Grocery Retailers Amp Up Paid Search Spend

Competitors jockey for online advantage

Author: Andria Cheng

June 23, 2017

The low-margin grocery sector has become a high-stakes battleground with a variety of new and existing players competing for share. 


Headlines like the entry of European giant Lidl into the US market, and Amazon's purchase of Whole Foods Market, underscore the shifting dynamic of the sector, but the pace of change is evident in other ways, too.  The latest sign: spending on paid search has exploded.

In the 12 months through May 2017, 1,741 advertisers spent $4.5 million sponsoring any of 124 non-branded grocery keywords such as “grocery delivery service,” “online grocery shopping,” “grocery store” and “supermarket” on desktop search on Google, according to AdGooroo, a paid search data provider to ad agencies and advertisers. That’s a surge of 245% from a year earlier, signaling sharply increased interest in winning over online grocery shoppers.

“This is unusual,” said AdGooroo President Eric Marcy in an interview. Looking across all sectors, he said, paid ad search on Google usually only sees “steady double-digit growth year over year” and in the “low-teens” percentage increase globally. With increased online grocery orders, delivery and click-and-collect services, “the grocery economy is shifting. You are going to see continued increase in grocery with paid search.”

Even before Amazon shocked the grocery industry with its agreement to acquire Whole Foods for $13.7 billion, it was already amping up its paid search spending in the grocery category, nearly doubling its grocery related Google paid ad search to $133,000 in the year through May, the AdGooroo data showed. That made Amazon the eighth-largest spender on the list.

Grocery and fresh goods are increasingly an area where retailers like Walmart are cutting prices or making “price investments” to drive traffic to stores. With the growth of online grocery orders, retailers also hope to use their physical stores as a competitive edge for time-crunched customers to collect their web orders either curbside or in stores. In fact, Whole Foods’s more than 460-store footprint is widely considered to be a key reason behind Amazon’s purchase: The stores could become a distribution network, giving customers a place to pick up their orders or helping Amazon deliver fresh groceries, cutting last-mile delivery costs.

Walmart, which counts on the grocery category for more than half of its Walmart US sales, is staking its leadership claim on the ad front. Walmart.com increased its Google desktop text paid ad spending on the keyword group more than 10x to $858,000, making it the top spender, up from just $51,000 in the year-earlier period, the AdGooroo study showed. German discount grocer Aldi, which recently announced plans to expand its US footprint to 2,500 stores by 2022 from 1,600, became the second-largest spender, also increasing its Google paid search ad on desktop more than 10x to total $441,000 in the year through May.

Also among top 10 are brick-and-mortar retailers Safeway and Kroger as well as online bulk goods seller Boxed.com and grocery delivery service Shipt.com.

While Jet.com wasn't among the top 10 paid-search grocery advertisers, the Walmart unit significantly increased its spending: it invested $82,000 in the keyword group search in the studied period, up from just $3,000 in the prior-year period, AdGooroo data showed.

The study also suggested that Walmart.com’s spending is paying off in terms of clicks: it led all advertisers, garnering a 19.1% share of total clicks on the keyword group. Aldi had an 11.6% share, followed by a 7.6% share at Kroger. Meanwhile, Amazon ranked in 9th place with a 2.8% click share. And Whole Foods, struggling to reverse a string of comparable sales declines, ranked 18th in paid search ad spending. In fact, its spending level declined, contrary to the overall industry surge.  In terms of click share, Whole Foods trails behind at only 1.2%.

But as a part of Amazon, that seems likely to change.

“You are going to see Amazon (with Whole Foods) climb the ladder,” AdGooroo's Marcy predicted.