The butterfly effect of Boots launching its own marketing agency on other retailers

The news that Boots has launched its own marketing agency to help its suppliers broke this month. For those that work in and around the retailers this wasn’t a big surprise. Yes, there has been a shift to an in-housing of talent but also, more interestingly, a growing movement in retailers themselves becoming more like media companies.

Traditionally, retailers have exerted pressure on their suppliers to contribute to marketing budgets to help accelerate sales from the listings that have been secured. This would have meant FMCG brands contributing to the cost of in-store promotions including branded signage and gondola ends, or perhaps having to pay for sponsored emails to parts of the retailer database.

Understanding the impact of these investments was always difficult to measure because the retailer would then often charge more money for that data insight. It was always considered a bit of a black hole and an extra cost of doing business with retailers. Hopefully that lack of transparency will begin to improve with the changes we are now seeing, and there will be greater accountability and demonstration of meaningful ROI data given to suppliers.

There are a number of contributing factors that have seen the rise of retailers including Boots in the UK or Walmart in US setting up in-house agencies and offering more marketing services across their own digital and e-commerce channels.

The rise of online shopping has clearly driven a greater focus on online marketing and sales activity investment. However, the impending removal of third-party cookies will dramatically reduce the ability of supplier brands to target audiences in the same granular way as before, outside of the retailer channels.

Retailers offer brands the ability to be laser-focused on reaching audiences at the point of purchase and there is a huge value in that. This uses the first-party data of the retailers themselves and removes a high level of complexity for brands that try and do this themselves in a post-cookie world. Retailers know the value this offers and are gearing up to service brands and capture more sales and marketing investment – and probably at a premium price.

Building out an internal marketing agency at Boots to offer suppliers an integrated offering across its marketing channels makes sense for an organization of its size. Boots will no doubt have the same challenges as any other large organization trying to build an in-house marketing services team. However, at this point in time, it may well work.

Research shows that talent has been burnt out at agencies over the last 18 months and that in-house roles are more prized. A role that offers more work/life balance, job security and benefits is more tempting than ever before. Also, Boots sells a wide variety of products in interesting sectors, which will appeal to creatives and performance marketing experts.

The sales pitch deck to Boots brands will be pretty compelling and it will be interesting to see how well it integrates the online and offline offering to deliver integrated campaigns. It gives Boots an edge over its retail competitors in presenting another reason to do business with it over another retailer.

There is of course a ‘watchout’ here for brands. Relying on Boots to activate campaigns is putting a lot of trust into its hands. It’s a bit like asking it to mark its own homework from an effectiveness perspective. There is also sensitivity about how its promotes its own brands alongside the paid promotion of the supplier brands.

In summary, it’s a great opportunity for brands to better understand how their marketing investments are being spent, but it is also imperative that brands are fully part of the planning of the activity and gain the resulting data that historically has been so lacking. And like any other plan, it must be judged against wider plans for effectiveness.

Jim Hawker, co-founder at Threepipe Reply.