Costco Is Testing Using Its Member Data for Targeted Ads

Costco is entering the ad network market using its extensive loyalty membership data, targeting the shopping habits and past purchases of its 74.5 million household members.

To bring this plan to fruition, the retail giant is conducting beta tests using its audience data to target users on other websites, with plans to extend this to its own site.

This will enable brands to direct ads to specific customer segments, such as parents buying baby products and people looking to purchase exercise equipment.

Costco's membership model, requiring a card for both in-store and online shopping, allows it to link individual purchases to specific households, helping advertisers better understand customer behavior and ad effectiveness.

 

 

 

 

 

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While the company's plans remain in the testing phase, it continues to scout for potential ad-tech vendors to whom it plans to provide its trove of data. 

"Not only will we help you reach a Costco member, we will help you reach the right members in the right context based on past behavior," Mark Williamson, Costco’s AVP of retail media to Marketing Brew, told Marketing Brew.

Better Late Than Never

Costco is a bit late leveraging its data to take advantage of the digital media industry, which is forecasted to reach $166 billion by 2025. 

Other retail giants, including Target, Walmart, Sam’s Club, Best Buy, and Kroger, have already capitalized on customer shopping data to build their own ad networks.

Additionally, even non-retail corporations such as Uber, Marriott, and Chase have entered the retail media space.

While Costco has been slower to adopt the trend, it sees significant potential.

Back in 2021, Walmart partnered with The Trade Desk to expand its advertising ambitions, generating $3.4 billion in revenue last year from its global advertising business.

Last April, Walmart also announced its strategic expansion in retail advertising.

Similarly, Target’s retail media network, Roundel, contributed over $1.5 billion in value for the company.

Williamson also acknowledged Costco’s delayed entry into retail media.

"It’s not incorrect to characterize Costco as behind the rest of the industry in retail media," he shared.

However, the AVP also noted that the leadership team recognized retail media’s potential to drive value for members, prompting them to finally get involved.

Costco's Advertising Plan

Currently, Costco’s advertising efforts are modest, with revenue generated from its Costco Connection magazine and basic on-site ads managed by ad-tech company Criteo.

This led Williamson to believe there is significant room for growth, suggesting the company could potentially quadruple its media revenue "just by operating differently, by unlocking the power of the data that we have."

Despite not disclosing specific revenue expectations, Williamson emphasized the opportunity, highlighting BMO Capital Markets’ estimate of Costco’s digital advertising revenue at about $225 million last year.

While Costco has not yet started pitching this offering to media agencies, Williamson reported high interest from suppliers, brands, and agencies eager to engage with Costco’s new ad network.

"I’ve never had as much incoming demand from suppliers, brands, and agencies who have just been champing at the bit and have been so curious, like, ‘What’s taking Costco so long?'" he concluded.

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Editing by Katherine 'Makkie' Maclang