Harnessing AI to Boost The Adoption of In-Store Retail Media

Retail media is one of the fastest-growing advertising channels that helps brands reach shoppers right at the point of purchase with highly relevant ads, and in turn, retailers can leverage the channel as a new revenue stream. Retailers have mastered the channel online, but extending it into their in-store experience has come with challenges. However, AI is emerging as a powerful tool to help retailers with a brick-and-mortar presence extend their retail media networks without sacrificing relevancy, reach and customer experience.

Major retailers and convenience stores like 7-Eleven are tapping into the enormous potential of physical retail media, and it’s clear that the shift is accelerating. In fact, in-store retail media is expected to grow at an accelerated rate through 2025. This shift presents an opportunity to reach customers at the crucial point of purchase (and closer to the bottom of the funnel).

With 85% of sales still occurring in physical stores, retailers must develop strategies that drive sales and engage in-store audiences effectively to remain competitive, and AI is already showing promise in these areas as well as measurement and efficiency.

Aiming AI at Retail Media Outcomes

For retail media strategies to succeed, they need to prioritize both driving sales and customer experience. Retailers exist to sell products, and retail media can boost sales by leveraging first-party data to deliver relevant content that leads shoppers toward a purchase. While online retailers have already seen the transformative power of AI, physical retailers are now eager to achieve the same success in-store.

Here are three key areas where AI is being deployed to improve customer engagement and boost sales:

1. Content Creation & Ad Placement at Scale

For retailers operating multiple locations, establishing the right retail media mix is just the first step. The real challenge is scaling it effectively across a broad network while tailoring it to the needs of shoppers. AI can streamline the process of content creation and ad placement across a retailer's network of stores.

By analyzing data in real time, AI can identify which products resonate with local shoppers and adjust ad content to match these preferences. Recent data has found that 52% of marketers predict that AI will enable highly personalized shopper experiences, demonstrating the growing impact of AI in delivering tailored content.

AI-powered algorithms also help retailers determine the most effective in-store advertising locations. These systems can then reach customers using data such as shopping behavior, time of day and inventory levels to deliver the right message at the right time for the most impact. For example, if a store experiences a spike in foot traffic due to a local sports game, AI can adjust the content in real time to promote related products or special offers, maximizing the sales opportunity. Businesses that leverage AI and machine learning (ML) to personalize ads see a 1.3 increase in incremental return on ad spend.

2. Measurement and Attribution

In-store retail media presents a unique challenge: accurately measuring and attributing the impact of ads on sales. While tracking online customer journeys from ad exposure to purchase is relatively straightforward, the measure of success for campaigns and in-store sales can be more complex. While the industry is making moves to standardize in-store retail media measurement, AI can bridge this gap by combining and analyzing data from various sources, such as point-of-sale systems, loyalty programs and in-store sensors.

Using AI, retailers can track how customers interact with in-store media and understand how these interactions influence purchasing decisions. For example, a digital display may show an ad for a specific product, and AI can help determine whether there was a corresponding increase in sales for that item within a certain timeframe.

AI also helps improve transparency in retail media measurement by detecting patterns of fraudulent activity with unmatched speed and precision. This is particularly important for in-store audio advertising, which is gaining momentum as a top-three channel for retailers. Once considered a secondary channel due to its intangible nature, audio advertising is quickly becoming a valuable investment for both online and brick-and-mortar retailers.

But one challenge with in-store audio is ensuring that ads are actually played and heard. In busy retail environments, employees may unplug legacy media players to play personal music or turn off the sound entirely. In high-traffic or noisy locations, manual adjustments to volume would be nearly impossible to manage, leading ads to be drowned out. AI can prevent this type of audio ad fraud by automatically adjusting the volume based on ambient noise levels, ensuring that the audio is clear and audible to customers. AI can also time-stamp the ads, providing additional validation and improving the accuracy of measurement.

3. Continuous Learning and Optimization of In-Store

 By leveraging AI, retailers can continuously refine their strategies to create more effective advertising campaigns in physical stores. AI-powered solutions evolve with every customer interaction, gathering data that enables them to identify patterns and preferences that inform future campaigns. For instance, AI might help retailers discover that a particular energy drink performs better when promoted in the afternoon or that certain messaging resonates more with specific demographic groups.

This process of ongoing optimization goes beyond individual campaigns. As more data is collected on purchasing behavior and in-store dwell time, retailers can gain deeper insights into customer engagement to then inform key decisions around store layout, product placement and promotional strategies.

With these data-driven insights, retailers can fine-tune their overall in-store media strategy, reallocating resources to the most successful tactics. The result is a dynamic, adaptive approach that not only enhances customer experiences but also drives sustained sales growth. A recent study by GroceryTV found that in-store retail media campaigns consistently drive double-digit sales uplift in brick-and-mortar stores.

The Future of In-Store Retail Media with AI

As the retail industry recognizes the need to activate and standardize retail media within physical stores, AI’s ability to scale content, measure results and continuously optimize strategies positions it as a major ally in the future of in-store retail. By embracing AI-driven solutions, retailers can have an edge in an increasingly competitive landscape and rediscover the power of in-store engagement for driving both customer satisfaction and revenue growth.

Retail media's expansion into physical stores marks a new chapter in the evolution of customer experience. With the help of AI, retailers have the tools to turn every in-store visit into an opportunity to deliver tailored experiences that lead to sales lifts. As the line between digital and physical continues to blur, the retailers that harness AI to combine these worlds will be at the forefront of retail innovation.

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