The Challenges and Opportunities of Retail Media

At a growth rate of 21.8 percent for 2024, retail media is the fastest-growing form of ad spend in the U.S., according to data from eMarketer.

As impressive as that growth rate is, retail media faces challenges hampering its growth.

Dominance in Retail Media

For one, data from eMarketer shows that Amazon.com will account for 74.2 percent of retail media ad spend in the U.S. As a point of comparison, the Google–Meta duopoly accounts for less than 50 percent of U.S. digital ad spend.

With nearly three of every four U.S. dollars spent on retail media going to Amazon, retailers other than Amazon must offer compelling retail media options to win ad dollars.

According to data from the October 2023 Prosper study, among the three largest retailers in the U.S., 58.2 percent of households had Amazon Prime memberships, compared to 28.2 percent for Costco, and 16.8 percent for Walmart Plus. Costco, with an average household income of $81,200 vs. $66,200 for Amazon, and $61,500 for Walmart, may be able to capture retail media spend from Amazon for higher-end luxury products.

Data from the Prosper study also found that Amazon Prime’s video and music streaming were the second and third most-cited reasons for Amazon Prime membership, at 52.3 percent and 21 percent respectively (behind free two-day shipping at 78.2 percent). This information can help other retailers improve their offerings to enhance their retail media propositions.

Consolidation of the Retail Media Long Tail

As an extension of Eric Seufert’s claim that "everything is an ad network," it seems that in 2024, every ad network became a retail media network. Non-retailers such as Uber, T-Mobile, JP Morgan Chase, Klarna, PayPal, Expedia, Marriott, and United Airlines have all launched media networks.

However, many of these networks lack the scale to compete with Amazon. This is why a consolidated approach among retail media networks is necessary, allowing marketers to execute campaigns across a range of networks from a single platform.

Although this is easier said than done, initiatives like the retail data co-op Rippl are steps in the right direction. Data from Turbyne shows that 40 percent of brands work with fewer than three retail media networks, while another 42 percent work with four to six. Clearly, consolidation is needed. Furthermore, 47 percent of brands surveyed by Turbyne would spend their budgets with midsized retailers if they could do so via a single platform.

This consolidation isn’t limited to the long tail. Walmart Connect, the second-largest retail media network in the U.S., is expected to account for 6.8 percent of retail media ad spend in 2024, less than 10 percent of Amazon’s share. Third-ranked Target Roundel is expected to account for 3.2 percent of retail media ad spend in 2024, down from 4.2 percent in 2020, according to eMarketer. This data highlights the significant challenges faced by even the largest retail media networks outside of Amazon.

Make it Easier

While consolidation will attract more marketers and increase the budgets allocated to retail media, another key pain point, as highlighted by Turbyne’s research, is the complexity of purchasing ads on retail media networks. Among surveyed marketers, 35 percent cited the difficulty of the process as their top barrier to increased investment in retail media.

This complexity is reflected in the fact that, on average, brands worked with 25 media partners, 22 media agencies, and 23 ad tech platforms over the previous three months. Additionally, 26 percent of surveyed marketers indicated they would work with a retail media platform if it offered an automated buying process.

Integrating Online With Offline Retail Marketing and Media

The third major challenge hindering retail media growth is the integration of online and offline/in-store marketing.

Retailers want continuous engagement throughout the customer journey, including relevant in-store ads to close the transaction. This is why 70 percent of brands reported that they would invest more in retail media if in-store tactics were integrated with digital efforts into a single retail media offering.

Despite Amazon’s near-monopoly in retail media, there is potential to disrupt it. Breaking Google and Meta’s duopoly took years, but by 2022, their share of digital advertising dropped to 48.4 percent, falling below 50 percent for the first time since 2014 (including Amazon and TikTok).

The real opportunity to challenge Amazon’s dominance in retail media lies in better and more effective integration of online and offline channels. Despite owning Whole Foods, Amazon hasn't fully unified the brand with its retail media efforts. Walmart, Target, and other retailers should be able to create a more cohesive customer journey across online and offline retail media.

Daniel Avshalom is the vice president of media at marketing technology user acquisition and engagement platform Zoomd Technologies.