Retail Media Marketing: Where the Budget Is Going and Why

Retail media marketing is the practice of brands buying advertising inventory directly within a retailer’s digital environment, whether that’s a sponsored product listing on Amazon, a display placement on a grocer’s app, or a promoted result on a pharmacy website. It puts brand messages at the point where purchase decisions are made, using the retailer’s first-party data to target shoppers who are already in a buying mindset.

It’s one of the fastest-growing channels in paid media right now, and the reasons are structural, not fashionable. Retailers have data that most brands can only dream of. They know what people buy, how often, at what price point, and alongside what else. That’s a different category of signal from anything a third-party cookie ever delivered.

I spent a good portion of my agency career overvaluing lower-funnel performance channels. The numbers looked clean, the attribution was tidy, and clients loved the reported returns. It took me longer than I’d like to admit to recognise how much of that performance was simply capturing demand that already existed, not creating new demand. Retail media has some of the same risks baked in. Before you commit serious budget, it’s worth understanding what the channel actually does and what it doesn’t.

Why Retail Media Has Grown So Quickly

The growth of retail media isn’t a mystery. Three things happened in rough sequence, and they reinforced each other.

First, Amazon proved the model. Sponsored products on Amazon generated returns that made search advertising look modest. Brands could bid on category terms and appear directly in front of shoppers who had their card details saved and their delivery address pre-loaded. The friction between ad exposure and purchase was almost zero. When Amazon’s advertising revenue started appearing in earnings reports as a multi-billion dollar line item, every major retailer noticed.

Second, third-party cookies started disappearing. Retailers suddenly had something genuinely scarce: authenticated, consented, transaction-level first-party data. Grocers know your household size, your dietary preferences, your brand loyalties, and your price sensitivity. That’s not inferred from browsing behaviour. It’s observed from actual purchases, week after week, year after year. As programmatic targeting became noisier and less reliable, retail media became comparatively more precise.

Third, retailers needed new revenue. Physical retail margins are thin. E-commerce margins are often thinner. Advertising, by contrast, is high-margin and scalable. A grocer selling you a display placement in their app doesn’t need to stock extra product, hire extra staff, or rent extra shelf space. It’s incremental revenue with almost no incremental cost. That commercial logic is hard to argue with, which is why every major retailer from supermarkets to DIY chains to pharmacies is now building out a media offering.

If you’re thinking about where retail media sits within a broader growth strategy, it’s worth reading through the Go-To-Market and Growth Strategy hub for context on how individual channels connect to commercial outcomes. Retail media doesn’t exist in isolation. It works best when it’s part of a coherent plan, not a standalone activation.

What Retail Media Actually Includes

The term covers more than sponsored listings, though that’s where most brands start. A more complete picture looks like this:

On-site sponsored placements are the most familiar format. Brands pay to appear at the top of search results or category pages within a retailer’s website or app. This is the Amazon Sponsored Products model, replicated across hundreds of retailers globally. It’s intent-driven, measurable within the retailer’s system, and relatively easy to activate.

On-site display advertising includes banners, takeovers, and branded content within the retailer’s digital environment. Less intent-driven than sponsored listings, but useful for new product launches or seasonal pushes where you want broader visibility within a relevant context.

Off-site retail media is where it gets more interesting. Retailers are now packaging their first-party data and using it to target their shoppers across the open web, on social platforms, and in connected TV environments. You’re not advertising on the retailer’s site. You’re using their audience data to reach their customers elsewhere. This is a meaningfully different proposition and one that starts to address the upper-funnel gap.

In-store digital media is the physical layer: digital screens at shelf, in aisles, at checkouts, and increasingly on smart carts. This is still maturing as a format, but for brands that sell in physical retail, it closes the loop between media exposure and the moment of decision at shelf.

Retail media networks are the infrastructure layer. Major retailers have built out dedicated ad tech platforms, often in partnership with established programmatic vendors, to manage inventory, targeting, and reporting. Walmart Connect, Kroger Precision Marketing, Boots Media Group, and Tesco’s dunnhumby-powered offering are examples of retailers treating media as a formal business unit rather than an ad hoc revenue line.

The Commercial Logic for Brands

For a brand selling through retail, the appeal of retail media is straightforward. You’re advertising in an environment where your product is already available to buy. The shopper doesn’t need to go anywhere else. If your ad works, the conversion happens immediately in the same session. That’s a fundamentally different dynamic from display advertising that drives awareness but requires the shopper to remember you, seek you out, and find you at a later point.

There’s also a defensive logic. If you’re not bidding on your own category terms, a competitor will. In a retail media auction, absence is a choice with consequences. I’ve seen brands pull back from retail media investment during a budget squeeze and watch their share of search within a key retailer drop within weeks. Recovering that visibility costs more than maintaining it would have.

The data feedback loop is another genuine advantage. Retail media campaigns, particularly on-site ones, generate sales data that ties directly to media exposure. You can see which products, which placements, and which audiences drove incremental basket additions. That’s more actionable than most brand tracking studies I’ve sat through.

That said, the commercial logic cuts both ways. Retailers are not neutral partners. They’re selling you access to your own customers, customers who already buy your brand, in exchange for margin they’re not giving you in trade negotiations. It’s worth being clear-eyed about that dynamic. The relationship between brand investment in retail media and the underlying trade terms is something category managers and CMOs need to think about together, not in separate conversations.

The Measurement Problem Nobody Is Solving Cleanly

Here’s where I want to slow down, because the measurement narrative around retail media is too clean and too convenient.

Retail media networks report return on ad spend using their own attribution models, within their own walled gardens. They control the data, the methodology, and the reporting interface. When a retailer tells you that your campaign delivered a 4x ROAS, they’re measuring sales that occurred on their platform after an ad exposure. What they’re not telling you is how many of those sales would have happened anyway, how many were existing loyal customers who were going to buy regardless, and how much of the measured conversion is post-hoc rationalisation of a purchase that was already decided.

I spent years in agency leadership watching clients celebrate performance numbers that, on reflection, were measuring capture rather than creation. A shopper who searches for your brand name on a retailer’s site and then clicks a sponsored listing that you paid for is not a conversion you created. That sale was going to happen. You just paid to be in the way of it.

This isn’t unique to retail media. It’s the same critique that applies to branded search, to retargeting, and to most lower-funnel activation. But retail media has particularly strong structural incentives to overstate returns, because the retailer is both the media owner and the data custodian. Their interest is in showing you numbers that justify continued investment.

The more honest approach is to run incrementality tests. Measure the difference in sales between exposed and unexposed groups, matched for purchase history and demographics. That’s harder to do, and the numbers will be less flattering, but they’ll be more useful. Some of the more sophisticated retail media networks now offer incrementality measurement as a feature. Use it.

For broader context on how measurement challenges play out across growth channels, the Semrush piece on market penetration is worth a read for grounding the conversation in what growth actually requires at a structural level.

The Upper-Funnel Opportunity Most Brands Are Missing

Most brands use retail media as a lower-funnel tool. They bid on category and brand terms, run sponsored listings, and measure conversion. That’s fine. It’s table stakes in competitive categories. But it’s not where the more interesting opportunity sits.

The upper-funnel opportunity in retail media is off-site, using retailer first-party data to reach shoppers who are not yet in a purchase mindset but who match the profile of your best customers. A grocer’s data can tell you which households buy premium products, which are price-sensitive, which have recently bought a competitor brand, and which have lapsed from buying yours. That’s a targeting brief that most media planners would find compelling.

When that data is activated programmatically or in social environments, you can reach people before they’re in the retailer’s app. You can influence consideration, not just capture it. That’s a different kind of value, and it’s closer to what brand advertising has always been trying to do, just with sharper targeting.

The analogy I use internally is a clothes shop. Someone who walks into a store and tries something on is far more likely to buy than someone who walks past the window. Retail media at the lower funnel is for people already in the fitting room. Upper-funnel retail media is for getting people through the door in the first place. Both matter. Most brands only fund the first.

For brands thinking about how creator partnerships can amplify retail media campaigns, particularly in seasonal contexts, Later’s work on creator-led go-to-market campaigns has some useful thinking on integrating paid and earned media in retail environments.

How to Build a Retail Media Strategy That Isn’t Just Bidding

Retail media strategy at most brands is tactical: set bids, monitor ROAS, adjust spend. That’s not a strategy. It’s campaign management. A real retail media strategy starts with commercial objectives and works backwards.

Start with category and shopper dynamics. Which retailers matter most to your category? Where do shoppers start their purchase experience? What does the competitive landscape look like within each retailer’s search environment? These questions belong to category management as much as media planning. If your retail media team and your trade marketing team aren’t talking regularly, you’re making decisions with half the picture.

Be explicit about what you’re trying to do. Are you defending existing volume against competitive conquest? Are you driving trial of a new product? Are you reaching lapsed buyers? Each objective requires a different media approach, a different measurement framework, and a different definition of success. Mixing them into a single campaign and reporting blended ROAS is how you end up with numbers that feel good but tell you nothing.

Allocate budget across the funnel deliberately. The temptation is to put everything into sponsored listings because the attribution is cleaner. Resist it. If your only retail media investment is lower-funnel, you’re not growing your customer base. You’re defending it. Those are different jobs with different budget requirements. Growth requires reaching people who don’t yet buy you, not just converting people who already would.

Build retailer relationships into your media strategy. The best retail media programmes I’ve seen are ones where the brand has a genuine commercial relationship with the retailer, not just a media buying relationship. Joint business plans that include media investment alongside distribution, ranging, and promotional commitments tend to produce better outcomes than treating retail media as a standalone line item. That requires the commercial and marketing teams to work together, which is harder than it sounds but worth the effort.

Pressure-test the measurement. Before you scale, run an incrementality test. Accept that the numbers will be lower than the platform-reported ROAS. Use those numbers to make honest allocation decisions. The brands that will win in retail media over the next five years are the ones that measure honestly now and build on a real foundation, not an inflated one.

For a broader view of how pricing and go-to-market structure affect channel performance, the BCG piece on pricing and go-to-market strategy offers useful framing on how commercial structure shapes the effectiveness of any channel investment.

The Organisational Tension Retail Media Exposes

One of the more interesting things about retail media is the organisational dysfunction it surfaces. In most large consumer goods companies, the trade marketing team manages retailer relationships and the marketing team manages media. Retail media sits uncomfortably in the middle. It’s a media channel, but it’s also a trade investment. It drives brand metrics, but it’s reported against sales metrics. It’s bought by agencies, but it’s negotiated by commercial teams.

I’ve worked with clients where the same retailer media placement was being negotiated separately by the trade team in a JBP conversation and by the media agency in a platform buying conversation, with neither aware of what the other was doing. The retailer, of course, was perfectly happy with that arrangement.

Getting retail media right requires a single owner with visibility across trade, media, and commercial objectives. That person doesn’t always exist. Creating that role, or that coordination mechanism, is often the most valuable thing a brand can do before they start worrying about bid strategies and targeting parameters.

The BCG work on brand and go-to-market strategy touches on the alignment challenges between marketing and commercial functions, which is directly relevant here. The organisational problem is often bigger than the media problem.

Retail media is one piece of a larger go-to-market puzzle. If you want to think through how it connects to your broader commercial strategy, the Go-To-Market and Growth Strategy hub covers the full range of strategic decisions that sit around channel investment.

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.

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