Retail media networks

A retail media network (RMN) is a large group of affiliated online locations where marketers can purchase ad space. Because RMNs are owned and operated by retailers, the ad space they sell for digital advertising is known as “retail media,” and the ads are meant to be viewed while buyers are already browsing for and purchasing other products.

A retail media network can comprise a combination of the network owner’s primary website and other onsite, offsite, and digital in-store channels. It may also include channels owned by third-party media companies with which the RMN owner partners to expand its offerings.

While retail media networks are not new, the lockdowns necessitated by the COVID-19 pandemic in 2020 made online shopping a necessity and exponentially increased the number of online purchases. This spurred the growth of retail media networks, which have continued to expand by increasing the range of products they offer and by partnering with other retailers. 

More retailers are dedicating ad spend to retail media networks: Retail media is the fastest-growing segment in the advertising industry, projected to be worth $8.32 billion by 2027 and account for 16% of total digital ad revenue. Much of that will be spent on digital media that is part of a retail media network. McKinsey predicts that ad spend on retail media networks will exceed $100B by 2026.

Types of retail media networks

There are currently approximately 240 retail media networks and their ranks are growing.

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The biggest retail media network owners are Amazon, Walmart, and Target. But any company with a digital presence — from grocery store chains to cosmetics companies to purveyors of automotive supplies — can assemble and manage an RMN. 

There are five main categories of retail media networks:

1. Digital marketplace platforms like Amazon, eBay, and Etsy, which sell ad space to third-party advertisers whose products can be purchased on-platform.
2. Mass merchandisers like Walmart, Costco, Target, and Macy’s, which sell products — and offer advertising space — online and in brick-and-mortar stores.
3. Category retailers like Home Depot, Wayfair, BestBuy, CVS, Petco, Marriott, Lowe’s, or Kroger, which sell related products of interest to niche customers.
4. Intermediaries like Uber, Lyft, DoorDash, and Instacart, which offer services but whose websites and apps provide space for retail media advertising and can also deliver hyper-targeted or geo-targeted ads.
5. Connected retail media platforms like Criterio, which integrate the networks of various retail companies, enabling advertisers to scale their advertising across multiple retail media networks more easily.

Amazon is by far the largest retail media network — so much so that it has become synonymous with retail media. With about an 80% global market share of retail media spend, it dwarfs its closest competitor, Walmart, with just 6%. The top 10 retail media networks sell groceries and/or consumer packaged goods. Consumer packaged goods companies also spend the most on RMN advertising.

Examples of retail media network advertising

Retail media networks offer a variety of advertising opportunities.

Onsite ads

Onsite ads appear on a retail media network’s websites and mobile apps. There are three main types of onsite ads:

• Sponsored product or brand advertising usually appears on a website’s search results, product detail, category, and browse pages. These placements, which are made interactively and based on the shopper’s browsing behavior and purchase history, are ideal for advertising products to shoppers interested in similar items.
• Display ads, similar to the advertising in print media.
• Native ads, which are designed to blend in with surrounding content and not appear as a hard sales push.

Offsite ads

Offsite ads, sometimes called “up-funnel ads” because they appear further from the actual point of sale, appear on other online channels associated with the retail media network, including partner sites, mobile apps, social media platforms, promotional emails, streaming platforms, and even public WiFi portals. They are usually part of brand awareness campaigns: Their reach is broader, and they’re less likely to lead directly to a purchase. 

In-store ads

Retail media network owners with brick-and-mortar stores use digital signage, TVs, point-of-purchase screens, and interactive kiosks in strategic locations to provide sponsored product recommendations. These ads might also appear on digital out-of-home media like billboards and in real-world locations owned by RMN partners, like the digital displays on gas pumps and electric vehicle charging stations.

How do retail media networks work?

Retail media network owners have a deep understanding of their customers’ purchasing patterns because they collect first-party data, including browsing behavior and demographic information, about their customers. They use that data to demonstrate the value of the ad space on their network to advertisers. Armed with that data, marketers target their ads by purchasing ad space on an RMN near content or other products of interest to their buyer personas. 

Because the same company controls the various channels in a retail media network, advertisers can orchestrate marketing campaigns across multiple channels and connect with potential customers throughout their purchasing journey.

Retail media networks are usually promoted by a dedicated sales and marketing team separate from the team that promotes the RMN owner’s products. In fact, large RMNs function as separate divisions: Amazon Ads, Walmart Connect, Target’s Roundel, and so on.

How campaigns work on retail media networks

A retail media network platform usually comprises an interface through which marketers purchase or bid on ads, and a reporting and analytics module so advertisers can assess how their ads are performing. Running a campaign on an RMN typically involves the following six steps. 

1. Retailers provide information on the ad space and channels available to marketers.
2. The advertiser sets up a campaign, either directly on the RMN’s platform or using a demand-side platform, which makes it easier for marketers to run campaigns on multiple RMNs. The campaign specifications include audience, budget, ad formats, and channels.
3. The retailer bids on the ad space.
4. The ads of the winning bidder are served to the various channels. The placement is optimized based on the specifications established by the advertiser and the RMN’s first-party data.
5. If the ad is onsite and triggers a purchase, the retailer gets a portion of the item’s cost and the retailer gains first-party data based on the purchaser’s onsite behavior.
6. Those data-based insights are analyzed and used to optimize future RMN choice, ad spend, ad targeting, and so on.

Benefits of retail media networks

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Benefits to advertisers

Advertisers benefit from retail media networks in three ways.

• More effective targeting - RMNs optimize ad placement and report on campaign performance, often in real time. Because RMNs use first-party data — data collected directly from their customers — RMNs help marketers target their ad spends more efficiently, optimize campaigns, connect with potential customers, and engage with existing customers more effectively. 
• Higher conversion rates and sales volumes - Since the retailer owns the network, an RMN is a good way to reach prospective buyers when they are most receptive: actively comparing products or have already decided to make a purchase. This increases the likelihood of converting a prospect to a buyer.
• More accurate ROI calculations - Because retail media networks are data-driven and can accurately link ad impressions directly to purchases, the analytics they offer enable advertisers to understand their audience’s shopping behavior, connect ad spend with product sales accurately, make reliable ROI calculations, and hone strategic business decisions about inventory, sales and marketing resources, and ad budgets. 

A majority of marketers cite the ability to reach an incremental audience and leverage a retailer’s first-party data as primary benefits of RMNs.

Benefits to consumers

Consumers benefit from the more personalized shopping experience that retail media networks provide. Seeing ads relevant to their interests helps them discover new products and brands and makes it easier to comparison shop. 

Revenue from RMNs may also help retailers offset overhead costs, allowing them to price their products competitively — which means consumers may get a better deal on the products they purchase on a retail media network’s website.

Benefits to retailers

Retailers benefit from retail media networks because they provide additional revenue streams:

• From the sale of the ads themselves
• From the sale of the first-party data they collect

Because the customer data they aggregate is so valuable, many large retailers — including Amazon, Target, Kroger, and Walmart — have become de facto data companies. The data not only adds value to the ad space in the retail media network but has become a commodity itself. 

By offering advertisers ad placements informed by high-quality first-party data, even smaller retail media networks can attract ads from brands that would usually purchase ads with a larger audience because the audience they can provide is so likely to convert impressions to purchases.

Retail media networks can also increase the value of individual transactions through cross-selling and upselling. 

How to choose the right retail media network

Choosing a retail media network — or the right combination of RMNs — to advertise on involves assessing return on ad spend (ROAS), ad offerings, and technology. As with any ROAS calculation, there are three interrelated criteria: budget, audience size, and niche. Because retail media networks can provide precise first-party data on their audience and real-time analytics on ad performance, finding networks with the right audience for the right price is a matter of lining up all the data. 

That said, not all RMNs offer the same type of ads. Online-only retailers may not offer in-store advertising, for example, and smaller networks may not have partners who offer geo-targeted ads. 

In addition, return on ad spend for retail media ads can be trickier to calculate than other types of advertising. The cost for ad space on an RMN is not necessarily constant and can fluctuate based on criteria like:

• Ad clicks
• Ad impressions or views
• Conversion rates
• Add-to-cart rates
• Value per transaction

RMNs often sell ad space to the highest bidder, making it difficult for small and midsize retailers to compete against larger brands. Programmatic advertising, an automated process driven by machine learning that buys and sells digital ads in real time, delivers the most effective ads based on triggers derived from shopping patterns. However, it can further complicate ROAS calculations. As a result, many marketers use demand-side platforms or turn to third-party media buyers to handle their retail media ad spend. 

Data and technology challenges for RMN advertisers

Measuring the performance of RMN advertising — particularly when an advertiser works with more than one RMN — is among the biggest challenges facing marketers. Most retailers work with between three and six RMNs. Because each RMN platform has its own interface, marketers must learn to use multiple platforms.

But industry reporting standards have only recently been established and the majority of RMNs have not opted into them yet. So most retailers continue to share data on ad performance differently.  Add in a complex purchasing process, fluctuating currency values in a global marketplace, and multiple ad formats and channels, comparing performance across networks becomes very difficult.

In addition, while the success of retail media network advertising is based on the first-party data informing ad buys and placement, advertisers do not own that data. And the data on their ads’ performance remains siloed in each RMN.

To overcome these data silos, marketers use a combination of data transfer technology such as ETL or ELT, and data warehouses to aggregate and store the data from the retail data networks on which they advertise. RMN data can then be integrated with data from other marketing channels, analyzed as a whole, and activated using a composable customer data platform.