Affirm's in-store Apple Pay play, Kroger's coupon revival, and WTF is a retail media network

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0:55Hello everyone and welcome to the Modern Retail Podcast, the show where we break down how the retail industry is shifting and modernizing. I'm senior reporter Melissa Daniels here today with our executive editor, Ana Hensel. Ana, how are you today? I'm good. It's been a minute since I've been on the podcast, so it is good to be back. Ana is here with us today filling in for Gabby, who is out of office this week. And then later in the episode, Ana will be joined by special guest Digiday's Kimiko McCoy. They have a great featured segment for us breaking down the ins and outs of retail media networks.

1:31If you don't know what those are yet, we got you covered. And we're going to get into why every retailer seems to be launching one, what's working for advertisers, really interesting stuff. But first, we are going to hit some of the week's industry news. We're going to talk about how Affirm is rolling out its buy now, pay later option for in-store via Apple Pay. And believe it or not, paper coupons are making a comeback with some Kroger stores reintroducing them. All right, let's get into it. So it was some big news in the fintech and buy now, pay later space this week. A firm which has already partnered with Apple Pay for online purchases is now going to be available for in-store transactions.

2:11That means that people who use Apple Pay to check out in-store will have an option to split up their purchase in a buy now, pay later plan with a firm. That's pretty big news. I mean, Apple Pay is accepted by more than 85 % of retailers in the U.S. and over 80 % of retail spend still happens in stores. So if I'm a firm, this is a big opportunity to get inside digital wallets that people are bringing to stores. I mean, I've been tracking the buy now, pay later space for a while too. And I do think the in-store opportunity is really the most interesting. In the early days, let's say, I remember covering a firm back in 2019.

2:53And the focus back then was really just on adding e-commerce merchants in as many verticals as you could. So travel, beauty, home goods. But in-store is really the big piece of the pie here because like you mentioned with those stats, that is where most transactions still happen in stores. So it was really interesting. Yeah. During one of a firm's last earnings calls, CEO Max Lovechin was really talking about the in-store opportunity there. And there was this quote you found, Melissa, that I thought was really interesting where he said, we are a component of someone else's wallet. Basically, in this case, you know, a firm is showing up in Apple Pay for people who already have both a firm and Apple Pay.

3:42And so it presents a really interesting challenge for a firm, I think. In-store is the big opportunity, but also oftentimes to get there, it means showing up in someone else's wallet. Yeah, exactly. It's an interesting needle to thread. You know, online, they've been able to do that with ShopPay. I think that powers a lot of business for them. They don't actually splice out how much business they do with which wallet partner, which would be very interesting to get our hands on, but not something that they share. You know, they also have some automatic payment options that you can do with Chrome.

4:16They're kind of interfaced there. I'm not a Chrome user, so I can't speak to that one. But yeah, they're already doing so well online that I almost feel like this moment makes sense because they have the kind of trust and loyalty from a firm consumers who are used to using them online that pivoting to using it when you're in store via your Apple Pay digital wallet might feel more natural than say it would have three years ago when these things were still a little more nascent. Yeah, I think that's a great point. But it also, I feel like to get consumers to do anything or to really make something a part of their natural routine, you really have to bombard them with branding and messaging.

5:03So actually, during the Affirm's fourth quarter earnings call in August, again, Max Levchin was talking about the in-store opportunity, and he was talking about, you know, we really see a powerful lift when there's all of this like branding that, hey, a firm is now in stores and they see a big lift if say, a retailer does a campaign promoting the fact that a firm is in store. And so it'll be interesting because, you know, with Apple Pay, it's a payment method that all these other retailers are already accepting, right? And so how will they layer that on? Will they be promoting Affirm and Apple Pay in concert with each other?

5:48And I also just think that what's interesting with, again, with payments is there are so many different payment options out there. So it's like, how do you promote all of these things? And as Affirm, how do you get your partners to promote you? Yeah. Yeah. No, it's almost like a payments promotion turducken because you have your retailer promoting the deal on Apple Pay, on Affirm. We'll see if they go that far. I also want to note, I thought this was funny, that we're calling it in-store retail or in-person shopping or brick and mortar, but Max Levchin calls it offline commerce. I thought that was a really great term.

6:27I might start integrating into my daily life. Yeah, I mean, it is. Yeah, it's there's so many terms for whatever you want to call this opportunity. Offline commerce. Yeah, I guess it is. It's the original commerce, but now it is also offline commerce. Yeah, but he said that in the context of something that I really like to geek out on. And this is that the big inhibitor to some of these things coming together is still the technology itself. And one of the reasons that we haven't seen buy now, pay later companies really break through in quote unquote offline commerce yet is because offering the plans at the same terminal that also takes debit cards, also takes NFC or also has to take this kind of card, also tap to pay, also slide.

7:13It's kind of like too much. And, you know, technology is not invented or rolled out or adopted overnight by retailers for their checkout counter. They just don't update that quickly. So getting the adoption, you know, in sync with the payment methods that retailers are prepared to accept has sort of been the disconnect. And that's where I think the Apple Pay introduction or, you know, a firm being introduced on Apple Pay for in-store usage is kind of a bigger deal because that is a little more mainstream now. We were talking offline about how even just when you forget your wallet or forget your debit card, Apple Pay is right there.

7:53So that's a great time to use it. And there are other folks who just use it as their default. It just depends on where you shop. Yeah, absolutely. And the other thing that I find really fascinating about the buy now, pay later space is kind of all of these mini battles going on between the different players about trying to get one retailer to make them their exclusive buy now, pay later partner. So that's the other really interesting challenge that a firm is faced with here as they try to move in stores more. So one big piece of news from earlier this year was that Walmart actually was going to switch from Affirm to Klarna.

8:34And so getting Apple Pay is only one piece of the pie. Of course, a company like Affirm also still has to be striking deals with all these other retailers, again, also because Affirm wants these retailers heavily promoting them in stores. But what else are you watching in the buy now, pay later space right now, Melissa? Well, definitely the in-source stuff is interesting to me, but I just think holiday overall, I'm really curious to see what happens. Yeah, I mean, there was just a blockbuster Cyber Monday for these services last year. Adobe Analytics reported that BNPL drove$991.2 million in spending just on one day.

9:18And that was up 5.5 % year over year. so that's crazy yeah and I feel like that's only going to be more pronounced this year when we're in this moment where people are super budget conscious and super value driven you know I just buy now pay later something today breaking news and I did not use a firm I used a competitor but I'm very excited about it and it just made something that I was buying that much easier I don't know if I would have done that this time last year. So it just, you know, kind of depends. Yeah, but I do think just given all the macro uncertainty, I do feel like it is going to be a buy now, pay later holiday this year.

10:05BNPL Monday versus Cyber Monday. Yeah. Although I also saw it referred to already as Cyborg Monday because of all the AI bots that will be recommending products your way. I don't know about that. I veto that term. I was waiting for your eye roll. I know. I'm like, I can't wait for honest reaction. No more new jargon. There is so much to watch in this space. I'm looking forward to covering it. It's definitely one of my favorite Q4 topics and interesting to watch, too, what it does for impulse buying. But moving on to one of our other big industry news topics this week, we're going to talk about the resurgence of paper coupons.

10:43Kroger's interim CEO, Ron Sargent, said during the company's second quarter earnings call recently that it's begun reintroducing paper coupons. I think this is interesting. Ana, tell me what you learned about this topic. Yeah, well, I've been tracking a few things related to paper coupons here and there, but kind of the interesting news this week was that Kroger, which is a very big retailer, specifically said that they were reintroducing paper coupons as a way to appeal to this really value-focused consumer segment. So one quote from Ron Sargent during this earnings call, he said, we're really trying to appeal to a broader customer segment, not only people that are very digitally savvy, but also people who are not or not able to be.

11:33And then this also, you know, he name-checked these in the same breath with some of these other efforts that Kroger is doing to focus more on price perception. So the company said it has lowered prices on more than 3 ,500 items since the beginning of the year. And again, Sargent said related to these two changes that our customers are recognizing these changes and they are giving us credit for them without really sharing many specifics. Kroger's same store sales were up in the most recent quarter, so that helps. And the company also said families are looking for, quote, quality and value right now.

12:11Both big buzzwords right now that we have probably said on this podcast many times. And Kroger also said that its private label products had another strong quarter. Yeah, so this was, it was really interesting to read that. And then just also got me thinking about kind of my own history with paper coupons and when I've noticed them. Yeah, when was the last time you used a paper coupon? Um, well, I will say that, uh, it's been a while, probably years. Um, and it's because, you know, I will get these paper coupons. I like many people, I'm trying to save money right now. And so if I shop at a mass retailer, oftentimes you'll get a paper coupon after purchase.

12:54It's like, if you spend this much within this period of time, you know, you get this much off, but the deals never really make sense for me. Like, it doesn't make sense for me to stock up on something in the next week to save five bucks. So I definitely look at them, but I never use them. And that speaks to a disconnect there. But I do think there's an opportunity in paper coupons. Yeah. You know who's really good at this is P &G. They have a pretty good direct mail couponing arm. and every quarter or something, I get a big bundle of coupons from them. When I shopped in store for those kinds of products, I did use them, but now I buy everything online from my home.

13:36So I've changed my shopping habits, but that was pretty effective. I also used to get some coupons from Baby Formula back when we were in that stage of parenting, but it was really annoying. I'm not gonna name check the company, but they sent paper coupons that were used like a check. So when I would go to the cashier, they wouldn't always know how to process them and it would turn into this kind of thing. So, but the deals were really good. It was like$10 off, which for a can of$30 formulas makes a big difference, but they were kind of a hassle to use. What I like now, and we've written on Modern Retail about how startups and smaller DTC companies or smaller wholesale brands that are trying to make a name for themselves in retail are doing some innovative things around couponing.

14:25But I kind of like the Venmo or Cash App strategy where brands will say, hey, send us your receipt and we'll Venmo you for this can of energy drink or whatever it is. That I think is the modern couponing from my perspective. Oh, interesting. Just pay me back. Yeah, I know that a lot of that is done through startups that are trying to prove that they can drive volume in retail. I don't know if a P &G is doing that, but that's really interesting. Yeah, it's definitely more of a DTC startup thing. And you can advertise it. I mean, you can put that deal into your target it when you're launching in at the Whole Foods down in Palm Desert or wherever.

15:07Yeah, absolutely. But I think this all just speaks to how noisy digital is right now. And I know for me, it's very hard when you're getting inundated with constant emails, text messages, Instagram ads about sales and price changes to know what's actually a good deal. And that's where I do think there can be promise in paper coupons. It's straightforward. It's easy to spot. Yeah. So I edited this story about a month ago from one of our reporters, Julia Waldo, who interviewed startups that were finding success acquiring new customers through paper coupons. So she interviewed this one startup that sells menstrual cups and discs.

15:49They recently gave away paper coupons that promoted a buy one, get one free offer to promote its Whole Foods availability. And the company had just launched in Whole Foods in March. So they definitely wanted to drive some volume there. The success of this promotion varied depending on the location, but the company said it saw a 20 % month-over-month sales lift at one Whole Foods location and a 36 % lift at another location. And yeah, there was just this really interesting quote in the story. Again, all the founders of these DTC startups, they're so used to open rates and click-through rates and all of these metrics of digital.

16:31And when talking about the appeal of paper coupons, this founder said, even if shoppers throw your coupon in the bin, your open rate is 100%. You know they saw it. It wasn't enough to get them to take action, but they saw it. And I think that's really interesting to note. Right. Yeah. It counts for something. You launched your brand in their brain for a millisecond, right? Let's track it. Yeah. I think this is just an interesting space to watch when people are so price conscious right now. And I think it's going to continue to evolve. One Gartner survey found that 33 % of consumers reported using coupons last year just due to the increased cost of living.

17:11Everyone's looking to save money. But on the flip side of that, we're also seeing fewer people do extreme couponing. You remember that? It's such an odds-coded thing. Yeah, it was really funny. There was an interesting Wall Street Journal article that was published in the summer. And they actually interviewed someone who was featured on one of those shows who was like, I don't do extreme couponing anymore because it's not worth it. The story cited data from RRD, which is a printing services company that estimated that the number of coupons marketers distributed last year was$50 billion. But that's down pretty significantly.

17:50It used to be like$330 billion in the 2010s, roughly. It's interesting. There's a few different factors at play here. I do think that there is something about paper. It stands out in this digital, noisy landscape. But if the offers are too complex or it's too much for people to sift through, they're not going to redeem them. So it's an interesting opportunity here. I do think there's room for companies like Kroger to find success with paper coupons if you make them straightforward and appealing, of course. Yeah, absolutely. I think those are all really sharp insights. And, you know, it's really interesting to think about just how much paper coupons have fallen out of favor.

18:33And, you know, also thinking about the parallel rise of coupon stacking online, right, and the way that people sort of stack their loyalty with their credit card points, with their Rakutan or their Fetch or whatever it is. You know, there's all these different ways you can sort of rack up savings through different programs online that are sort of the online commerce response to paper couponing. But like most strategies, it's going to depend on your brand. It's going to depend on your customer. It's going to depend on your retailer. None of this is one size fits all. Yeah, absolutely. All righties.

19:07Well, next up, we have our featured segment. Really excited to listen into this one. Ana, tell me what you and Kimiko discussed about retail media networks. Yeah. Well, so we at Digiday Media had an event a few weeks ago focused on retail media. Um, and in this segment, we kind of just look at like, what is this opportunity? Why is it a big thing in retail right now? Um, if you are listening to this podcast, you probably know what retail media is if you work in the industry, but if not, we're going to break it down for you. Basically, retailers want to sell you ads now in addition to products.

19:48Yes, it is a crazy world out there. I'm constantly asking people, how is this different than a banner ad? weren't we already doing this 15 years ago? But turns out it's actually really different. So let's get into it and stay tuned for more after the break.

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21:20Hello, this is Anna Hensel. I'm the executive editor at Modern Retail. And this week, we are going to be diving into all things retail media. If you're listening to this podcast, there's a good chance you know what retail media is. But if not, we are going to give you a nice thorough explainer on this hot topic. Retailers are desperate for another line of revenue. So what they're doing, they're selling ads in addition to physical products. So for this deep dive into retail media with me, I have Digiday's senior marketing reporter, Kimiko McCoy, who is going to be talking about this from the agency side.

22:01Kimiko, welcome. Thank you so much, Anna, for having me on the podcast. I'm super excited for this. I guess you can call it a brand collab. Yes, a collab, a crossover, whatever you want to call it. It's going to be great. So, Kimiko, you cover marketing at Digiday, but do you want to give the listeners a little bit more about your background and what kind of topics you cover related to retail media? Yeah, absolutely. So if this is your first time listening, I'm Kimiko, senior marketing reporter at Digiday, as was stated. I cover basically, I don't even know how to describe my beats. So much of it is just based on like how marketers are spending their ad dollars, a la retail media networks.

22:37So I cover a lot of how that spend is happening, how it's shifting. And it's crazy how much it touches the cross-intersection between retail media and things like influencers and CTV and search and display and whatnot, which we'll get into those things during this podcast episode. But it's a really, really interesting beat. And I am excited to be here to talk about it. What you said earlier is a great point about this is crossing over into a bunch of areas. And now it's just kind of marketing. But we'll get into that. And I'm curious to back up a little bit. But when was the first time you like heard of retail media or when do you feel like this started to become a thing?

23:15I think I've been covering this space for like maybe last year and a half now. And I saw Walmart made an announcement about Walmart Connect being launched. Right. And then like there was a slew. It seemed like an onslaught. I don't know if you remember where there was like just back to back to back where you had like Chase Bank and Marriott and a handful of others all releasing some experience, all releasing some form of a media network, whether it was a travel media network or a commerce radio network or a retail media network. Yeah. And I just kind of got in the throes of it. My biggest memory is like Home Depot actually sent me a pitch.

23:55They were like, we're having an upfront for our retail media network. We'd love for you to come. And I was like, what's happening here? Yeah. And so that was kind of my first experience with it. And I think that's, you know, when I started taking it seriously as a beat. And at the same time, I think you had some media buyers and marketers and agency executives that were also starting to think of it the same way. So it was really interesting. What about you? Yeah, so I was thinking about this earlier. And so I've been covering retail for about six years now. And what I remember is covering advertising announcements from some of the big retailers in 2019.

24:28So Walmart, Kroger were really investing in this. I remember that was, I believe that was the year that Target rebranded to Roundel. And so what I saw in 2019 is a few of the big players really focusing on this, not as much some of the smaller or more specialty retailers. Now it feels like everybody has a retail media network, which we'll get into. And I feel like that really started to happen post-COVID, also because you saw an explosion in e-commerce sales. So now some of these retailers had bigger digital businesses where maybe it made more sense to invest in retail media. Yeah, I think absolutely.

25:11And to your point about the commerce business, I think that's like you were saying about some of the more specialty and niche ones like Sephora and things like that kind of Macy's coming into this space as those businesses built out. It'll be interesting to see how it goes as people continue to venture back outside and want to get their hands on things in real life. But, you know, money, money, money. Yeah. Extra revenue. Yeah, absolutely. So like we mentioned, this has kind of happened alongside the explosion in e-commerce sales. But also why all these retailers are really getting into it is because of Amazon, which is what the answer is for a lot of things.

25:48Amazon, of course, has made a lot of money off of selling ads in addition to buying pretty much anything you want off of Amazon. And so what all these retailers are, kind of why we are seeing so many retailers get into this space is because if Amazon can do it, why can't I? So some numbers I pulled just to give a sense of how big this space is. So Amazon's ad business is actually projected to hit$60 billion in revenue in 2025. And then as another point of comparison, Walmart's advertising business hit$4.4 billion in revenue in 2024. So that kind of gives you a sense of the scale. Amazon is the big player here.

26:35They're projected to do around$60 billion in revenue in advertising in 2025. Walmart, still very big, but decently smaller than Amazon. But that's actually been a big sea change for Walmart because back in 2018, their current CEO, Doug McMillan, said, our advertising business is tiny. Basically, we haven't focused on it as much as they should. And so that's when Walmart really set out on this journey to become an advertising business in addition to a retailer. This is kind of in line with how big e-commerce is relative to these respective retailers. So Amazon is the big e-commerce retailer in the U.S.