Are Retail Media Networks Redefining the Economics of Modern Retail?

Retail media has transitioned from the margins of digital advertising to the core financial backbone of modern retail. Global retail media advertising spend crossed US$130 billion in 2024, accounting for more than one-fifth of total digital ad spend and is forecast to grow at over 15% CAGR through the decade. What makes this growth exceptional is not just its scale, but also its profitability. For several large retailers, media and data monetisation now deliver margins that materially exceed those of their core merchandising businesses. 

This shift marks a structural redefinition of retail economics. As product margins face sustained pressure from price transparency, supply chain volatility, and private label competition, retail media networks have emerged as a resilient, data-driven profit engine anchored in first-party shopper relationships. 

Why retail media economics outperform traditional retail

 

The financial logic of retail media is fundamentally different from selling goods. Retailers monetise owned demand rather than manufactured inventory. The cost base is essentially fixed, inventory is digital or incremental, and pricing power is underpinned by deterministic purchase data rather than probabilistic audience modelling. 

Public disclosures underscore this dynamic. Amazon’s advertising services segment has scaled into a tens-of-billions-dollar annual business, growing faster than its core e-commerce revenue while delivering materially higher operating margins. Walmart Connect has followed a similar trajectory, becoming one of the company’s fastest-growing profit contributors as it expands across on-site search, off-site programmatic, and connected television inventory tied to Walmart’s first-party data. 

For executives, the implication is clear. Retail media is not an ancillary revenue stream; it is a primary revenue stream. It is a margin stabiliser and, increasingly, a margin expander. 

From ad inventory to commercial platform

 

Retail media maturity is defined by the extent to which advertising is integrated into the retailer’s commercial platform. Leading networks have evolved beyond sponsored product listings into multi-format ecosystems that span on-site placements, off-site activations, video, CTV, and in-store digital screens. 

Kroger’s retail media business illustrates this shift. Built on its loyalty data and powered by its in-house analytics subsidiary 84.51˚, Kroger enables advertisers to plan, activate, and measure campaigns across digital and physical touchpoints with closed-loop attribution to sales. This capability has positioned the network not merely as an ad seller but as a strategic growth partner to consumer brands navigating fragmented media channels. 

The strategic insight here is that scale alone is insufficient. Sustainable profitability comes from integrating data science, media execution, and commercial strategy into a single operating model. 

Measurement is the real source of pricing power

 

Retail media’s pricing power rests on its ability to demonstrate incremental sales impact. Unlike traditional digital media, retail networks can link exposure directly to transaction data across channels. This closed-loop measurement capability is why advertisers are reallocating budgets from open-web display and social platforms toward retail-owned media. 

However, measurement sophistication varies significantly across networks. Advanced players are investing heavily in incremental testing, clean-room partnerships, and cross-platform attribution frameworks. Walmart’s expansion into connected TV through integrations with smart TV manufacturers exemplifies how retailers are extending deterministic measurement beyond their own digital properties into the living room. 

For advertisers, this creates a rare combination of reach, relevance, and accountability. For retailers, it justifies premium pricing and longer-term budget commitments. 

Organisational and operating implications

 

Treating retail media as a true profit centre requires organisational redesign. Successful retailers operate media as a distinct business unit with its own profit and loss (P&L) statement, product roadmap, and sales incentives. This separation reduces internal conflicts between merchandising and media monetisation while enabling faster innovation. 

Sales capabilities must also evolve. Retail media selling is no longer about inventory volume. It is about outcome-based commercial conversations with brand and performance marketing leaders. Retailers that fail to professionalise this function risk commoditization and pricing pressure, despite having strong data assets. 

Technology investment is equally critical. Scalable ad tech stacks, privacy-first identity resolution, and interoperable APIs with demand-side platforms are now table stakes for relevance in enterprise media plans. 

Risk management and regulatory discipline

 

As retail media scales, scrutiny intensifies. Data governance, consent management, and transparency are becoming competitive differentiators rather than compliance checkboxes. Retailers operating across jurisdictions must ensure that shopper data usage aligns with evolving privacy regulations while maintaining the confidence of advertisers. 

Another structural risk lies in perceived conflicts of interest. When retailers control both shelf placement and ad exposure, governance frameworks must be explicit and transparent. Precise auction mechanics, disclosure standards, and internal firewalls are essential to sustaining trust with brand partners. 

The strategic leaders in this space are those who treat governance as an enabler of growth rather than a constraint. 

Strategic priorities for the next phase of growth

 

Retail media networks are entering a phase of consolidation and sophistication. Over the next three years, differentiation will be driven by three factors. First, the ability to unify online and offline measurement at scale. Second, expansion into premium video and CTV inventory linked to shopper data. Third, the development of interoperable standards that allow brands to compare performance across retail networks with confidence. 

Retailers that underinvest in these areas risk being relegated to tactical budget allocations rather than becoming core components of enterprise media strategies. 

Conclusion

 

Retail media networks have reached an inflection point. What began as a monetisation experiment has become one of the most structurally attractive profit pools in retail. With global spend exceeding US$130 billion and accelerating, media and data monetisation now shape how leading retailers defend margins, deepen supplier relationships, and fund long-term digital transformation. 

The strategic question for retail leadership is no longer whether retail media should be part of the core business; it is whether it should be integrated into the core business. It is whether the organisation is structured, governed, and technologically equipped to scale it into a durable profit engine. Those who act decisively will redefine their role in the advertising value chain. Those that do not will watch margin leadership shift to competitors who understand that the future of retail profitability is as much about media as it is about merchandise.