Confidential submissions to the supermarkets inquiry being conducted by competition watchdog the ACCC have raised concerns about pressure on suppliers to advertise.
The interim report of the inquiry quoted suppliers as saying they felt they had to spend money advertising on the retail media platforms of Coles and Woolworths, Cartology and Coles 360.
Those two, along with Chemist Warehouse, are the biggest players in retail media in Australia. Morgan Stanley forecasts retail media spending in Australia on in-house/owned ad platforms to grow to $2.8 billion in 2027 from around $1 billion in 2022.
Both Coles and Woolworths are in the Federal Court accused by the ACCC of misleading consumers through discount pricing advertising on hundreds of supermarket products, relating to marketing campaigns Prices Dropped and Down Down.
The ACCC's interim report said suppliers raised concerns that due to Coles and Woolworths buyer power, suppliers feel obliged to acquire ancillary services such as retail media and data analytics to preserve their commercial relationship.
“Many participants explained that they are required to fund some supermarket promotions, advertising and online marketing,” the ACCC reported after holding roundtables with suppliers," the ACCC said.
“One participant also raised that suppliers are being asked to cover a new charge for advertising through retail media. This includes physical and digital advertising in store, in shopping centres and online.”
Coles 360 advertising services includes social media, Flybuys member advertising and Coles magazines, but also in-shop promotional materials such as on digital screens, in-store sampling, digital search and homepage as well as Coles radio.
Cartology offers similar services to suppliers to advertise through its retail media services.
Both Coles and Woolworths have made recent investments to expand data processing and analytics capabilities.
“One confidential submission noted that supermarkets’ multiple roles of providing data analysis, determining prices and other services such as freight and media while also being the main buyer of products raises competitive risks and conflict of interest concerns,” the ACCC report said.
Supplier stakeholder groups submit that supermarkets have significant market insights and access to data, the ACCC said.
“This places them in a favourable negotiation position while suppliers, who only have data on their own farm or sales, are at a commercial disadvantage,” the report said.
Some suppliers reported feeling obliged to take up offers to use the supermarkets’ in-house media services. This is in addition to rebates or the supplier receiving a lower wholesale price from the supermarket during a promotional period because the retail price has been reduced.
Suppliers of homogenous products, such as some fresh produce categories, expressed concern about a lack of transparency regarding the funding they contribute to these marketing campaigns.
They report being asked to make a contribution to total spend on the campaign but they have no awareness of whether their required contribution is proportional to that of other suppliers of the same product.
These suppliers also report to not have any awareness of how the funds are spent, beyond seeing the final results.
Several submissions to the ACCC raised concerns about supermarkets’ use of consumer data for targeted advertising.
However, the ACCC has not yet formed a view as to whether the data collection practices of any supermarkets raise concerns.
Supermarkets can enrich consumer data from loyalty programs or other internal sources by linking it with data from external sources, such as data obtained through data brokers or data-sharing platforms.
Data enrichment may facilitate deeper insights about consumers which in turn enable targeted advertising and personalised marketing, or improve retailer offerings.
Retailers may also share insights derived from the data with other partners or third parties.
CHOICE, in its submission to the ACCC, said supermarkets had invested heavily in data-driven technology to protect and grow their revenue and market share.
And that “due to the size and significance of supermarkets, they have a considerable reach and impact”.
CHOICE told the ACCC “loyalty schemes provide highly valuable first-party consumer data’ which, when aggregated, “can be analysed to understand patterns of purchasing across time and space, the effect of prices on costs and profits, local market positions, efficient warehousing and logistics and opportunities for growth”.
CHOICE, citing research, said almost three-quarters of Australians described targeted advertising as intrusive.
And fewer than a tenth felt comfortable with being targeted with advertising without prior permission.
CHOICE said targeted advertising “‘can manipulate consumer choice and can even recommend unhelpful or harmful products”.
A study by the Consumer Policy Research Centre found that 46% of Australians are not comfortable with companies targeting advertising to them based on their online behaviour.
Another 13% were comfortable only if they had opted into such advertising.
Almost half (49%) of Australians were not comfortable with companies targeting them based on their personal characteristics (such as gender, age, income or location), and a further 29% were comfortable only if they had opted in.
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