Latest / Retail Media Breakfast Club / My Notes From an Interview with Costco's RMN leader, Mark Williamson
Transcript
- Costco Interview and 3 takeaways === [00:00:00] Remember the kid at school who was super cool precisely because they just didn't give a rats while all the other kids were trying so hard to fit in. And have the latest and greatest brands to wear, making excruciating decisions over weekend plans. But the cool kid just rolled outta bed with tussled hair sauntered into class, drops their bag on the ground while everyone watches with envy. That's Costco's retail media network. Costco is by the admission of the leader of their RMN Mark Williamson, A last mover in the world of retail media. While the Amazons of the world are brazen in their pursuit of monetizing every pixel of every asset they own or can otherwise art of the deal into a partnership. Costco. Meanwhile, coolly assesses the situation from arm's length and [00:01:00] decides to sit a couple of rounds out before casually giving a secret signal, allowing its secret admirers to fawn over them too much. Well, yeah, it's Costco you always leave with more than you plan for. This Aloofness extends to Costco's interest in sharing their retail media philosophy or roadmap with the media. So I was shocked and delighted to come across an incredible interview with Mark on the Middleman podcast, which is by the way. The best kept secret in retail media podcasts right now. I especially love the pre-interview banter between the hosts and definitely recommend checking it out. I'll link up to it in the show notes, mark. Someday I hope you'll talk to me. But for now, here are my takeaways from the interview from the Middleman podcast/ Good morning and welcome to the Retail Media Breakfast Club. I'm [00:02:00] your host, Kerry Masters, and every weekday at 6:00 AM Eastern, I bring you candid and real discussions in the world of retail, media and marketplaces in just 10 minutes. So bring your own cup of coffee and we'll get smarter about retail media together. number one. Membership's first media. Second. Costco's entire approach to retail media can be summed up in one principle. Membership comes before monetization every time. Here's one thing that Mark says in the interview. We have to look at everything through the lens of our member promise and of the reputation that we have with our members. While other retailers scramble to optimize on the shiny object of retail media dollars, Costco deliberately hangs back. This restraint is strategic. We definitely view ourselves as having a last mover advantage. He says, we've been suspiciously absent from the broad retail media ecosystem for [00:03:00] several years. Instead of optimizing for advertiser performance metrics, Costco focuses on weather advertising, enhances the member experience. The advertising value proposition is remarkably simple. If we can deliver more relevant messaging to members. Wherever they're consuming content that should drive traffic, that should drive shops, that should drive top line sales. Mark says this focus creates scarcity, which paradoxically makes Costco's retail media offerings more valuable. In the crowded retail media landscape, Costco stands out by not trying so hard take away. Number two, merchants rule the kingdom. At Costco, the merchant supplier relationship remains sacrosanct. Something that differentiates them from competitors who've repositioned their retail media networks. As standalone media [00:04:00] businesses, we will always be retailers to our core, which means the merchants are still the center of our universe, regardless of the source of funding. Williamson says. This merchant centric approach forces Costco to confront a fundamental question that many retailers struggle with. As Williamson puts it, the question comes down from a fundraising perspective. As Williamson puts it, the question comes down from a fundraising perspective. Is the merchant the face of the ask, or is the retail media team the face of the ask So there's a philosophical question baked in here. By making the merchant and not the media team, the one who asks for ad dollars, that changes the nature of the ask for retail media [00:05:00] spend, and it ties it back to the same goals that drives Costco's core business. Member value and product velocity. This alignment preserves supplier trust and prevents the margin chasing silo mentality that erodes both shopper experience and long-term sales. You might recall just a couple of weeks ago, I shared a article and podcast about Walmart asking for 25% more ad spend from their suppliers. these are the kind of relational challenges that a lot of retail media networks are grappling with, with right now. So to navigate this challenge, Costco has built a growth team. Specifically designed to be the connective tissue between traditional merchant relationships and newer agency driven opportunities. On the media side, these growth managers, uh, are accountable to a VP of merchandising [00:06:00] and to all the buying teams within that vertical. So this is a very interesting. Set up that is different to what we're seeing with a lot of RMNs that are set up with their own p and l. Costco's growth team must answer to merchants about the fundamental retail impact of any campaign and. During the interview, mark makes an example of ex having, having to explain to a chief merchant what top line revenue result a ad campaign on the retail media network was able to drive all those retail media dollars coming in. need to show up for the greater good of Costco's member experience. And takeaway number three, performance over profit margins. another refreshing aspect of Costco's approach is their focus on what actually works for suppliers rather than what maximizes their own margins. Where I think retailers get sideways in this [00:07:00] conversation is if you're trying to hit a margin target, mark says that approach often leads retailers to push higher margin advertising products regardless of performance. This echoes what I've heard. Several times in the industry over the, just the last couple of months. One example is from Andreas Reiffen from the ad Tech company, Penta Leap, which is a client of mine, and he told me a couple of months ago about losing some pitches because retailers were more focused on monetizing every search term, then providing relevant results to customers. He said that initially we lost pitches because RMN said. Yeah, but my advertisers want to show ads and just because they don't rank in the organic results, it's silly not to capitalize on that and take their money, essentially. And Andreas said, we always said, that's a feature, not a bug, because you have users who want to buy stuff they're actually interested [00:08:00] in. You don't wanna show a tablet when someone searches for a laptop. If you do that, you'll kill more of your online business. But because people are living. In a retail media silo and just worried about the p and l of the retail media business, they don't care about what happens on the merchandising side. So costco takes the opposite approach here. When a supplier has budget to spend, mark and his team doesn't automatically push them towards sponsored product ads. Or offsite ads with the highest margin for Costco. Instead, they're making recommendations based on proven performance that they understand. And a lot of that comes down to in-store activations. So Mark says, if someone says, Hey, I've got a hundred thousand dollars of what should I do with it? I'm like, have you tried an end cap? Because those work pretty well. Have you tried sampling? Because that works pretty well. So in a world where many retail media networks are becoming increasingly complex and opaque, [00:09:00] Costco's straightforward approach to measurement and value stands out by focusing on what's actually driving sales rather than what drives the highest margins on the media business. They're building advertiser trusts that will serve them well as their retail media offerings mature. The Cool Kid Act is no accident. By keeping the member promise sacred, letting merchants steer the wheel, and measuring success in sales and not RMN margin. Costco has built the one retail media network advertisers want to sit with at lunch. Sometimes doing less is the ultimate flex./ That is it for today. I hope you enjoyed this episode of the Retail Media Breakfast Club. We meet here every day at 6:00 AM Eastern, so be sure to subscribe and get your daily dose of insights, trends, and hot takes in the world of retail, media and marketplaces.