Digital advertising has changed significantly in the last few years. One of the biggest shifts has come from inside the retail world itself.

Retailers have started using their websites, apps, and stores not just to sell products—but also to sell advertising space. This shift has created a new system for how brands reach consumers and how ads are measured.

This article explores how retail media developed, what it is, how it works, and why it has become a central part of the digital advertising landscape.

What Is Retail Media

Retail media is advertising that appears on platforms owned by retailers. These platforms include e-commerce websites, mobile apps, and physical stores.

Retail media allows brands to show ads to shoppers directly where they are already looking for products. It places advertising at the point of purchase, where consumers are making buying decisions.

Definition: Retail media is a type of digital advertising where brands promote their products on retailer-owned platforms such as websites, mobile apps, and in-store digital screens.

The main retail media formats include:

• On-site display ads: Banner ads that appear on a retailer's website

• Sponsored products: Ads shown within search results or product listings

• Off-site ads: Ads shown on external websites, targeted using data from the retailer

Retail media began to grow in the late 2010s. Retailers started launching their own advertising networks, using their shopper data and digital platforms to offer targeted ad space to brands. Examples include Amazon Advertising, Walmart Connect, and Target Roundel.

How Retail Media Changed Digital Advertising

Retail media changed how digital advertising works by allowing brands to show ads to people when they are most likely to buy something. This happens on websites, apps, and even in physical stores owned by retailers.

In traditional advertising, it was hard to know if a digital ad led to a sale. Retail media introduced closed-loop measurement, which connects the ad directly to the purchase. This means advertisers can see what was bought after someone saw an ad.

![Retail media closed-loop measurement diagram showing how ads connect directly to purchase data]

Retail media also shifted targeting to the point of purchase. Instead of placing ads when people are just browsing the internet, these ads appear while people are actively shopping.

Another important change is how data is used. Retailers use their own data—called first-party data—from customer purchases and interactions. This data is more valuable now because third-party cookies used to track people across the web are being phased out.

Why It Gained Momentum

Rising Costs on Traditional Channels

Over the past few years, the cost of advertising on platforms like Facebook and Google has increased significantly. Many advertisers saw their costs per thousand impressions (CPMs) go up by 10-20% year over year.

Retail media offered an alternative with stronger return on ad spend. Brands began to shift budgets after seeing better results compared to traditional digital channels.

Demand for First-Party Data

Privacy laws like GDPR in Europe and CCPA in California, along with changes like Apple's iOS 14.5 update, limited how advertisers could track users across the internet. These changes reduced the effectiveness of third-party cookies.

Retailers already had access to first-party data—information collected directly from their customers. This data allowed advertisers to target shoppers based on actual behavior, not assumptions.

First-party data advantage: Retailers know what customers actually buy, not just what they might be interested in. This makes targeting more accurate and effective.

Growth of Connected TV and Omnichannel

Connected TV (CTV) provided new places for retail media ads to appear. Retailers began using CTV platforms, mobile apps, and in-store screens as part of their advertising programs.

Retail media networks became more integrated, connecting physical stores with digital platforms. This allowed advertisers to show consistent messages across multiple locations and devices.

Shifts in Consumer Privacy

Consumer awareness of data privacy increased. Laws and platform policies began to favor consent-based tracking, which requires users to agree before their data can be used.

Retail media networks offered a way to reach audiences using first-party data that had already been collected with user consent.

Key Drivers of Ongoing Growth

First-Party Data Advantage

Retailers gather first-party data directly from their customers through actions like joining loyalty programs, making purchases, and browsing online. This data includes specific behaviors that allow advertisers to divide audiences into detailed groups.

These groups might include customers who buy often, customers who have stopped buying, or people who frequently view certain types of products.

Omnichannel Integration

Retail media networks now link digital and physical retail environments. Ads placed online are connected with real-world touchpoints, such as in-store screens, shelf labels, and mobile notifications.

This integration supports continuity across the customer experience. A shopper may see an ad on a retailer's website, get a reminder on their phone while near a store, and then see an in-store display near the product.

Real-Time Attribution

Retail media platforms track campaign performance quickly and in detail. They show how ad exposure connects to purchases using data from the same retail system.

This level of measurement is known as closed-loop attribution. It includes metrics like return on ad spend (ROAS), incrementality, and basket analysis that reveals what else was purchased.

Practical Steps to Launch a Campaign

Align Objectives and Pick Platforms

Begin by identifying business goals for the campaign. Common goals include increasing sales, promoting specific products, or reaching new audiences.

Next, evaluate available retail media networks. Compare them based on audience demographics, targeting tools, ad formats, and minimum investment levels.

Match the network's strengths with the campaign objectives and product type. This alignment helps ensure the platform can support the campaign's focus and scale.

Develop Creative That Converts

Retail media creative assets are typically displayed in product listings, search results, and banner placements. These formats require clear messaging and visuals.

Best practices:

• Use high-resolution product photos with consistent backgrounds

• Write brief, informative product descriptions

• Format creative assets to match platform specifications

• Compress files to reduce load time on mobile

Display and video ads should be designed for the specific environment of the retail platform. For example, a banner on a grocery app may require a different layout than a video ad on a connected TV.

Use Data for Targeting and Measurement

Retail media networks offer access to first-party shopper data. This includes behavioral data like browsing and purchase history, as well as demographic data.

Select targeting criteria that align with the intended audience. This could include past buyers, category browsers, or shoppers who abandoned a cart.

During the campaign, monitor performance using metrics such as:

• Return on ad spend (ROAS)

• Conversion rate

• Incrementality (sales driven by the ad versus what would have occurred without it)

Use A/B testing to compare variations in creative, bids, or audience segments.

Optimize and Scale

Once the campaign begins generating data, review reports to identify patterns in performance. Focus on which products, placements, or audiences are producing the highest returns.

Adjust bidding strategies to prioritize top-performing ad placements. Reduce or pause underperforming segments.

Refresh creative assets regularly to maintain engagement. Repeating the same visuals too often can lead to reduced performance, known as ad fatigue.

Challenges Brands Face

Privacy Regulations and Data Governance

Retail media relies on customer data, which is subject to privacy laws like GDPR and CCPA. Companies use systems that manage customer consent, secure data storage, and monitor how data is collected and used.

Privacy solution: Many retail media platforms handle compliance internally, making it easier for advertisers to run campaigns without worrying about complex regulations.

Competition for Ad Inventory

Retail media platforms offer limited space for ads. As more brands enter this space, demand for premium placements increases. This makes certain ad spots more expensive and harder to secure.

To compete, advertisers often plan their campaigns early, adjust bids frequently, and build direct relationships with retail media networks.

Limited Internal Expertise

Retail media combines skills in media buying, data analysis, creative development, and platform navigation. Many organizations do not have teams with experience in all of these areas.

Companies build internal teams by hiring people with retail media experience or work with external partners who specialize in this field.

Where Technology Fits In

AI and Predictive Analytics

Artificial intelligence (AI) and machine learning are used in retail media to improve how ads are shown to consumers. These technologies automate tasks such as choosing how much to bid for an ad placement and selecting which ads to show.

AI-powered tools in retail media include:

• Automated bidding systems that adjust in real-time

• Creative optimization that tests different versions of ads

• Audience modeling that predicts which shoppers are most likely to buy

Predictive analytics uses historical data to estimate future behavior. In retail media, this helps advertisers match products to people based on past shopping patterns.

CTV and Interactive Video

Retail media now includes Connected TV (CTV), which refers to internet-connected televisions that allow users to stream content. Ads on CTV are often shown during streaming shows or videos.

Some retail media ads on CTV use QR codes that link to product pages. Others use remote controls to allow viewers to select or buy products directly from the screen.

Emerging retail media technologies:

• Shoppable video: Viewers can click or scan to purchase items directly from a video ad

• Voice commerce: Smart speakers and voice assistants are used to place orders or get product information

• AR/VR experiences: Augmented and virtual reality allow users to view or try products digitally

Looking Ahead

Retail media has changed how digital advertising works by placing ads directly in the environments where people are shopping. It allows brands to connect advertising with actual buying decisions.

In the coming years, several shifts in retail media are expected:

1. Many retail media networks are merging or forming partnerships, resulting in fewer but larger platforms.

2. New measurement tools are emerging that help advertisers see how their campaigns perform across multiple retail media networks.

3. New ad formats are being tested and adopted, including shoppable video ads and augmented reality experiences.

4. Voice-enabled shopping experiences are expanding through smart speakers and other devices.

5. Retailers are continuing to integrate online and offline advertising to create a more connected experience.

Darkroom applies a data-focused approach to help brands plan and manage their retail media campaigns. For those exploring this space, schedule an introductory call with Darkroom to learn more.

FAQs About Retail Media

What budget do I need to start advertising on retail media networks?

Advertising budgets for retail media networks vary by platform. Some networks accept campaigns starting around $5,000 per month, while others with high traffic may require $25,000 or more.

How does retail media performance compare to social and search advertising?

Retail media often shows higher return on ad spend than social or search advertising. Many advertisers report returns of 3-5 times their investment in retail media compared to 2-3 times on other channels.

How can brands measure the impact of retail media campaigns beyond direct sales?

Retail media networks offer incrementality testing tools that use control groups to compare outcomes between people who saw the ad and people who did not, helping measure the true impact of campaigns.

Which retail media networks work best for consumer packaged goods brands?

Walmart, Kroger, and Instacart are popular choices for CPG brands because they provide access to grocery shoppers and offer detailed purchase history data.

How can direct-to-consumer brands use retail media if they don't sell through retailers?

Direct-to-consumer brands can use retail media to reach shoppers browsing similar product categories, helping them find new customers based on shopping behavior even if their products aren't sold on those platforms.