Retail Media Market Growth Outpaces Advertiser Value

Retail media is advertising published by retailers, with Amazon Sponsored Products being the most widely recognized example. This form of commerce allows merchants to promote their products within a platform that already controls the customer journey, effectively turning an online storefront into a dedicated advertising channel. For a shopper searching for “waterproof hiking boots,” the message appears close to the moment of purchase, which is a distinct advantage for the advertiser.

Growth of Retail Media Spending

The market is substantial and growing rapidly. A 2025 Journal of Retailing paper estimated 2024 global retail media spending at more than $140 billion, including $54 billion in the United States. More recently, eMarketer forecasts U.S. retail media ad spend at $69.33 billion in 2026, a 17.9% increase from 2025. Ecommerce companies can participate on either side of this market. A merchant selling through Amazon, Walmart, or other marketplaces can buy ads to convert more shoppers, while the same merchant can also sell and publish ads on its own site and email list.

The advertisers’ goal is to increase sales. Retail media can be useful because the message appears close to the purchase decision. A brand that spends $1,000 on retail media and generates $5,000 in sales it would not otherwise have received can produce $1,500 in contribution margin before advertising, resulting in a $500 net benefit.

However, the economics look different when the sale would have happened anyway. A marketplace where a seller historically ranked well organically may add more sponsored placements, causing competitors to bid for them, and the seller must spend $5 on advertising to maintain a $50 sale it used to get without that expense. The shopper still purchases the same product, and retail media has generated revenue for the marketplace, but not for the advertiser. This possibility is more than theoretical. The Journal of Retailing report noted concerns that retail media can erode advertisers’ margins when the attributed sales are not incremental or new.

Measuring True Ad Performance

Assessing the impact of retail media requires looking beyond simple return on ad spend metrics. An advertiser generating $8 in sales for every $1 ad may have received those conversions anyway. To estimate the true effect, large advertisers use randomized experiments, marketing mix models, geo-testing, and similar methods. Smaller companies can assess new-customer sales, organic performance, and periods with and without campaigns. This distinction matters for both sides of retail media, as the platform is not inherently a win or loss.

Retail media can also affect the margins of merchants publishing the ads. Consider a retailer with a category page generating $100,000 in monthly merchandise sales and $30,000 in gross profit. A supplier agrees to pay $3,000 per month for a prominent advertising placement. However, if the sponsored placement displaces the merchant’s own conversions, gross profit falls from $30,000 to $28,000. The retailer-publisher collected $3,000 in media revenue but gained only $1,000 overall.

The Risk to Publisher Margins

In some cases, the outcome can be even worse. If gross profit from product sales falls to $26,000, the $3,000 from retail media lowered overall margin by $1,000. Advertising revenue increased, but business performance declined. That risk extends beyond a single product. Too many sponsored products or irrelevant recommendations could make a store harder to shop, weaken customer trust, or reduce conversions over time.