What Is Retail Media?
Retail media is advertising sold by retailers to brands on the retailer’s own digital and physical properties, including e-commerce sites, apps, email lists, and in-store screens. Because shoppers browse and buy in the same environment, retail media ads reach audiences with demonstrated purchase intent at the moment of decision. Amazon Advertising generated approximately $46.9 billion in ad revenue in 2023, making it the clearest proof of how lucrative that proximity can be.
How Retail Media Works
Retailers monetize their first-party shopper data by selling ad placements to the brands whose products appear on their shelves or listings. A consumer packaged goods brand like Procter & Gamble pays Walmart, Target, or Kroger not just for shelf space, but for sponsored placements inside those retailers’ digital storefronts. The retailer closes the loop by connecting ad exposure to actual purchase data, something third-party ad networks cannot reliably do.
The transaction typically follows one of three models:
- Self-serve auction: Brands bid programmatically for keyword-based placements, similar to paid search. Amazon’s Sponsored Products operates this way.
- Managed service: The retailer’s sales team runs campaigns on behalf of brands, often with a minimum spend requirement.
- Programmatic offsite: Retailers extend their first-party audience segments to external publishers via DSPs, reaching shoppers beyond the retailer’s own properties.
The Retail Media Network (RMN)
A retail media network is the formal advertising infrastructure a retailer builds to sell, manage, and measure ad placements across its properties. Walmart Connect, Target Roundel, Kroger Precision Marketing, and Instacart Ads are among the most established networks in the U.S. outside of Amazon. GroupM, the world’s largest media investment company, estimated retail media would account for $128 billion in global ad spend by 2026.
Each network differentiates on the quality and specificity of its shopper data. Kroger Precision Marketing, for example, draws on purchase histories from more than 60 million loyalty card households. That data allows advertisers to target buyers of a specific product category, brand switchers, or lapsed customers far more precisely than any traditional media buy could.
Ad Formats in Retail Media
| Format | Placement | Primary Goal |
|---|---|---|
| Sponsored Products | Search results, category pages | Conversion, shelf visibility |
| Sponsored Brands / Display | Homepage, top-of-search banners | Awareness, consideration |
| Sponsored Video | Product detail pages, search | Consideration, brand story |
| Digital Out-of-Home (DOOH) | In-store screens, end caps | Impulse purchase, new product trial |
| Offsite / Programmatic | External publishers, social | Retargeting, prospecting |
Key Metrics and How to Calculate Them
Retail media campaigns are measured using a mix of e-commerce and advertising KPIs. The most critical is Return on Ad Spend (ROAS):
ROAS = Revenue Attributed to Ads / Ad Spend
A brand spending $50,000 on Amazon Sponsored Products and attributing $200,000 in sales achieves a 4x ROAS. Amazon’s own benchmark for Sponsored Products in competitive categories typically ranges from 3x to 6x, though margins vary by product category.
A second metric specific to retail media is Share of Voice (SOV) on a given search term:
SOV = Brand Impressions on Keyword / Total Impressions on Keyword
Brands that hold a higher SOV on category search terms tend to see compounding organic rank benefits on platforms like Amazon, where click-through rate and conversion history influence organic placement. This creates a flywheel where paid spend reinforces organic visibility.
Advertisers also track New-to-Brand (NTB) rate, which measures what percentage of purchases from an ad came from customers who had not bought from that brand in the prior 12 months. A high NTB rate signals that campaigns are growing the customer base rather than just re-converting existing buyers.
Why Retail Media Is Growing
Three structural forces are accelerating retail media adoption:
- Cookie deprecation: The end of third-party cookies pushed advertisers toward environments with durable first-party data. Retailers sit on some of the most valuable purchase-signal data available.
- Margin pressure: Retailers facing thin e-commerce margins recognized that advertising revenue carries margins of 70 to 90 percent, far above grocery or general merchandise.
- Measurability: Brands seeking traceable return on investment gravitated toward channels where the path from ad exposure to transaction is short and direct.
Instacart, the grocery delivery platform, reported that its advertising business generated $906 million in revenue in 2023, representing the majority of its total revenue. That figure shows how quickly even younger retail platforms have scaled ad products into a primary revenue stream.
Retail Media vs. Traditional Trade Promotion
Retail media often replaces or supplements trade promotion budgets, the funds brands historically paid retailers for shelf placement, end caps, and circular features. Unlike trade promotions, retail media is measurable at the impression and conversion level, which makes it easier to justify to finance teams and optimize in near real time.
A brand running a Kroger end cap in 2010 had limited ability to attribute incremental sales to that placement. The same brand running a Kroger Precision Marketing display campaign today can measure basket-level lift directly.
The overlap between marketing and trade budgets creates internal friction for many CPG companies. Brand managers and shopper marketing teams often compete for the same retail media inventory with different objectives and different P&L owners. The industry has not fully resolved this structural tension.
Considerations for Advertisers
Retail media networks operate as walled gardens: each platform has its own measurement methodology, attribution windows, and reporting interface. A brand running concurrent campaigns on Amazon, Walmart Connect, and Target Roundel cannot compare results on a consistent basis without third-party measurement tools. This fragmentation increases operational complexity as the number of networks an advertiser manages grows.
Attribution windows also vary. Amazon defaults to a 14-day click attribution window for Sponsored Products, while other networks may use 7-day or 30-day windows. Comparing ROAS across networks without accounting for these differences produces misleading conclusions.
Brands new to retail media should prioritize networks where their category has significant shopper volume and where the retailer’s data matches their target customer. A premium skincare brand may find Target Roundel a stronger fit than a warehouse club network, regardless of the latter’s scale, because audience composition matters as much as raw reach.
Frequently Asked Questions
What is retail media in simple terms?
Retail media is advertising that brands buy directly from retailers, such as Amazon, Walmart, or Target, displayed on those retailers’ own websites, apps, and in-store screens. Because the retailer controls both the ad and the point of purchase, it can tie ad exposure to actual sales data, something standard digital advertising cannot reliably do.
How does retail media differ from traditional digital advertising?
Traditional digital advertising uses third-party data and reaches broad audiences across external websites. Retail media uses first-party purchase data to reach shoppers inside a retailer’s own environment, at the exact moment they are deciding what to buy. The result is more precise targeting and more direct attribution to sales.
What are the largest retail media networks?
Amazon Advertising is the largest retail media network by a wide margin, generating approximately $46.9 billion in ad revenue in 2023. Outside Amazon, the leading U.S. networks include Walmart Connect, Target Roundel, Kroger Precision Marketing, and Instacart Ads.
What is ROAS and why does it matter in retail media?
ROAS, or Return on Ad Spend, measures how much revenue a brand earns for every dollar spent on advertising. It is calculated by dividing revenue attributed to ads by total ad spend. In retail media, ROAS is the primary performance metric because retailers can directly connect ad exposure to purchase, making attribution more reliable than in most digital channels.
Why are brands shifting budget into retail media?
Three factors are driving the shift: the decline of third-party cookies, the measurability of retail media compared to traditional channels, and the fact that placements reach shoppers with active purchase intent. Retailers have also made ad inventory more accessible to brands of all sizes as they build advertising into a core revenue stream.
For a broader view of how retail media fits into full-funnel planning, see the entries on programmatic advertising, first-party data, and cost per acquisition.