”

This is thanks to a significant increase in the number of visits to the company’s e-commerce offers. According to the company: “With approximately 1 billion customer visits annually to our e-commerce touchpoints, we believe many of our suppliers – including leading national and international home furnishings brands – could become advertisers. We see that over time, retail media revenues could reach up to 3% of the Group’s total e-commerce sales.”

According to retail media expert Colin Lewis: “If you combine (Kingfisher’s)”the ambition for e-commerce to achieve sales penetration of 30%, of which one third is gross sales in a high-margin market,” that is, they create the basic requirements for a significant retail media business. What is (his) goal at Retail Media? Coming back to (his) annual report: the ambition for retail media revenues to reach up to 3% of the Group’s total eCommerce sales.

It says: “The latest data for Q1 2024 shows that online sales now account for 18.8% of Group sales (Q1 23/24: 16.9%), meaning that in 2024 Kingfisher will have around £250m of pure e-commerce revenue. However, if we take into account that (Kingfisher) claims that retail media is expected to account for 3% of total e-commerce sales and is able to achieve a penetration rate of 3% today, then Kingfisher claims that it could generate approximately £7.5 million in revenue from retail media. This seems low for gross income for such a large company.

What do similar companies in the US claim?

Home Depot is the largest DIY chain in the U.S. with 2,300 stores and recently relaunched its retail media operations, its retail media network under the name Orange Apron Media, writes Colin Lewis. The Orange Apron Media network allows suppliers to purchase advertising on top banners, carousels of sponsored products, and advertising spots in promotional e-mails.

It claims to have several thousand suppliers who advertise on its retail media network. In the coming years, the network intends to double this number by adding several thousand more. At 100 Home Depot stores, vendors can buy ads on in-store TV screens.

Kingfisher is clearly in the early stages of its retail media journey when we’re talking about ambitions purely in terms of what it can do on the ground.

For all retailers setting up an RMN, there is always a challenge: there is a limited amount of inventory on site. Retailers run out of inventory very quickly because they have to think about customer experience and the potential fill rate of any ad unit.

Once the problem has been properly addressed on-site, the next stage of the RMN journey takes place off-site – the inventory target uses first-party data from the retailer as it appears on social media or the open web.

The last part of the development is the in-store screens – always much later and more difficult to activate due to costs and logistics. This Onsite -> Offsite -> Model in store is the only way to grow your retail media business beyond its initial online-only phase.

Therefore, Kingfisher’s ambition for retail media revenue to reach 3% of the group’s total e-commerce sales appears moderate and perhaps unambitious. We’ll see how this plays out over the next few years, but you don’t need a Madam Zelda crystal ball to calculate how quickly the group’s ambitions can change.