According to a recent global forecast from the marketing research firm WARC, marketers are projected to allocate a significant $128 billion towards retail media or advertising on ecommerce platforms this year. This category, known as retail media, is expected to see a substantial 10.2% increase compared to the previous year, with a further growth of 10.5% anticipated for the next year. Remarkably, this growth seems to be impacting traditional advertising channels like Google search and offline media, including linear TV.
In recent years, retail media has gained tremendous traction in the advertising landscape. This surge is partly attributed to marketers’ concerns about the economy, prompting them to invest in advertisements that have a more direct impact on driving consumer purchases. Alex Brownsell, the Head of Content at WARC, mentioned that some of this growth is happening at the expense of conventional advertising avenues such as linear TV, print media, and audio platforms.
Linear TV spending is predicted to decline by 5.4% this year, reducing its share of the total global advertising budget to 16.3%, according to WARC. Expenditure on “newsbrands and magazines” is expected to drop by 5.9%, with audio advertising down by 0.8%. Meanwhile, retail media is set to expand its share to 13.3% of the total advertising spending.
Furthermore, retail media is making inroads into search advertising that was traditionally dominated by Google, as stated by Bill Fisher, Principal Analyst at Insider Intelligence. In the United States, search spending on retail media properties is projected to increase by 18.7% this year, whereas search spending outside of retail media is anticipated to grow by only 5%, according to Insider Intelligence.
Google has oscillated between various shopping strategies and leadership changes in its quest to rival Amazon as the preferred choice for shoppers. Despite offering features like Shopping Ads, analytics, and order management tools, Google is not typically regarded as a retail media operator by industry analysts.
The primary beneficiaries of the retail media boom include Amazon, expected to account for a significant 34.6% of global retail media spending in 2023, maintaining its dominant position. Other beneficiaries encompass supermarkets like Kroger, ecommerce platforms like Farfetch, and apps such as Uber.
However, not all retail media spending is displacing Google and traditional advertising channels. According to Forrester’s CMO Pulse survey for the second quarter, the majority of retail media spending is being sourced from existing trade and shopper marketing budgets. Retailers are reallocating these budgets to support the expansion of their retail media networks.
Retail media providers are aggressively vying for a larger share of advertising budgets by diversifying their ad formats beyond search. Amazon, for example, offers a range of video, streaming, and social commerce options. Walmart is expanding its in-store advertising business by increasing ads on self-checkout screens and in-store audio. In its recent IPO filing, Instacart outlined its plans to introduce “shoppable product brand pages.”
However, not all retail media networks are poised to become major players in the advertising space. Insider Intelligence’s forecast from March indicates that Instacart (42.8%) and Walmart (39.1%) will be the fastest-growing players in US digital advertising this year, outpacing non-retail media companies like Apple and TikTok, with Amazon expected to grow by 17.4%.
According to Forrester’s Nikhil Lai, there is a long tail of retail media networks with insufficient traffic on their platforms to generate the spending levels achieved by the dominant triopoly of Amazon, Walmart, and Instacart. Consequently, these smaller players are likely to focus on helping advertisers connect with their target audience across other websites.