Retail Media Advertising: Why Most Brands Are Playing It Wrong

Retail media advertising is the practice of buying ad placements within a retailer’s owned properties, whether that’s sponsored listings on Amazon, display ads on a grocery chain’s app, or promoted slots across a retailer’s digital ecosystem. Done well, it puts your brand in front of shoppers at the moment they are actively looking to buy. Done poorly, it becomes a very expensive way to compete for demand that was already heading your way.

Most brands are doing the latter. They treat retail media as a lower-funnel performance channel, optimise relentlessly for return on ad spend, and congratulate themselves on the numbers, without ever asking whether those numbers are telling them anything useful. I’ve seen this pattern across dozens of client engagements and it costs brands more than they realise, not just in wasted budget, but in stunted growth.

What Retail Media Actually Is, and What It Is Not

Retail media has become one of the most talked-about channels in marketing over the last few years, and with that attention has come a fair amount of imprecision about what it actually covers. At its core, retail media is advertising sold by retailers using their own first-party data and their own properties. Amazon Advertising is the most prominent example, but the category now includes networks operated by Walmart, Target, Kroger, Boots, Tesco, and hundreds of other retailers across grocery, pharmacy, fashion, and electronics.

What makes it structurally different from other digital advertising is the proximity to purchase. When someone searches for “protein powder” on Amazon, they are not browsing for inspiration. They are shopping. That intent signal is genuinely valuable, and it is the legitimate reason brands allocate budget here. The proximity to the transaction is real, and so is the measurability, at least in theory.

What retail media is not, despite how it is often positioned, is a reliable growth engine on its own. It is predominantly a demand capture channel. It intercepts buyers who are already in the market. That is useful, but it is not the same as building a brand, expanding your customer base, or reaching people who have never considered your product. The conflation of these two things is where most brands go wrong.

Earlier in my career I had a strong bias toward lower-funnel performance. The numbers were clean, the attribution was tidy, and it felt like accountability. It took me years of managing large budgets across multiple categories to understand that a significant portion of what performance channels claim credit for was going to happen anyway. The person who has already decided to buy your product and searches for it by name on a retail platform is not a conversion you manufactured. You intercepted them. That is a different thing, and it should be valued differently.

The Attribution Problem Nobody Wants to Talk About

Retail media measurement is largely controlled by the retailer selling you the advertising. That is not a conspiracy, it is just the commercial reality of how these networks are structured. Amazon reports your campaign performance. Walmart Connect reports your campaign performance. The grocery retailer you are running a seasonal promotion with reports your campaign performance. In each case, the entity measuring the results is also the entity benefiting from your continued spend.

This creates attribution windows that are often generous, view-through credit that inflates reported returns, and ROAS figures that look impressive until you compare them against your actual sales trajectory. I have sat in too many quarterly reviews where a brand’s retail media ROAS was climbing while their total category share was flat or declining. The numbers were not wrong exactly, they were just measuring something smaller than the question the business needed to answer.

The more rigorous approach is to triangulate. Use the retailer’s reporting as one data point, not the only one. Look at incrementality: what would have happened to your sales if you had not run the campaign? Some of the larger retail media networks now offer incrementality testing, and it is worth using even if the results are uncomfortable. Brands that have run these tests often find that their true incremental return is meaningfully lower than the headline ROAS suggests. That does not mean the channel is not worth using. It means you are making decisions based on a more honest picture of what you are actually buying.

If you are working through broader go-to-market strategy questions, including how retail media fits within a wider channel mix, the Go-To-Market and Growth Strategy hub covers the frameworks and thinking that connect channel decisions to commercial outcomes.

Why Sponsored Search Inside Retail Platforms Is Not the Same as Google

A lot of brands run their retail media campaigns using the same logic they apply to paid search on Google, and it creates problems that are hard to diagnose because the surface-level mechanics look similar. Both involve keyword bidding. Both return sponsored results above organic listings. Both report clicks, impressions, and conversion data. But the underlying dynamics are different enough that treating them as equivalent consistently produces suboptimal results.

On Google, you are often reaching people at the research stage. They are comparing options, looking for information, evaluating alternatives. The purchase may be days or weeks away. On Amazon or a major grocery retailer’s search, the shopper is usually much closer to the transaction. The intent is sharper and the competitive context is tighter, because you are not just competing for attention, you are competing for shelf position against brands the shopper can buy with one click.

This changes how you should think about keyword strategy, bid management, and creative. On retail search, your product listing itself is the ad. The quality of your title, your imagery, your reviews, and your price point all affect whether a paid click converts. Brands that invest heavily in sponsored placements without investing in their underlying product content are essentially paying to drive traffic to a weak landing page. I have seen this pattern repeatedly in categories like FMCG and consumer electronics, where brands win the bid but lose the sale because the product detail page does not do its job.

The other distinction worth understanding is the role of organic rank. On most retail platforms, your paid and organic performance are linked. Strong conversion rates from paid campaigns can lift your organic ranking, and strong organic rank reduces your dependence on paid spend. This flywheel effect means that early investment in retail media, even at lower efficiency, can pay dividends over time if it is building organic momentum. But it only works if your product content, pricing, and reviews are strong enough to sustain conversion once the paid support is reduced.

The New Buyer Problem: Why Retail Media Struggles to Build Brands

Think about a clothes shop. Someone who walks in and tries something on is significantly more likely to buy than someone who walks past the window. The act of engagement changes the probability of purchase. The challenge with retail media is that most of the people you are reaching have already walked in the door. They are already in the market. You are not changing their probability of purchase in your category, you are competing for which brand they pick.

That is a legitimate thing to spend money on, particularly in competitive categories where switching between brands is easy. But it is not the same as reaching someone who has never considered your product and shifting their behaviour. Growth, real growth, requires the latter. It requires reaching people who are not already in the purchase funnel and giving them a reason to enter it with your brand in mind.

Retail media networks have been expanding into upper-funnel formats, including display advertising, video placements, and offsite targeting that uses retailer first-party data to reach audiences across the open web. These formats have genuine potential for brand building, but they are often treated as an afterthought compared to sponsored search. The brands that are getting the most out of retail media are using the full stack: sponsored search to compete at the point of purchase, and upper-funnel formats to create the demand that makes that competition worthwhile.

Understanding how go-to-market thinking connects brand investment to commercial outcomes is something Vidyard’s analysis of why GTM feels harder touches on usefully, particularly around the gap between channel activity and actual market penetration. The same tension exists in retail media: activity is easy to measure, but whether that activity is building something is a harder question.

How to Evaluate Retail Media Networks Without Being Sold a Story

Not all retail media networks are created equal, and the gap between the best and the rest is significant. Amazon remains the dominant player by scale, but the explosion of retail media has produced a long tail of networks with varying data quality, audience scale, and measurement capability. Brands that treat them as interchangeable are making a mistake that will show up in their results eventually.

When evaluating a retail media network, there are four things worth scrutinising before committing budget. First, audience scale and composition: does the retailer’s shopper base meaningfully overlap with your target customer? A pharmacy retailer’s network might be excellent for health and beauty brands and irrelevant for home improvement. Second, data quality: how strong is the retailer’s first-party data, and how recently has it been validated? Third, measurement methodology: does the network offer incrementality testing, clean-room data collaboration, or independent verification, or is it entirely self-reported? Fourth, inventory quality: are the placements genuinely premium, or are you buying remnant inventory dressed up as retail media?

The commercial transformation work that BCG has documented around go-to-market strategy is relevant here: the brands that grow are the ones that apply rigorous commercial thinking to channel selection, not the ones that follow the industry’s enthusiasm for whatever is new. Retail media is not new anymore, which means the question is no longer whether to use it but how to use it with discipline.

I spent time during my agency years managing relationships with media owners across a wide range of formats, and the pattern was consistent: the networks with the most to prove were the ones that made measurement the hardest to interrogate. When a retail media network is reluctant to discuss incrementality or resistant to independent measurement, that tells you something worth knowing before you commit spend.

Building a Retail Media Strategy That Actually Connects to Business Outcomes

The brands that use retail media well start from a business question, not a channel question. They ask: where is our growth going to come from? Is it from winning switchers within a category where we already have distribution? Is it from driving trial among buyers who have not purchased our brand before? Is it from defending share in a category where a competitor is gaining ground? Each of these questions leads to a different retail media approach, and conflating them leads to campaigns that optimise for the wrong thing.

Winning switchers in a competitive category is a legitimate use of sponsored search. Driving trial among new buyers requires upper-funnel formats and potentially offsite targeting using the retailer’s first-party data. Defending share in a category under competitive pressure might require a combination of sponsored search to maintain visibility and promotional mechanics to protect price positioning.

The budget allocation question is where most brands get stuck. There is a gravitational pull toward whatever is most measurable, which in retail media means sponsored search. But measurability and value are not the same thing. The most measurable activity is often the least incremental, because it is capturing demand that already existed. Allocating budget across the funnel requires accepting some ambiguity in the measurement, and that is uncomfortable for teams that have been trained to optimise ROAS as a primary metric.

When I was growing an agency from around 20 people to over 100, one of the hardest internal conversations was convincing clients to value demand creation alongside demand capture. The performance numbers from lower-funnel activity always looked better in a slide deck. But the brands that grew were the ones willing to invest upstream, to reach people who were not already in the funnel and bring them in. Retail media has the same structural tension, and resolving it requires commercial courage as much as analytical rigour.

Thinking about pricing strategy in the context of retail media is also worth doing carefully. BCG’s work on long-tail pricing in go-to-market contexts highlights how price positioning interacts with channel strategy in ways that are easy to underestimate. In retail media, promotional pricing can drive short-term conversion lifts that look excellent in campaign reports but erode brand equity and margin over time. The optimisation lens needs to be wider than the campaign window.

The First-Party Data Opportunity Most Brands Are Missing

One of the genuinely compelling things about retail media is the quality of the first-party data underpinning it. Retailer transaction data is purchase behaviour, not modelled intent. When a grocery retailer tells you that a specific audience segment buys protein products twice a month and has recently added a new sports supplement to their basket, that is a meaningfully richer signal than a cookie-based interest category on a programmatic platform.

The opportunity for brands is to use retail media not just as an advertising channel but as an intelligence source. What does purchase data tell you about who is actually buying your product versus who you thought was buying it? What does basket analysis reveal about complementary categories you could be present in? What does switching data tell you about which competitor brands your buyers are moving between?

Most brands access a fraction of this intelligence because they engage with retail media networks purely as media buyers rather than as data partners. The retailers with more sophisticated networks are increasingly offering clean-room environments where brands can bring their own customer data and match it against retailer transaction data without either party exposing raw records. This is where retail media starts to become genuinely strategic rather than just another line item in a media plan.

The practical constraint is that accessing this level of data partnership typically requires meaningful spend commitments and a level of commercial relationship with the retailer that goes beyond a self-serve campaign account. It is not available to every brand at every retailer, and the investment required to access it needs to be weighed against the strategic value of the insights it produces.

For teams thinking through how customer data strategy connects to broader growth planning, the Go-To-Market and Growth Strategy hub covers the strategic frameworks that tie these decisions together into a coherent commercial approach rather than a collection of disconnected channel tactics.

What Good Retail Media Governance Looks Like

Retail media spending has grown fast enough in many organisations that governance has not kept pace. Budgets that started as small tests have scaled into significant line items, managed by a mix of brand teams, shopper marketing teams, and performance agencies, often without a coherent framework connecting the activity to a commercial objective.

The result is duplication, conflicting optimisation signals, and reporting that looks impressive in isolation but does not add up to a coherent picture at the portfolio level. I have seen large FMCG brands running sponsored search campaigns across the same retailer from three different internal teams, each optimising independently, each reporting separately, and none of them aware of what the others were doing. The retailer was delighted. The brand was paying three times for the same inventory.

Good governance starts with a clear owner: someone who has visibility across all retail media activity, understands both the commercial and the media dynamics, and can make decisions about budget allocation at a portfolio level rather than a campaign level. It also requires a measurement framework agreed in advance, not retrofitted after the campaign to justify the spend. And it requires a clear brief that connects the retail media activity to a specific business objective, not just a channel KPI.

None of this is complicated in principle. The complication is organisational: retail media sits at the intersection of marketing, sales, and trade, and the internal politics of who owns it can create more friction than the external complexity of running the campaigns. Resolving that internally is a prerequisite for getting the external activity right.

About the Author

Keith Lacy is a marketing strategist and former agency CEO with 20+ years of experience across agency leadership, performance marketing, and commercial strategy. He writes The Marketing Juice to cut through the noise and share what works.

Frequently Asked Questions