In 2024, YoY growth rates in retail media ad spending dipped below 20% for the first time, and growth is expected to decelerate every year through 2029. This broader industry slowdown is catching eager retail media networks (RMNs) off-guard, creating urgency to adapt for leaner times.

Retail media has evolved from ecommerce side hustle into a compelling opportunity to generate high-margin revenues

Retail media has captured the attention of multibrand retailers looking to offset ecommerce margin drains. Across the retail landscape, ecommerce sales penetration continues to inch up, following a major boost during the pandemic. Because ecommerce sales generally incur lower margins, the channel’s increasing share of sales means that retailers need to maintain a growing penetration of low-margin sales. Retail media revenues, with rich margins estimated to be over 70% from selling ads on-site, have cemented retail media’s place in ecommerce strategies by helping offset thinner margins.

Evaluating a retailer’s success requires context beyond dollar amounts. Today, most of the spending on retail media is allocated to ads on retailers’ websites. Site traffic and breadth of product assortment (categories and brands) have a significant impact on total potential. Analyzed solely from the perspective of RMN revenue volume from retailer to retailer, the significant gaps in share give the impression that only a few retailers are successful. But examining a retailer’s RMN revenues in proportion to its ecommerce business, it’s easier to see how even a comparatively small RMN can make a meaningful difference to the bottom line.

However, smaller retailers face greater financial constraints, making the fixed costs of launching and maintaining an RMN a heavier burden. While the impact of retail media revenues on a retailer’s business can be significant, many of the costs associated with running an RMN are fixed. This creates significant constraints for smaller retailers. Some of the most expensive elements, such as proprietary technology and sales staffing, may end up becoming prohibitively expensive. Building proprietary tech stack components in-house can have long-term payoffs, but upfront costs make this out of reach for most retailers.

Read the full report, Future-Proofing Retail Media for the Next Chapter.