Retail media is a popular type of advertising that’s experienced plenty of growth in recent years. It’s potentially fruitful and lucrative both for ecommerce brands looking to advertise their products and services, as well as retailers or other websites looking for an additional income stream.

However, along with these benefits, there are also some drawbacks that it’s important to know when considering whether or not to rely on retail media. If you don’t consider these, using retail media may hurt your profits, displace conversions, or do nothing but capture sales that you would’ve already gotten anyways.

What is Retail Media?

Retail media is a form of advertising where brands pay retailers (or other brands) to promote their products on a retailer’s own website or app, or in their store. This could be through a sponsored product listing, a banner ad, or in a homepage carousel.

The goal here is for the advertiser to place their product or service in front of the publisher’s audience in hopes of converting brand-new customers. Retailers will use their own shopping data to ensure ads are targeted accurately, and these ads often reach shoppers while they’re searching for a product or about to make their buying decision.

Companies can work on both sides of retail media. For example, a company could buy sponsored placement within Amazon for its product, while also selling space on its own site, email list, or newsletter to complementary brands.

While retail media is often digital in nature, there are also plenty of in-store retail media varieties like digital screens and kiosks, checkout or POS ads, overhead signs, product demonstration or sample stations, and more.

In fact, some retail media networks are entirely built around physical-world attention as opposed to online, such as Circle K’s Full Circle Media.

The Growth of Retail Media

Retail media has seen major growth in recent years and is growing quicker than any other digital channel. In fact, total U.S. retail media spend is on pace to hit $107.6 billion in 2026, which is around triple what it was only five years ago. While many digital channels have grown in 2026, retail media networks are at the top with 26.1% growth.

This growth is being fueled by things like:

• More people shopping online, and thus more people seeing and interacting with ads for products.
• The shift to first-party data as privacy regulations tighten.
• A greater demand among consumers for ads personalized for them and their interests.
• Retail media’s closed-loop attribution that connects ad exposure directly to purchases to accurately measure return on ad spend (ROAS).
• The high-profit margin that retailers can enjoy when publishing ads.

The Potential Benefits of Retail Media

Retail media offers several possible benefits for both advertisers buying ads and the retailers publishing them. For advertisers, retail media helps them:

• Reach new potential customers.
• Meet people in high-intent situations (such as while browsing for a product or right before making a purchase decision).
• Get clear insights into things like click-through rates and ROAS.
• Stand out against competitors on a page or in a store.

For those publishing the ads, retail media:

• Serves as a new income stream that’s highly profitable.
• Lets them monetize data.
• Helps them strengthen relationships with brands.

The Possible Downsides of Retail Media

However, there are also some retail media downsides that brands and retailers may run into. On the advertiser side, it’s possible that retail media can erode your margins if you pay for sponsored placement on products you would have sold anyways.

You end up with the same sale, but instead of enjoying all of the profits, you’ll get less as you had to pay the retailer for the placement. Other downsides for advertisers include the high costs of some ads and limited control over things like exactly where the ads are placed and customer data.

Ad publishers and retailers need to watch out that placing too many ads on their site or platform doesn’t hurt site performance or clutter the interface, both of which can ruin the visitor experience.

Also, if a merchant decides to publish ads for other companies, there’s a chance that it may also displace conversions and drive people away from the site. For example, if they make $5,000 from selling ad space, it may feel like a great deal.

But if those ads drove people away and led to a $6,000 loss in sales, then publishing those ads didn’t really earn them $5,000, but actually cost them $1,000.

Our Take

A Valuable Option, But Use it Carefully

Retail media can serve as a wonderful chance to reach potential buyers when they’re close to converting, and get your product or service in front of someone who may never have seen it otherwise. It’s also another potential income stream for retailers as they sell ad space on their sites, apps, or in-store surfaces.

However, those on both sides of retail media also need to be careful. Ecommerce brands looking to purchase ads need to make sure they’re not paying for people they would’ve converted anyways by doing things like running incrementality testing or by focusing your budget and direction on cold audiences.

For retailers thinking about publishing ads to have another income stream, make sure to do it tastefully enough that it doesn’t ruin your audience’s experience, and also beware of advertising products or services too similar to what you offer, as that may drive sales or conversions away from your site.