Vast Majority of Advertisers are Already Investing in Retail Media

Tim Cross 13 December, 2022 

More than ninety percent of advertisers, and nearly three quarters of agencies, say they are partnering with retailers to reach consumers, according to research from IAB Europe and Microsoft released today. And the majority of those who haven’t already invested in retail media plan to do so over the next year.

While some of this spend will be new money flowing into advertising, the majority will be reallocated from other channels. Sixty-two percent of the 800 buy-side stakeholders surveyed by IAB Europe and Microsoft said retail media ad spend will be reallocated from elsewhere.

And traditional advertising platforms are set to lose out the most. Sixty percent of advertisers said they are shifting budgets from traditional ad channels over to retail media, as well as 45 percent of agencies. Social media will also take a significant hit, with 39 percent of advertisers and 29 percent of agencies reallocating social budgets towards retail media.

No longer an emerging channel

Retail media is often painted as an emerging channel, but IAB Europe argues this characterisation is no longer accurate. While investment in retail media is still growing quickly, retail media is now a major channel both in terms of its penetration among advertisers and agencies (shown by today’s data) and in terms of absolute spend (which GroupM predicts will top $110 billion this year – connected TV advertising by comparison is expected to reach just under $20 billion).

In Europe specifically, IAB Europe pegs retail media spend this year at €8 billion. This is expected to top €25 billion by 2026.

This growth will presumably be largely driven by advertising who are already spending on retail media increasing their investment. If those who told IAB Europe that they plan to start investing next year follow through, that will mean 99 percent of advertisers and 94 percent of agencies will be partnering with retailers.

Investment is likely to ramp up in large part as a response to the deprecation of the third-party cookie. Ninety-one percent of advertisers surveyed said they see retail media as a key part of their advertising strategy following the deprecation of the cookie, alongside 76 percent of agencies.

Advertisers are also likely to increase spending as their own investments in data begin to pay off. First-party data was unsurprisingly picked out as a key opportunity within retail media, with more than a third of buyers citing it as one of the major drivers of adoption. But while 91 percent of those surveyed said they already have a first-party data strategy in place, 49 percent say they’re still working towards scaling their strategies.

But there are still significant obstacles to be overcome. A lack of integration with other ad tech was cited as a stumbling block by 33 percent of buyers overall. And the cost of retail media tie-ups are in some cases prohibitively high, with 26 percent of buyers listing cost as a barrier.

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About the Author:

Tim Cross is Assistant Editor at VideoWeek.
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