Google changes default Local Inventory Ads behavior

Introduction to the Local Inventory Ads Update

Google is rolling out a significant update to how retail advertisers manage their local product feeds within Google Ads. Starting August 31st, Google will change the default behavior for Local Inventory Ads (LIAs) in Standard Shopping campaigns. Under this new update, LIAs will be automatically enabled by default for all eligible Shopping campaigns linked to a Merchant Center account that has the Local Inventory Ads add-on active.

In addition to changing the default state of these ads, Google is retiring a long-standing legacy campaign setting and replacing it with a more streamlined inventory filtering system. This shift represents a broader effort by Google to simplify its ad platforms, remove duplicate settings, and encourage an omnichannel approach to search engine marketing. However, for search engine marketers and retail businesses that rely on precise, segmented budget controls for their online and physical store inventories, this update requires immediate attention and strategic adjustments before the August deadline.

What are Local Inventory Ads (LIAs) and Why Do They Matter?

To understand the implications of Google’s latest update, it is important to understand the role that Local Inventory Ads play in the modern retail landscape. LIAs are designed specifically for brick-and-mortar retailers who want to drive physical foot traffic to their store locations. When a nearby shopper searches for a product on Google, an LIA can display crucial real-time store information, including:

• In-store product availability (whether the item is currently in stock at the nearest store).
• The precise distance to the physical retail location.
• Store hours, address, and contact information.
• Local store pricing, which may occasionally differ from online-only pricing.
• Alternative fulfillment options, such as “Curbside pickup” or “Buy online, pick up in store” (BOPIS).

When a user clicks on a Local Inventory Ad, they are typically directed to a Google-hosted local storefront page or a local landing page on the retailer’s own website. This seamless web-to-store experience has become a cornerstone of omnichannel retail marketing, allowing businesses to capture high-intent local shoppers who want to purchase an item immediately rather than waiting for shipping.

Historically, managing these local campaigns required a deliberate opt-in process. Advertisers had to actively configure their Google Merchant Center accounts, connect their local product feeds, and manually enable local product settings within their Google Ads campaigns. By making LIAs the default experience, Google is signaling that local and online search marketing should no longer be treated as isolated channels, but rather as interconnected components of a single retail strategy.

Breaking Down the Google Ads Update: What is Changing?

The upcoming change directly impacts how Standard Shopping campaigns handle product inventory. Google is replacing legacy campaign settings with a simplified filtering mechanism. Let’s look closer at the specific technical changes occurring on August 31st.

The Removal of the Legacy “Local Products” Setting

Previously, when setting up or managing a Standard Shopping campaign, advertisers could navigate to “Other settings” and find a checkbox for “Local products.” This setting allowed advertisers to opt in or out of showing products from their local inventory feeds. If you wanted to run a purely online campaign, you simply left this box unchecked. If you wanted to include in-store products, you checked it.

Starting August 31st, Google will completely remove this “Local products” setting. Any Shopping campaign linked to a Google Merchant Center account with the Local Inventory Ads add-on enabled will automatically have local product ads turned on. Advertisers will no longer have a simple toggle switch to turn off local inventory at the campaign level.

The Shift to the New Inventory Filter System

With the legacy setting removed, Google is shifting all control over local inventory distribution to the Inventory filter settings within Google Ads. Instead of a binary on/off switch, advertisers will now manage their product feeds using a channel-based filtering system.

The updated Inventory filter allows advertisers to segment their campaigns based on the purchase channel. The two primary filter values are:

• Channel = Online: This restricts the campaign to displaying products that are sold online and shipped directly to the customer’s address.
• Channel = Local: This restricts the campaign to displaying products that are available in physical retail locations for in-store purchase or pickup.

If no inventory filter is applied, the campaign will naturally serve both online and local products, drawing from both feeds simultaneously. This change consolidates campaign management, centralizing how local inventory is filtered and removing overlapping, redundant controls in the Google Ads user interface.

Why Google is Shifting to Default Local Inventory Ads

Google’s decision to change the default behavior of Local Inventory Ads aligns with its broader product roadmap, which heavily emphasizes automation, simplified campaign structures, and omnichannel optimization. There are several underlying reasons for this strategic transition:

1. Eliminating Redundant UI Controls

Over the years, the Google Ads interface has accumulated various overlapping settings as new features were introduced on top of legacy frameworks. Having both a “Local products” toggle in campaign settings and an “Inventory filter” option in the product group settings created unnecessary complexity. By removing the legacy toggle, Google simplifies the user interface and establishes a single, clear method for managing inventory channels.

2. Promoting Omnichannel Adoption

Many retailers fail to realize the value of showcasing their physical store inventory to online searchers. By enabling Local Inventory Ads by default for eligible accounts, Google encourages more businesses to leverage their offline assets. This default-on approach helps retailers capture localized search volume they might otherwise lose to major online-only e-commerce platforms.

3. Preparing for AI-Driven Campaign Types

Google is increasingly steering advertisers toward AI-powered and automated campaign types, such as Performance Max (PMax). These automated systems perform best when they have access to a complete dataset, including both online and offline product feeds. Consolidating inventory controls under the Inventory filter makes it easier for Google’s machine learning algorithms to dynamically allocate budgets to the channel most likely to convert, whether that conversion happens online or in a physical store.

The Practical Impact on E-Commerce and Retail Advertisers

While simplifying campaign settings sounds beneficial, this update could disrupt existing campaign structures and performance metrics if not managed proactively. Advertisers who manage hybrid retail accounts must understand how this change will affect their daily operations.

1. Unintended Budget Allocation and Dilution

Many sophisticated retail advertisers maintain strict, separate budgets for their online store and their physical retail locations. This separation is often driven by different profit margins, distinct regional marketing goals, or separate corporate department budgets.

If an advertiser has an active Merchant Center account with the LIA add-on enabled, any Standard Shopping campaign that previously targeted online-only sales will suddenly begin serving local inventory ads starting August 31st. Without manual intervention, budgets intended purely for nationwide e-commerce acquisition could be partially diverted to local store visits, altering the overall cost-per-acquisition (CPA) and return on ad spend (ROAS) dynamics of the campaign.

2. Changes in Bid Strategy Performance

Smart Bidding algorithms rely on historical conversion data to predict future performance and set optimal bids. Local conversions, such as “Store Visits” or “Local Actions” (like directions and phone calls), have different conversion rates and values compared to standard online purchases.

If a campaign suddenly transitions from an online-only model to a hybrid online-and-local model, the sudden influx of local conversion data can temporarily confuse the bidding algorithm. Advertisers might see fluctuations in performance as the system adjusts to the new mix of online and offline conversion signals.

3. Reporting and Attribution Discrepancies

When online and local products are blended into a single campaign by default, analyzing channel-specific performance becomes more challenging. Marketers will need to rely more heavily on segmenting their reports by “Click type” (e.g., Local storefront clicks vs. Product landing page clicks) or “Store visits” to accurately attribute performance to the correct retail channel.

Step-by-Step Action Plan: Preparing for the August 31st Deadline

To avoid unexpected campaign behavior and budget shifts, search marketers must audit their Google Ads and Merchant Center accounts before the August 31st deadline. Here is a step-by-step guide to preparing for the transition.

Step 1: Audit Your Merchant Center and Google Ads Accounts

First, determine which of your Google Ads accounts are eligible for this change. Identify any Standard Shopping campaigns that are linked to Google Merchant Center accounts where the “Local Inventory Ads” program is active. If you have the LIA add-on enabled in Merchant Center but are not currently running local ads in some of your Shopping campaigns, those campaigns are at risk of being automatically opted in on August 31st.

Step 2: Define Your Inventory Channel Strategy

Decide how you want to structure your budgets moving forward. You have two primary structural options:

• The Blended Approach (Default): Allow online and local inventory to run within the same Shopping campaigns. This is ideal for smaller retailers or businesses with shared online and offline budgets who want Google’s algorithms to maximize overall sales across all channels.
• The Segmented Approach: Maintain distinct campaigns for online and local inventory. This is highly recommended for larger retailers, multi-location brands, or businesses with separate, rigid budgets for e-commerce and physical stores.

Step 3: Configure Your Inventory Filters

If you choose to keep your online and local strategies segmented, you must manually apply the new Inventory filters to your campaigns before August 31st. Follow these steps within Google Ads:

1. Open your Google Ads dashboard and navigate to the Campaigns tab.
2. Select the Standard Shopping campaign you wish to edit.
3. Navigate to the campaign Settings.
4. Locate the Inventory filter section.
5. Set the filter to match your desired strategy:
   • For online-only campaigns, set the filter to Channel = Online.
   • For local-only campaigns, set the filter to Channel = Local.
6. Save your changes.

By proactively applying these filters, you ensure that your campaigns will continue to target the correct inventory sources without interruption when the legacy setting is retired.

Step 4: Monitor Performance and Adjust Smart Bidding

In the weeks following the update, closely monitor your campaign metrics. Pay special attention to budget utilization, click-through rates (CTR), and conversion distribution. If you transitioned a campaign to a blended model, check if your Smart Bidding targets (such as Target ROAS) need to be adjusted to account for the inclusion of local conversion values, such as store visits.

Best Practices for Omnichannel Shopping Campaigns

As Google continues to blur the lines between online and offline commerce, adopting an omnichannel marketing mindset is essential for long-term success. Below are several best practices to optimize your Google Shopping performance under the new system.

Leverage Store Visit Conversions

If you are running campaigns with local inventory enabled, it is critical to track Store Visits within Google Ads. Store Visit conversion tracking uses anonymized data from users who have opted into location history to estimate how many ad clicks resulted in a physical visit to your retail store. Assigning a realistic monetary value to a store visit allows Google’s Smart Bidding algorithms to optimize bids based on the true omnichannel value your ads generate.

Optimize Your Local Product Feed

The success of your Local Inventory Ads depends heavily on the accuracy of your local product inventory feed. Ensure that your local feed updates frequently—ideally multiple times per day—to prevent displaying out-of-stock items to nearby shoppers. Displaying an item as “In Stock” when it is actually sold out can lead to poor customer experiences and wasted ad spend.

Utilize Local Storefront Customization

When users click on your LIAs, you can choose to direct them to a Google-hosted local storefront or a merchant-hosted local storefront (MHLS). If your website is capable of dynamically displaying local inventory and pricing based on a user’s location, implementing a merchant-hosted local storefront can provide a more branded, cohesive user experience, while also allowing you to capture valuable first-party website analytics.

Conclusion and Key Takeaways

The upcoming change to Google’s Local Inventory Ads default behavior represents another step toward automated, feed-driven search advertising. The change was first identified and shared by PPC specialist Arpan Banerjee, who posted a notification email sent to affected Google Ads manager accounts on LinkedIn.

To summarize, here are the essential points to remember as the August 31st deadline approaches:

• August 31st Deadline: Local Inventory Ads will be enabled by default in all eligible Standard Shopping campaigns linked to Merchant Center accounts with the LIA add-on active.
• Setting Removal: The legacy “Local products” checkbox under “Other settings” is being permanently retired.
• New Control Mechanism: Advertisers must now use the Inventory filter with the attributes Channel = Online or Channel = Local to segment their online and in-store inventory.
• Proactive Action Needed: To prevent unexpected budget shifts or campaign performance changes, review your Shopping campaign settings and manually apply the correct inventory filters before the transition date.

By preparing for this update ahead of schedule, retail marketers can avoid budget disruption, maintain control over their ad spend, and continue to leverage Google’s shopping ecosystem to drive both e-commerce sales and physical store visits.