While the “wild west” era of retail media networks (RMNs) once pushed brands to spend aggressively, recent data suggests successful advertising requires a mix of different RMN formats to meaningfully boost visibility and profit returns.
Mid-sized brands exemplify retail media’s evolution, according to a Keen Decision Systems report that measured the retail media spending of 182 brands over the past year. These companies, generating roughly $100 million to $500 million in annual retail sales, have enough budget flexibility to experiment across multiple retailers, including Amazon, Walmart, Target and Instacart, while still having significant room to scale.
Three quarters of mid-sized brands retail media buys grew their RMN investment by 26% year over year compared to 8% for small brands and 24% for large brands, Justin Jefferson, VP of strategy and insights at Keen Decision Systems, explained.
How are mid-sized brands driving RMN growth?
Smaller brands with limited budgets often concentrate retail media spending on one platform rather than expanding investment to other channels. Whereas mid-sized brands are supporting RMN growth through a combination of new net dollars and reallocations from existing channels, Jefferson said.
That flexibility gives mid-sized brands an advantage over both ends of the market. While larger brands that have already conducted extensive testing across retailers and ad formats, have less room for incremental ROI gains, he added.
Mid-sized brands, meanwhile, are still uncovering new opportunities as they expand beyond Amazon and diversify their retail media investments.
“Retail media follows distribution: You buy where you have shelf presence,” Jefferson said. “Mid-sized brands have earned multi-retailer distribution that small brands have not.”
Smaller brands face the opposite challenge. Limitations around budget, retailer relationships, data access and testing opportunities often push them toward a single retail media network, typically Amazon. Among smaller brands in Keen’s report, 71% of retail media spending goes to Amazon. While Amazon’s scale makes it easier for smaller advertisers to concentrate their budgets in one place, they may be overlooking higher-return opportunities elsewhere.
Diversifying RMN dollar allocation boosts ROI
Mid-sized brands have diversified more aggressively, allocating just 46% of their retail media budgets to Amazon and spreading the remainder across retailers such as Walmart, Target and Instacart. That diversification matters because some of the strongest returns in Keen’s data come from outside Amazon.
The next phase of retail media belongs to the brands that spend better, not just more.
Justin Jefferson, VP, strategy & insights, Keen Decision Systems
“A balanced mix simply gives more dollars a chance to earn those returns,” Jefferson said.
That raises a broader question for brands of all sizes: Where should they allocate their retail media budgets?
Keen found that 71% of retail media spending goes to search advertising on retail media networks, such as Amazon Sponsored Products and Walmart Connect. Search ads are effective at capturing consumers who are already actively looking for products.
However, display advertising generates 40% more profit than search, while streaming video also delivers a higher profit return on investment, according to the report. While search primarily captures existing demand, display and streaming video can help create demand and influence consumers earlier in the purchase journey. Despite those advantages, marketers continue to favor search because its performance is relatively easy to measure.
Jefferson argues that many brands are overly concentrated at the bottom of the funnel (i.e. sponsored search ads) instead of spreading out to the top (display ads, streaming video) and middle (display, video and some sponsored content).
“Top-of-funnel retail media pays back 2.1 times for mid-sized brands versus 1.5 for the bottom-of-funnel placements where about 86% of all retail media dollars sit today,” he said.
The findings suggest brands may benefit from a more balanced mix of search, display and video advertising rather than concentrating the majority of their retail media budgets on search alone. As retail media evolves, success may depend less on spending more and more on spending more strategically.
“In a young market, everyone spends on momentum,” Jefferson said. “In a maturing one, winners are decided by allocation quality. The next phase of retail media belongs to the brands that spend better, not just more.
