Retail Media Platforms Are Eating the Marketing Budget. Are They Worth It?

Retail media platforms give brands the ability to advertise within a retailer’s owned environment, reaching shoppers at or near the point of purchase. Amazon Advertising is the most prominent example, but the model now extends across Walmart Connect, Kroger Precision Marketing, Target’s Roundel, and dozens of smaller retail networks. The commercial logic is straightforward: the retailer has purchase data, the brand wants to reach buyers, and both parties extract value from the transaction.

What is less straightforward is whether the value brands extract justifies the cost, or whether retail media has become another channel that sounds compelling in a pitch deck but quietly underdelivers in practice.

Why Retail Media Has Grown So Quickly

The growth of retail media is not accidental. It sits at the intersection of three structural shifts that have been building for years.

First, third-party cookies are disappearing. Brands that built their digital targeting on cookie-based audience segments have been scrambling for alternatives, and retailers with authenticated first-party purchase data stepped into that gap. When a retailer knows that a specific customer buys oat milk every three weeks, that is a more durable and precise signal than a third-party cookie that inferred dietary preferences from browsing behaviour.

Second, retailers discovered that advertising revenue is extraordinarily profitable compared to product margins. Grocery retail operates on thin margins. Advertising revenue, once the platform infrastructure is in place, carries margins that look nothing like the core business. That economic incentive has pushed every major retailer to build or acquire media capability.

Third, brands saw an opportunity to reach consumers at a moment of genuine purchase intent. Someone searching for “protein bars” on Amazon is further down the funnel than someone who saw a display ad while reading the news. That proximity to purchase has made retail media feel like a safer bet than brand channels where attribution is harder to establish.

All three of those forces are real. But real forces can still create markets where the economics are worse for buyers than sellers, and that is worth examining honestly before committing significant budget.

The Attribution Problem Nobody Wants to Talk About

Retail media platforms offer what looks like clean attribution. You spend money on a sponsored product listing, someone clicks it, they buy the product, the retailer reports a sale attributed to your ad. The loop appears closed.

I spent a long time earlier in my career being seduced by this kind of reporting. When I was running performance channels, the numbers that came back from lower-funnel activity always looked strong. Return on ad spend figures that justified the investment, conversion rates that outperformed brand channels, cost-per-acquisition metrics that seemed to validate the strategy. It took me longer than I would like to admit to question how much of that was genuine incrementality and how much was the channel claiming credit for purchases that were going to happen regardless.

Retail media has the same problem, arguably worse. When a shopper searches for your brand name on Amazon and clicks your sponsored listing, you have paid for a conversion that was almost certainly going to happen anyway. The retailer’s attribution model counts it as a win. Your ROAS looks healthy. But the incremental value of that spend is close to zero.

This is not a reason to avoid retail media entirely. It is a reason to be precise about what you are actually measuring. Incrementality testing, holdout groups, and matched market analysis are more honest tools than the default attribution dashboards that retailers provide. The retailers have no commercial incentive to show you that a portion of your spend was redundant. You have to build that analysis yourself.

If you are thinking about how retail media fits into a broader go-to-market approach, the Go-To-Market and Growth Strategy hub covers the commercial frameworks that help you make those decisions with more rigour than most channel-level planning allows.

Demand Capture vs. Demand Creation: The Strategic Fault Line

There is a version of retail media that is genuinely valuable: reaching a shopper who is browsing a category, has not yet formed a brand preference, and encounters your product at the right moment. That is demand capture working well, and it can drive real commercial outcomes.

There is another version that is essentially a tax on your existing brand equity. If your brand is strong enough that shoppers seek it out, you are paying the retailer to not lose a sale you had already earned. The sponsored listing at the top of the search results for your own brand name is the clearest example of this dynamic.

I have used an analogy before that I think holds up here. 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. Retail media, at its best, is the mechanism that gets the right person through the door and in front of the right product. But if the person was already walking toward your specific rail with the intention of buying, you have not created anything. You have just paid for the walk.

The brands getting the most from retail media are the ones who have thought carefully about where in the purchase experience they are actually influencing behaviour. Sponsored display ads reaching category browsers who have not yet bought your product are doing something different from sponsored search ads triggered by your own brand name. Both show up in the same dashboard. They are not the same investment.

This connects to a broader point about market penetration strategy: growth comes from reaching new buyers, not from re-converting the ones you already have. Retail media can support penetration, but only if you design it to do that rather than defaulting to the placements that generate the most flattering attribution numbers.

The Walled Garden Problem at Scale

Every major retail media network operates as a walled garden. The data stays with the retailer. The measurement is conducted by the retailer. The audience segments are defined by the retailer. You get access to the outputs, not the underlying inputs.

For brands with strong internal analytics capability, this is manageable. You can run your own incrementality studies, triangulate across channels, and build a picture of retail media’s actual contribution. For brands without that capability, you are largely trusting the retailer’s reporting, and the retailer has a structural interest in showing you that your spend is working.

The asymmetry of information in these relationships is significant. When I was managing large media accounts across multiple categories, the most sophisticated clients were the ones who never took a single platform’s attribution at face value. They built their own measurement frameworks, ran their own tests, and pushed back when the numbers from one channel looked implausibly good. That discipline matters even more in retail media, where the retailer controls the data environment entirely.

There is also a competitive dynamic worth considering. On Amazon in particular, your competitors can bid on your brand terms. You end up in an auction where not participating has a cost, because a competitor can take the sponsored placement above your organic listing. That creates a defensive spending dynamic that benefits Amazon and puts brands in a position where the floor for retail media spend is set by competitive behaviour rather than their own commercial logic.

Which Retail Media Networks Are Actually Worth the Investment

Not all retail media networks are equal. The value of any network is a function of three things: the size and quality of its first-party data, the reach of its audience, and the sophistication of its targeting and measurement infrastructure.

Amazon sits at the top of this hierarchy by a significant margin. Its purchase data is unmatched in depth and scale, its audience is enormous, and its advertising tools are the most mature in the category. The tradeoff is that it is also the most competitive and expensive environment, and the walled garden dynamics are most pronounced here.

Walmart Connect has made substantial investments in its media infrastructure and is a credible alternative for brands where Walmart is a significant retail partner. The audience skews differently from Amazon, which can be an advantage depending on the category.

Kroger Precision Marketing has strong grocery purchase data and has built out offsite capabilities that allow brands to reach Kroger shoppers beyond the Kroger environment. For food and beverage brands, this is a genuinely useful capability.

Beyond the top tier, the picture gets murkier. Many smaller retail media networks are selling inventory that looks like first-party retail data but is, in practice, audience segments with limited scale and measurement infrastructure that cannot support serious incrementality analysis. The pitch is compelling. The delivery is often not.

The practical test I would apply: can the network give you a credible incrementality methodology, not just ROAS? If the answer is no, you are buying media on faith, and that is a difficult position to defend when you are reporting back on budget allocation.

How Retail Media Fits Into a Go-To-Market Plan

The brands that use retail media well treat it as one component of a coordinated commercial plan, not a standalone performance channel. The planning logic matters as much as the execution.

For a new product launch, retail media can support distribution by driving trial among category shoppers who have not yet encountered the product. That is a legitimate use case, and it connects to the kind of launch planning that BCG has written about in the context of complex product rollouts, where the sequencing of awareness, consideration, and conversion activity is as important as the individual channel choices.

For an established brand defending shelf position, the calculus is different. Here, retail media spend needs to be evaluated against the counterfactual: what happens to sales if you reduce or eliminate that spend? If the answer is “not much,” you are paying for something that is not doing real work. If the answer is “competitors take our placements and we lose visibility,” you have a more defensible case for the investment.

For a brand trying to grow market share, retail media alone is not sufficient. Growth comes from reaching people who do not currently buy your product, and most retail media placements are optimised toward in-category shoppers who are already in a buying mindset. That is a useful audience, but it is not the only audience that matters for a brand with genuine growth ambitions. Upper-funnel activity that builds awareness and preference among non-buyers is what creates the demand that retail media can then capture.

The growth frameworks that work in practice are rarely single-channel strategies. Retail media is most effective when it is the bottom layer of a plan that also includes brand-building activity, and when the budget allocation between those layers is set by commercial logic rather than the path of least resistance.

The Margin Question That Most Brands Avoid

There is a financial reality sitting underneath the retail media conversation that does not get enough attention in marketing circles. Retail media spend comes out of trade budgets in many organisations, which means it is competing with promotions, slotting fees, and co-op advertising for the same pool of money. In other organisations, it sits in the digital media budget and competes with paid social and programmatic display.

Wherever it sits, the cost of retail media has to be weighed against the margin it generates. For categories with strong margins, the economics can work even at relatively high cost-per-acquisition figures. For categories with thin margins, the math is often brutal. I have seen brands running retail media campaigns where the attributed revenue looked impressive but the net margin contribution, after factoring in the cost of goods, retailer margin, and media spend, was negative. The campaign was “working” by the platform’s metrics and destroying value by the P&L.

This is not a retail media problem specifically. It is a measurement problem that affects performance channels broadly. But it is particularly acute in retail media because the attribution looks so clean and the ROAS figures can be high enough to mask the underlying economics. Running the numbers all the way to margin contribution, not stopping at attributed revenue, is the discipline that separates good retail media planning from expensive theatre.

Pricing strategy and go-to-market economics are closely related. The BCG analysis on pricing within go-to-market strategy is a useful reference for thinking about how channel costs interact with margin at a structural level, even if the specific context differs from retail media.

What Good Retail Media Planning Actually Looks Like

Good retail media planning starts with a clear commercial objective, not a channel allocation. Before deciding how much to spend on Amazon or Walmart Connect, you need to know what specific outcome you are trying to drive, whether that is trial among new buyers, defence of existing shelf position, or incremental volume in a specific category segment.

From that objective, the channel choices and investment levels follow. Sponsored product ads make sense for capturing in-category search intent. Sponsored display can reach category browsers who have not yet committed to a brand. Offsite retail media, where retailers extend their audience data to external environments, can build reach among shoppers who are not currently in a buying mindset.

Measurement should be designed before the campaign launches, not retrofitted afterward. Decide in advance how you will assess incrementality, what holdout methodology you will use, and what success looks like in margin terms rather than just revenue terms. The retailers will provide their own attribution reports. Those are useful inputs. They should not be the primary basis for evaluating whether the investment was sound.

Finally, retail media should be integrated into the broader go-to-market plan rather than managed as a separate channel with its own budget and objectives. The brands that get this right are treating retail media as the bottom of a funnel that starts with brand-building activity, not as a standalone performance engine. The strategy and planning thinking that informs that integration is covered in more depth across the Go-To-Market and Growth Strategy hub, which is worth working through if you are building or revisiting your commercial approach.

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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