Google changes default Local Inventory Ads behavior

Google is rolling out a significant update to how advertisers manage Local Inventory Ads (LIAs) within Standard Shopping campaigns. Beginning August 31, Google will automatically enable Local Inventory Ads by default for Shopping campaigns that are linked to Merchant Center accounts with the Local Inventory Ads add-on active. Along with this default enablement, Google is phasing out a legacy campaign setting and replacing it with a streamlined inventory filter.

For multi-channel retailers and search engine marketing (PPC) specialists, this update marks a major shift in how digital budgets are allocated between online storefronts and physical retail locations. Understanding the mechanics of this change, why Google is implementing it, and how to adjust campaign settings before the late August deadline is critical to preventing unintended shifts in ad spend and performance.

An Overview of the Google Ads Update

Historically, advertisers who wanted to run Local Inventory Ads had to manually opt into the feature. This was done via a dedicated check box or setting within the Google Ads interface. Starting August 31, however, Google is shifting the default behavior. If your Google Merchant Center account has the Local Inventory Ads add-on enabled, any linked Standard Shopping campaigns will automatically opt into displaying local products.

As part of this transition, Google is making structural changes to the Google Ads campaign settings architecture:

• Removal of the legacy setting: The “Local products” option, which was previously located under “Other settings” in the Shopping campaign creation and management menus, will be completely removed.
• Introduction of the unified Inventory Filter: Instead of relying on the legacy checkbox, advertisers will now manage their local and online inventory presence exclusively through the campaign-level Inventory Filter.
• Channel-based segmentation: The updated Inventory Filter allows advertisers to explicitly filter their product catalog based on the distribution channel. Users can configure campaigns using Channel = Local or Channel = Online to dictate which products are eligible to show.

Understanding Local Inventory Ads (LIAs)

To fully grasp the impact of this update, it is helpful to look at what Local Inventory Ads do and why they are a crucial tool for brick-and-mortar retailers. Local Inventory Ads allow businesses to showcase their in-store products and inventory depth to nearby searchers on Google. When a user searches for a product close to a physical store location, the ad displays key local information, such as store hours, real-time stock availability, price, and distance to the store.

When a shopper clicks on an LIA, they are directed either to a Google-hosted local storefront (a landing page managed by Google that displays store-specific product details) or directly to the merchant’s own website if the merchant has enabled the Merchant-Hosted Local Storefront (MHLSF) feature. This seamless connection between digital search and physical shopping makes LIAs one of the most effective ways to drive foot traffic, boost offline sales, and cater to the modern “near me” consumer mindset.

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 effort to simplify the Google Ads platform and remove overlapping, redundant controls. In the past, managing local product visibility required navigating multiple menus, linking Google Business Profile accounts, enabling the LIA program in Merchant Center, and checking the “Local products” box within individual campaign settings.

By consolidating these controls under the Inventory Filter, Google is streamlining the campaign setup process. This change ensures that advertisers who have taken the time to set up local product feeds in the Merchant Center do not miss out on local ad delivery due to a missed setting at the campaign level. At the same time, it reflects Google’s continued push towards unified, omnichannel marketing strategies, where online and offline inventory are treated as part of a single, continuous retail ecosystem.

The Mechanics of the New Inventory Filter

The core of this update lies in the transition to the Inventory Filter. Rather than toggling local products on or off globally for a campaign, advertisers will now use precise filtering rules to determine which inventory is eligible for a specific Standard Shopping campaign.

The Inventory Filter operates based on product feed attributes. Following the update, the most important attribute for separating local and online efforts will be the “Channel” field. Advertisers can set the filter using the following parameters:

• Channel = Online: This configuration limits the campaign strictly to products that are available for purchase online and shipped directly to the customer. It excludes local in-store inventory.
• Channel = Local: This configuration restricts the campaign solely to products that are available physically in local retail stores. It is ideal for dedicated drive-to-store campaigns with localized budgets.
• No Filter (or Both Selected): If no channel filter is applied, the campaign will default to serving both online and local inventory, leveraging Google’s delivery algorithms to determine which format is most appropriate for the searcher’s intent and physical location.

How This Change Affects E-commerce and Retail Advertisers

While simplifying settings sounds beneficial, the shift to a default-on model introduces immediate challenges for PPC managers and retail media planners who rely on tight control over their digital marketing budgets.

1. Unexpected Budget Allocation

Many retailers manage online marketing and physical store promotions under separate budgets and distinct key performance indicators (KPIs). For instance, an e-commerce division might demand a strict 400% Return on Ad Spend (ROAS) for online purchases, while the retail store marketing team might operate on a cost-per-visit or offline revenue lift metric. If a Standard Shopping campaign suddenly begins serving Local Inventory Ads by default on August 31, online e-commerce budgets could inadvertently be diverted to driving physical store visits, disrupting performance metrics and budget reporting.

2. Bidding Strategy Discrepancies

Google Ads Smart Bidding behaves differently when local conversion actions are included. If a campaign suddenly incorporates local inventory, Smart Bidding algorithms will begin optimizing for both online sales and local actions (such as driving directions clicks or store visits). While this can maximize overall omnichannel value, it can also lead to a perceived drop in online conversion rates and online ROAS, even if offline sales are rising. Advertisers must be prepared to adjust their target ROAS or target CPA values if they choose to leave both channels active in a single campaign.

3. Inventory Feed Accuracy Risks

Local Inventory Ads rely on highly accurate, frequently updated local product inventory feeds. Unlike online feeds, which may only need to update daily, local store inventory feeds often require multiple updates throughout the day to ensure shoppers do not arrive at a store only to find an item is out of stock. If a campaign begins showing local products by default using an outdated or poorly maintained local feed, it could lead to poor user experiences and wasted ad spend on out-of-stock items.

Actionable Steps: Preparing for the August 31 Deadline

To avoid sudden disruptions in campaign performance and reporting when the change takes effect, advertisers should conduct a thorough audit of their Google Ads and Merchant Center accounts. Here is a step-by-step checklist to ensure a seamless transition:

Step 1: Audit Merchant Center Add-Ons

Review your Google Merchant Center accounts to confirm which ones have the Local Inventory Ads program enabled. If you have the add-on enabled but are not actively supporting or updating local inventory feeds, consider whether the program should remain active. If it is active, every linked Standard Shopping campaign will be affected by the August 31 update.

Step 2: Identify Affected Standard Shopping Campaigns

Compile a list of all active Standard Shopping campaigns. Identify which campaigns are designed strictly for e-commerce (online sales) and which ones are intended to drive local physical store sales. If you currently rely on the “Local products” checkbox under “Other settings” to keep these efforts separate, these campaigns require immediate attention.

Step 3: Apply the Channel Filter to E-commerce Campaigns

For campaigns that must remain purely focused on online sales, navigate to the campaign settings and locate the Inventory Filter. Update the filter settings to explicitly state Channel = Online. This proactive step ensures that even after the legacy setting is removed on August 31, the campaign will not begin serving local inventory ads or shifting budget toward offline store visits.

Step 4: Update Dedicated Local Campaigns

For campaigns dedicated to driving physical store foot traffic, update the Inventory Filter to Channel = Local. This isolates the campaign to in-store products and allows you to set specific local bids, local bid adjustments, and budget allocations tailored to physical retail goals.

Step 5: Review Smart Bidding and Conversion Goals

If you choose to run hybrid campaigns that serve both online and local inventory, review your account’s conversion settings. Ensure that “Store Visits” or other local conversion actions are valued correctly relative to online purchases. This allows Google’s Smart Bidding algorithms to accurately weigh the value of an online conversion versus a physical store visit when optimizing bids.

Strategic Best Practices for Omnichannel Campaigns

Once the technical adjustments are complete, advertisers can leverage this update to refine their overarching omnichannel strategy. Consolidating local and online management under the Inventory Filter provides a cleaner framework for sophisticated campaign structures.

The Co-located Campaign Model

For brands with highly integrated digital and physical operations, running a single campaign that dynamically serves both online and local inventory can be highly efficient. Google’s machine learning can analyze real-time signals—such as searcher distance from a store, device type, time of day, and local store operating hours—to serve the most relevant ad format. If a user is searching from their mobile device just two blocks from a store during business hours, the system will prioritize a Local Inventory Ad. If they are searching from a desktop at home late at night, it will display a traditional online Shopping ad.

The Segmented Campaign Model

For retailers with distinct digital and retail division budgets, the segmented campaign model remains the gold standard. By setting up two identical Standard Shopping campaigns—one filtered to Channel = Online and the other filtered to Channel = Local—you retain absolute control over budget allocation. This allows you to scale up local budgets during high-foot-traffic seasons (such as the holidays or back-to-school periods) without impacting your steady-state online e-commerce campaigns.

Industry Insights and Discovery

The upcoming change to Google Ads’ Local Inventory Ads management was first brought to light by pay-per-click (PPC) specialist and digital marketing consultant Arpan Banerjee. Banerjee shared a notification email sent by Google to affected Ads manager accounts on LinkedIn, alerting the digital marketing community to the impending August 31 deadline and the structural changes to campaign settings.

This early warning has given search marketers and retail advertisers the runway needed to audit their accounts, consult with clients, and implement the necessary inventory filters before Google automatically transitions eligible campaigns to the new behavior.

Conclusion

Google’s transition to making Local Inventory Ads the default selection for eligible Standard Shopping campaigns is a clear sign of the company’s commitment to simplifying ad management and pushing for a more integrated retail ecosystem. By replacing the legacy “Local products” setting with the unified Inventory Filter, Google is centralizing catalog management and making it easier for brands to reach local shoppers.

However, automation and simplified settings should not be equated with a “hands-off” management style. Advertisers who rely on distinct budgets and precise targeting parameters must take action before the August 31 deadline. By proactively auditing campaigns, updating the Inventory Filter to isolate local and online channels, and aligning bidding strategies with true business objectives, retail marketers can turn this platform update into an opportunity for improved campaign structure, cleaner reporting, and greater omnichannel success.