How retail media can drive revenue growth for food commerce platforms

June 10, 2022
| 3 min read

As of April 2022, there were 5 billion Internet users across the world, up from just 1.23 billion in 2005. This growth, which was further accelerated by the pandemic, has had a domino effect on the expansion of eCommerce. Other factors such as convenience, deep discounts, and higher margins for businesses have also made a significant contribution. So much so that by the end of 2022, the online retail market is estimated to exceed $73B.

Online retailers are capitalizing on the rise of eCommerce by launching their own retail media operations to drive a new pipeline of revenue. Today, almost all the top online retailers are intent on innovating and optimizing their retail media operations. However,  food commerce platforms, which have seen exponential growth, are yet to capitalize on this opportunity.

‍The Rise of Food Commerce

‍One of India's largest, fastest-growing, and evergreen retail categories is food commerce. The food delivery market in India is estimated to grow to $716.53M between 2022 and 2026, at a CAGR of 28.13%.

Platforms such as Zomato and Swiggy command almost 95% of the market, while Ola Eats, Dominoes, Pizza Hut, and Dunzo are the other players in this space. Such food commerce platforms offer consumers the values of choice, convenience, discovery, doorstep delivery and also boast a captive consumer audience. Yet, most food commerce brands have not capitalized on retail media as a revenue-generating opportunity.

The Core Challenge

‍Food commerce platforms offer a superior experience to consumers, and their consumer bases continue to grow. However, one of the core challenges is the inability to capitalize on this growth when it comes to profitability.

Most food commerce platforms only have two primary sources of revenue - service charges, which are billed to the consumer, and subscription/loyalty programs. Moreover, food commerce is a highly competitive consumer category, where deep discounting is a ground reality. In this scenario, retail media can bridge the revenue gap and disrupt the existing business model to drive profitability.

‍Leveraging Monetization Opportunities

‍Ads, onsite and offsite, remain a largely untapped source of revenue for food commerce. Enabling monetization can lead to earnings of 5-8% of their Gross Merchandise Value (GMV).

On the advertisers' side, this retail media opportunity is attractive to two groups:

1. Restaurant partners present on food commerce apps are always on the lookout for easy-to-use ad platforms that offer higher visibility and, in turn, conversions through more orders.

2. Brands want to target audiences present on food commerce apps - such brands may be from multiple consumer categories, such as FMCG, electronics, and grocery products.

‍Activating Retail Media the Right Way

‍Since the number of restaurant partners on a platform can run into tens of thousands, the solution is to build scalability and ease of use for restaurant and brand partners. As retail operations scale, the problem of inventory limitation crops up. To address this issue, solutions must target audiences across the native apps and in online spaces where consumers spend the bulk of their time (Google, social media apps, open internet, etc.)

Food commerce platforms will, of course, stay focused on their core business. Hence, building an ad platform from scratch won't work, as keeping up with changes in adtech is a whole other business.

This is where partnering with a collaborative retail media tech platform presents a plug-and-play opportunity for food commerce businesses to build a strong retail media operation without the hassles of creating an ad network from scratch.

Platforms like OnlineSales.ai have the right capabilities to support food commerce platforms in building their retail media operations from the ground up. Food commerce platforms can start monetizing the retail media opportunity right away and increase their revenues by up to 8%. Plus, by partnering with OnlineSales.ai, the transition can be a seamless one.

Want to know more?

‍Looking for ways to leverage your first party data and traffic to earn additional revenue? Our AI ML powered retail media tech, Monetize, helps you enable every advertiser to run ads on your platform to achieve their marketing goals and ensure higher yields for you. To learn more, contact us today.

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