What’s Driving Growth in the $100 Billion Retail Media Market?

What’s Driving Growth in the $100 Billion Retail Media Market?

Share this:

The battle over consumer data privacy has taken center stage for much of 2023, with technology giants like Google and Apple leading the charge in implementing stricter regulations. While primarily designed to protect user data, these measures have already created a unique opportunity for a rapidly growing segment of the digital advertising world — retail media.

Retail media has emerged as a powerful player in the digital advertising ecosystem over the past 12 months. And with U.S. retailers set to invest $73 billion in online advertising this year, it’s a good bet that retail media will continue to stay at the forefront. 

“With regulators, device manufacturers and web browser operators all enforcing tighter privacy policies, advertisers are rightfully seeking marketing tactics that continue to deliver the benefits of targeting and closed-loop measurement,” says Michael Greene, senior vice president of global vertical strategy at Criteo, a firm that help advertisers, retailers, and publishers activate and monetize audiences. “Retail media is a clear winner here, offering privacy-friendly, data-rich solutions amidst stricter regulations and greater technical barriers to data collection.”

While Google’s decision to phase out third-party cookies in its Chrome browser and Apple’s introduction of App Tracking Transparency (ATT) are aimed at safeguarding user data and boosting consumer trust, they’ve left advertisers and marketers searching for new avenues to target and engage their audience effectively. 

Greene says retail media has stood out among advertisers looking for new opportunities, at least in part because it capitalizes on the data assets and customer insights of retail giants like Amazon, Walmart, and others to deliver highly-relevant advertising campaigns. With retail media, advertisers can reach audiences and measure outcomes while still preserving privacy.

“Retail media is unique in being able to execute both audience targeting and closed-loop sales measurement without consumer data ever having to leave a retailer’s proverbial walls. Unlike other forms of media — in which user-level data has typically needed to flow across several different websites or mobile applications — retail media has inherent advantages in keeping data fully within a first party environment,” Greene says. “Additionally, advertising on retail sites is also inherently a brand-safe environment, as it relies on established, trusted retailer domains to reach consumers directly where they spend their time on the internet. This optimizes the consumer experience by serving personalized ads while also prioritizing privacy.”

U.S. retailers are expected to invest more than $73 billion in online advertising this year, and analysts believe that U.S. retail media ad spend, in particular, will reach more than $45 billion, representing a 20% rise over 2022. 

A Brand-Safe Alternative

Greene says that brands prefer advertising on retail websites because these platforms provide a relatively safe environment. In a retail setting, consumers are engaged in shopping activities, which naturally filters any undesirable or harmful content. Retail websites provide a level of trust and reliability that’s highly conducive to maintaining a brand’s reputation. 

Retail media networks also typically have strict content guidelines and quality controls in place, ensuring that brands can advertise in spaces that align with their values and target the right audience, minimizing the risk of appearing next to objectionable or controversial content. The brand-safe context enhances the overall advertising effectiveness and maintains the brand’s integrity in the eyes of consumers.

“This approach is privacy-minded, but it also leads to enhanced personalization efforts and ad formats that are aligned with the way consumers shop, leading to greater trust among consumers,” Greene says. “Overall, retail media has a pivotal element within advertisers’ strategies, providing them with an effective avenue to engage and convert consumers while offering retailers a diversified revenue stream.”

Looking Ahead

As the power dynamic between retailers and brands slowly shifts, Greene says retail media will continue to evolve. Brands are becoming retailers’ customers, and not just suppliers, for the very first time, creating the need for more accountability.

Looking ahead to the coming years, Greene expects to see retailers transform more into media companies, embracing greater industry standardization and looking to differentiate through their relationships with shoppers. He also expects to see retail media networks begin to extend beyond traditional stores, to other brands and verticals, such as adjacent retail industries, like food delivery, travel, hotels, and last-mile delivery apps. 

Having a greater focus on standardization and integrated ecosystems should decrease fragmentation, and it should also ensure greater data privacy compliance for advertisers.

“Over the next five years, we can anticipate increased adoption and technological advancements within the retail media sector. The space is set to advance, marked by consolidation, increased utilization of AI, seamless cross-channel integration, enhanced personalization and global reach,” Greene says. “As retailers grasp the significance of their digital presence and adjust to shifting consumer and regulatory dynamics, retail media will further solidify its position as a crucial advertising avenue.”

Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.