Dive Brief:

• Co-op advertising, also known as wholesale marketing, is budgeted funds retailers such as Macy’s, Nordstrom and Walmart spend on behalf of brands, and increasingly brands are making demands on how those dollars are spent, according to a Digiday report.
• Brick-and-mortar retailers are facing declining sales due to competition from e-commerce giant Amazon, and marketers want to make sure the money they hand over to retailers is being spent wisely. Brands are also thinking about their co-op budgets in the light of the relatively greater transparency they have when investing in product placement on Amazon. 
• Tierney Wilson, director of digital strategy for the agency January Digital, told Digiday the firm’s clients frequently ask about negotiating to ensure co-op dollars are spent on placements that have trackable results and do not compete with their own brand marketing.

Dive Insight:

The larger view of the change in co-op advertising is that this is the latest example of the long reach of digital in transforming marketing. It also reflects how the relationship between retailers and brands, never an easy one, continues to require a delicate touch. Brands need retailers to get in front of shoppers, but as in-store traffic shrinks while the need for a digital presence grows, marketers are taking a closer look at how their co-op dollars are being spent. 

Co-op advertising is a quieter area of marketing spending, although it has long been a part of the brand relationship with retailer partners, although agency and brand executives told Digiday it had previously been a “black hole.” The co-op ad market is around $25 billion in the U.S. and digital spending makes up between 30% and 50% of that amount, a major media exec anonymously told Digiday

While much of the focus on digital transformation has been on other areas of marketing over the past few years, the Digiday report suggests a bigger disruption in co-op advertising could be coming. Some of the ways the space could change include a bigger role for media teams in co-op advertising, the development of benchmarks or rules for how the money is spent and closer ties between brands' and retailers' marketing departments.