What: Bain & Co review where retailers stand when it comes to Retail Media.

Why it is important: Competition from other industries to also enter the ad space is stiff, for this reason, a strong, segmented, value proposal, mixed with a well-integrated operating system into the core business, is key.

Retail media networks, where retailers sell ad space on their websites and apps, have grown significantly, with over 150 networks globally. This growth has been aided by the e-commerce boom and changes in trade promotion due to the COVID-19 pandemic. However, the retail media landscape is set to become more competitive and complex.

Advertisers are now viewing retail media as a significant channel rather than an experimental one, with global sales exceeding $90 billion annually. This shift is leading to more strategic spending, likely resulting in a consolidation of ad spending across fewer networks. Advertisers are setting higher performance expectations, pushing retail media networks to improve in areas such as planning, capabilities, and outcome evaluation.

The retail media market is expected to grow to about $140 billion by 2026, with a significant shift in profits for retailers from traditional trade to activities like retail media. Consumer packaged goods (CPG) brands recognize the unique marketing opportunities retail media offers, especially its targeted reach and closed-loop attribution linking ad spend to sales. However, most networks currently have low Net Promoter Scores, indicating dissatisfaction among advertisers.

Challenges for retail media networks include rapid market changes, the need for a new go-to-market strategy, organizational integration, and performance measurement. Networks need to adapt by focusing on segmented strategies, integrating operations with core retail functions, and improving performance tracking.

As retail media matures, networks must demonstrate better returns and outcomes compared to other digital advertising channels. Retailers have a window of one to three years to adapt and position themselves for sustained growth in this high-margin area. The future of retail media will likely involve more collaboration, test-and-learn approaches, enhanced commercial functions, and acceptance of imperfection in the pursuit of high-margin growth.

No more easy money on the side: Retail Media enters the performance era