Retail media: 5 crucial decisions retailers must get right

Retail media has rapidly become the third-largest digital advertising channel, trailing only paid search and social advertising. Forecasts indicate that it will reach $160 billion in 2027, constituting 18% of global digital advertising and 11% of total advertising.

So, for retailers, it isn’t just a side project — it’s a game-changer. For those who lay solid foundations and maintain clear focus, it has the potential to transform the entire business, reducing reliance on core retail operations and bolstering the overall financial health of the company.

Why invest in retail media?

With unique first-party data, retailers offer an unmatched ability to reach audiences throughout their journey from awareness to purchase, both online and in-store.

For brands, this is a crucial opportunity to deliver more value to their audience at key moments of purchase intent while diversifying their digital advertising strategies beyond typical platforms including Google, Meta, and Amazon.

For retail media to truly succeed, retailers need to treat it as more than just another arm of their existing operations. It should be treated akin to a startup within the company, requiring different products, services, customers, and facing different competitors.

With disruption and squeezed margins ubiquitous in retail, this is a rare chance for retailers to establish and benefit from a higher-profit revenue stream. Retailers who move quickly will be better positioned to continue investing in overall business improvements and customer experience; retailers who dally risk falling behind.

At AlixPartners, we help retailers evaluate and accelerate their retail media business, guiding them through the complexities of building or enhancing their propositions, focusing on five critical decisions that can make or break their success.

Decision 1: What’s our ambition?

Getting started with retail media begins with a clear understanding of revenue potential. Retailers need to identify what they can monetise, who their target customers are, and which competitors they’ll face in the market.

The value of a retailer’s data hinges on the size as well as uniqueness of its customer base, and its ability to segment into relevant audiences, target those audiences effectively and measure the impact of media campaigns. Brands want diverse ways to reach these customers — and the ability to measure their media spend impact.

Retailers shouldn’t limit their prospects to current suppliers. Non-endemic brands offer significant untapped potential. Additionally, retailers must critically assess the competition and determine what it will take to create a standout retail media offering.

Decision 2: What’s the right business model?

Retailers need a comprehensive understanding of what’s required for the ongoing operation of a retail media business, including which parts of the process they can own and which to outsource.

Most retailers will partner with third-party specialists, from creative services to advanced audience targeting — at least to get the business started. The key is developing a strategic approach to these partnerships to ensure long-term success.

Internally, clear workflows are essential, particularly where retail media and buying teams intersect. Defining roles and responsibilities in areas such as lead generation, ad sales, and relationship management is crucial to avoid inefficiencies and miscommunication.

Decision 3: How much media expertise do we need?

Retailers must bring in media-savvy professionals, ideally including them in the leadership team designing this new unit. Whether sourced internally or externally, these experts will help retailers position themselves competitively in the market. It’s vital to have full-time staff who are fluent in the media landscape and have established relationships with media buyers on both the brand and agency sides.

Integrating these experts with existing teams will involve a learning curve, with professionals from each discipline needing to educate one another on industry norms. This cross-pollination of knowledge is key to building a cohesive, effective team.

Decision 4: What are the basics we must get right?

In the retail media space, retailers aren’t just competing with other supermarkets — they’re up against industry giants like Google, Meta, and Amazon. To break into this space meaningfully, retailers must invest in the fundamentals.

This includes capturing and integrating first-party shopper data, ensuring sufficient in-store and online traffic to attract advertisers, and creating valuable, data-driven audiences for brands. Campaign execution and measurement must be straightforward, and retailers must adhere to industry standards on ad quality, data compliance, and Cybersecurity.

Decision 5: What technology investments are needed now and later?

Technology is the backbone of any media operation. Retailers must offer advertisers creative flexibility and a broad range of options, all while minimising friction in the process. Compatibility with other ad tech tools, such as demand-side platforms (DSPs) and supply-side platforms (SSPs), is essential to allow brands to enrich the retailer’s data with external insights and create advanced audience segments.

A diversification opportunity that’s too good to miss

Just as brands aim to diversify their media spend, retailers should diversify their revenue streams. With razor-thin margins in traditional retail operations, the opportunity to monetise first-party data—a valuable but often underutilised asset—is one that retailers simply cannot afford to overlook.

To find out more how we help retailers evaluate and accelerate their retail media business, contact us to start the conversation.