Shoprite again posted impressive results this year, largely driven by strong sales at its Checkers, Usave and Shoprite stores.
Growth was robust: customer visits increased by 4.5%, the average basket size grew by 6.9%, and the number of products sold reached 7.4-billion.
An analyst would likely tell you that Shoprite sold more products than its competitors, achieved better margins and boosted its performance through operational efficiency and affordability across income groups.
At a Sunday braai, however, conversation likely turns to more anecdotal observations: the fun new bubble tea store inside a local Checkers, the sight of omnipresent Sixty60 deliveries or the unbeatable deal on the boerewors.
But behind much of this growth lies a less publicised, more intriguing, development: Shoprite’s rise not only as a supermarket giant but also as a media and advertising powerhouse. This is thanks to its Rainmaker Media division, which generated millions in the past financial year.
The idea of a supermarket also functioning as an advertising company may seem unusual. Deeply simplified, traditional retail advertising rands flowed outward, spent on space in newspapers and on radio and TV. This approach, often called “spray and pray”, aims to put ads in front of as many people as possible, in the hope that some would heed the calls.
But retail behemoths like Amazon and Walmart realised the goldmines of data they were sitting on, generated by the increase in digital payments, loyalty programmes and online shopping.
Locally, Rainmaker did much the same, almost as the pandemic took hold. It now reaches and understands 81-million South African shoppers monthly, processes 1.1-billion transactions annually and tracks 500-million baskets.
All of this is small fry compared with its global counterparts, but trendsetting for the local retail industry that has for decades relied purely on star-shaped cutouts in the snack aisle and digital in-store displays at till points. And though all major retailers in South Africa still use this in-store advertising technique, it’s hardly surprising that retailers with access to extensive, clean data are shifting from traditional mass advertising to more targeted, data-driven strategies.
Sitting on this much data puts retailers in an immensely powerful position — one that also generates significant revenue. This is perhaps why any precision retail media businesses will also quickly point out they aren’t the only winners in this scenario.
It’s like a dating service for brands and customers
— Tanja de Korte
“With retail media, there are three key stakeholders: the retailer, the brand and the customer,” says Rainmaker MD Tanja de Korte. “The retailer gains additional high-margin income, the brands receive more targeted advertising, and the customers benefit because the ads are more relevant.”
Who gets the best slice of the pie depends on your level of scepticism — and willingness to dig into the annual reports. But it’s impossible to ignore that this trend is gaining momentum; market research firm eMarketer forecasts that omnichannel retail media adspend in the US will reach $129.9bn by 2028.
The numbers are less clear in South Africa, where the concept is still in its infancy. However, in its annual results, Shoprite lists “marketing and media”, to which Rainmaker Media contributes the lion’s share, as its fourth-largest revenue stream, with an income of R473m.
Undoubtedly, Shoprite and its shareholders stand to benefit the most. As De Korte notes, Rainmaker is essentially a business-to-business player tapping into lucrative high-margin income streams. Suppliers that can afford to participate also benefit from increased visibility and more insightful analytics on their advertising campaigns.
“Rainmaker is a media sales business, and we want to connect the right people to the right products,” says De Korte. “It’s like a dating service for brands and customers.”
Whether customers feel like they’ve met their match likely rests on how uncomfortable they feel about their myriad data points turning them into the product.
Every time shoppers swipe those Xtra Savings cards — a phenomenon which occurs 2,500 times every minute — they’re contributing a small piece to the growing retail media puzzle. But becoming the product is easier to forget, if not forgive, when it means seeing fewer irrelevant ads and receiving more personalised discounts on items we thought we were going to buy anyway.
Marketing Intelligence Hub business analyst Nilesh Hansjee calls Shoprite’s approach “a clever, almost visionary way of monetising data”.
“If you’re not developing a retail media arm, you’ll struggle,” says Hansjee. “It’s a smart way to diversify revenue streams and reduce reliance on core retailing.”
As long as consumers are aware that their data is being used, and suppliers have the resources to elevate their brands, everyone stands to gain — except, perhaps in the long term, the media formats that have long been dependent on more traditional advertising, like the very publication you’re now reading.
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