Marcus Johnson (00:06):

Welcome to a special edition episode of the EMARKETER Podcast, Behind the Numbers. I'm Marcus Johnson, and today I'm introducing a special episode from the EMARKETER Commerce Media Trends 2026 Virtual Summit. In this episode, EMARKETER Vice President and Principal Analyst Sarah Marzano examines what's holding in-store back, what will it take to overcome these constraints, and where the most meaningful opportunities lie as retailers work to scale the next stage of retail media. Hope you enjoy.

Sarah Marzano (00:36):

Hi, everyone. Thanks for being here. I'm Sarah Marzano, VP and principal analyst for retail and commerce media at EMARKETER. You're going to be seeing a lot of me today. I've had the pleasure of sitting down with several guests to explore how commerce media is evolving, from how consumer behavior is shifting in the AI era to new ways brands are monetizing high intent lifecycle moments. Later in the program, I'll be leading a panel on how in-store retail media strategies are taking shape.

(01:04):

Because in-store retail media sits at the center of so many conversations right now, we'll begin there. I want to start with a clear statement that helps frame why this conversation continues to feel so complicated. Retail media in the U.S. was never built for physical stores. That doesn't mean in-store isn't important, and it certainly doesn't mean the opportunity isn't real. In fact, I believe that physical stores represent retail media's largest underactivated growth opportunity. But the system we built was designed around e-commerce native signals, e-commerce-native formats, and e-commerce native measurement. Retail media grew up around sponsored search, onsite placements, and digital conversion. And when success is measured in digital transactions, it naturally advantages e-commerce environments, while making physical retail harder to measure, compare, and scale within that same framework.

(02:02):

Today I'm going to do three things: First, put retail media growth into context. We'll look at what's real and what's unintentionally distorted. Second, I'll share what in-store ad buyers told us about why in-store retail media spend isn't scaling. And third, I'll show you what retail media leaders told us about why execution is lagging, before closing with what has to change if in-store is going to become more than a side bet.

(02:29):

Let's start with the big picture. The good news is on the surface level, retail media is thriving. We expect more than $70 billion in retail media ad spend this year alone, and we're well on our way to nearly $100 billion in 2029. Retail media remains one of the fastest growing major digital advertising channels, and it's on track to account for nearly one fifth of all digital ad spending by 2029. That scale and momentum are a big part of why retail media persistently dominates headlines.

(03:03):

But beneath that top line volume, retail media remains extremely concentrated. Amazon continues to capture the vast majority of retail media ad dollars. In fact, without Amazon, we're looking at less than $15 billion in ad spending this year, which amounts to less than 4% of total digital ad spending. Those numbers don't quite carry the same headline dominating effect.

(03:28):

But before we treat that asymmetry as a competitive failure, we have to understand why Amazon's dominance has been so durable in the first place. Amazon commands the lion's share of retail media ad spending, because for now, retail media largely means onsite ads, and Amazon alone controls nearly 40% of all U.S. e-commerce. When one player offers access to the majority of U.S. households and directly controls such a large share of digital transactions, ad spend consolidation becomes rational. That tendency is reinforced by the friction advertisers experience when scaling across multiple retail media networks, which often means managing separate platforms, inconsistent reporting, and measurement approaches that are not directly comparable. Amazon captures roughly 80% of all retail media ad spending, a share that significantly outweighs its portion of overall retail activity. The backdrop I just described naturally advantages the retailer with the most e-commerce scale rather than the retailer with the greatest total retail impact.

(04:39):

Now, it's well known that the majority of consumer retail spending still happens inside physical stores, but what's less frequently examined is that Amazon accounts for just over 6% of total retail sales here in the U.S. When you place Amazon's dominant share of retail media ad spending alongside its modest share of total retail sales, it becomes clear that the concentration in ad spending reflects how our system was designed, not necessarily where the most retail influence occurs.

(05:11):

Now, one thing I've been increasingly energized by is how ad buyer expectations around retail media are evolving. I see it in everyday conversations, and we're starting to see it emerge clearly in research as well. Retail media initially scaled because it was exceptionally good at driving lower funnel outcomes. Sponsored search and deterministic digital conversion make it one of the most accountable channels in the ecosystem. Those lower funnel objectives naturally reinforce e-commerce environments where transactions are trackable and tend to be more immediate.

(05:46):

But buyer goals are broadening. Case in point, when Cody asked ad buyers their primary reason for investing in retail media, driving sales came in second to increasing brand awareness. That tells us something important. Advertisers increasingly see retailer data as a full funnel asset, not just a performance lever. So retail media is no longer viewed as simply a lower funnel channel, and advertisers are planning accordingly.

(06:15):

When we visualize the entire shopping journey, it becomes clear that physical stores touch every stage of the funnel, from awareness and consideration through to conversion. Physical stores are the number one place where consumers say they discovered products they ultimately ended up purchasing. When new products are discovered on brand or retailer websites, stores are most often the next step consumers report in their journey. And of course, more than 80% of actual sales still happen in physical stores. Taken together, this opportunity highlights how large the in-store opportunity really is and how much value the industry is leaving on the table by not fully building retail media for where most shopping still happens.

(07:02):

The thing is, in-store retail media should be huge. But the sobering reality is that despite the massive potential, in-store spending is set to remain a tiny fraction of total retail media ad spend. By 2029, in-store retail media will just surpass $1 billion, which amounts to just over 1% of all retail media ad spending.

(07:29):

There's a clear disconnect between the role physical stores play in retail and the ad dollars flowing into them. To understand what's behind that disconnect, we turned to the buy side. Last fall, we surveyed more than 200 retail media ad buyers, and what we uncovered was particularly revealing in the context of in-store retail media's limited share of ad spend. One of the more surprising findings from this research is that the majority of retail media ad buyers report they are already investing in in-store retail media. This isn't limited to a small group of innovators; participation is broad. We do see differences by organization type: agencies slightly over-indexing on in-store investment while brands under-index slightly. But across the board, this is no longer a hypothetical channel.

(08:21):

So participation is real, and yet in-store spending remains limited overall, and this creates a really meaningful contrast between adoption and investment. If participation is broad but spending remains limited, the next question is how that spend is distributed. When we look at in-store allocations, we see clear concentration. Even among buyers who are investing in in-store retail media, most are limiting that spend to just one or two networks, if you compare that to retail media buying overall where buyers work with about five networks on average.

(08:57):

Earlier, we discussed the challenges buyers report when scaling across networks. That constraint is visible here in how narrowly in-store budgets are allocated. And importantly, this isn't about inexperience. Buyers investing in in-store formats tends to be among the more active retail media investors overall. They simply allocate in-store spend across fewer networks than they do retail media budgets more broadly.

(09:24):

To better understand why in-store investment narrows so quickly, we looked more closely at the challenges facing in-store ad buyers. One of the biggest challenges they point to is measurement and reporting integration. Nearly eight in 10 in-store retail media buyers say it's at least moderately difficult to incorporate in-store results into their broader retail media dashboards. That of course makes it harder to evaluate performance holistically or compare results across networks. When in-store performance sits outside of standard reporting systems, it introduces additional uncertainty and often requires manual reconciliation or added resourcing. That dynamic reinforces some of retail media's most persistent advertiser frustrations around inconsistent reporting and non-standardized measurement.

(10:14):

Now, naturally, we asked buyers what it would take to incentivize them to spend more, either with existing partners or with new ones. I expected we might hear calls for more inventory, broader scale, or additional formats, particularly because many in-store activations remain limited in deployment and uneven across in-store fleets. Instead, improved measurement and attribution rose to the top of the list. What's important is that buyers are not simply asking for more in-store presence; they're asking for in-store performance to integrate cleanly into the frameworks they already use to evaluate retail media in order to build confidence for increased investment. Most retail media measurement approaches were designed to optimize e-commerce transactions. Physical stores operate really differently, which makes that performance translation inherently more complex. Until in-store performance can be evaluated in ways that feel consistent with broader retail media KPIs, buyers tell us they will continue to scale spend cautiously.

(11:14):

When we step back from what buyers told us, what they've described isn't just friction. It's a structural constraint, and it starts with this reality. We've effectively retrofitted in-store measurement to match online frameworks. Retail media was built in digital environments and e-commerce-centric KPIs. So when buyers look at in-store performance, they're trying to evaluate it against systems designed for digital transactions. And that's where the cycle begins. Buyers hesitate to scale without comparability. If in-store performance can't be cleanly integrated into existing dashboards or benchmarked against online formats, spend stays cautious. That cautious spend has consequences. Retailers hesitate to invest heavily in the infrastructure and analytics without sustained buyer demand, and that limited investment means limited deployment. Limited deployment in turn slows measurement evolution because you don't get the signal density or standardization that comes with scale. And without scale pressure, there's no forcing function to redefine performance frameworks, so e-commerce-centric KPIs remain the default, and the cycle reinforces itself. This is the system buyers and retailers are operating inside today.

(12:31):

If buyers are clear about what they need, the question shifts. Are retail media organizations structured to deliver it? Retail media networks are media businesses layered on top of an already complex core business, retail. That complexity becomes even more pronounced in physical environments where execution depends on coordination across merchandising, store operations, technology, and analytics.

(12:58):

To better understand how prepared retail media teams are to meet that challenge, EMARKETER partnered with Bain & Company to survey U.S.-based retail media leaders about their priorities, challenges, and readiness for what in-store execution requires.

(13:15):

We'll start with more good news for in-store retail media. On the retailer side, belief isn't the issue. When we asked survey respondents which innovation areas they were currently exploring or investing in to enhance their retail media offering, in-store rose to the top of the list. What's interesting, and honestly a bit concerning, is that many retail media teams are actually counting on in-store formats to deliver near-term revenue growth, even though we just saw that in-store retail media spending is projected to remain quite small and buyer investment remains concentrated. This is where a real gap starts to form between retail media team growth expectations and the realities of how in-store spend is actually flowing today.

(14:02):

This next data set starts to explain that disconnect. Retail media leaders are quite confident in their strategic alignment with their company's objectives, their goals, their growth ambitions, and market opportunity. But, we found that that confidence falls off a cliff when it comes to organizational belief. There was a 30 point drop between confidence in strategic alignment and confidence that the broader organization actually believes in the retail media strategy. That difference matters a lot. When leadership, merchandising, store ops, and tech teams aren't bought in, even the strongest strategy won't translate into execution, especially in physical stores.

(14:43):

We learn a lot by looking at where retail media teams tell us they're struggling the most, and particularly from the underlying drivers behind those challenges. The first challenge we heard about from our survey respondents was measurement and attribution, and tellingly, they pointed to that challenge being driven by difficulty tracking performance across in-store, online, and offsite channels. Second, retail media teams point to struggles with talent gaps most acutely felt in measurements and analytics roles. And third, advertiser adoption, which survey respondents told us was constrained by inconsistent reporting and a lack of attribution clarity.

(15:26):

What's important is that that mirrors exactly what ad buyers told us earlier. So this isn't a demand problem. Advertisers recognize the value of in-store retail media. But without consistent, credible reporting and attribution, investment remains cautious. Meanwhile, retailers are clearly indicating that they lack the tools and resources and organizational buy-in necessary to deliver on these key areas.

(15:51):

To understand why these challenges persist, it helps to look at organizational design. Retail media teams sit in very different parts of the organization from one retailer to the next. And what's important is that that wasn't always a major issue. Crucially, when retail media was built primarily around e-commerce, it required less cross-functional coordination, digital teams could operate more independently, and it mattered less where they sat. In-store retail media is different. It depends on alignment across merchandising, store operations, technology, and measurement. When retail media teams are still structured around e-commerce first models, the lack of cross-functional buy-in becomes a real blocker on in-store scale.

(16:33):

If we want to understand whether retail media organizations are truly positioned to scale in-store, we also have to look at incentives, because incentives ultimately shape behavior more than org charts do. When we asked retail media leaders how their teams are incentivized, most described revenue-focused structures tied directly to retail media performance. Far fewer reported cross-functional KPIs that incorporate broader shopper, brand, or e-commerce goals. And, fewer than one-third indicated alignment between retail media and merchandising teams.

(17:08):

In-store retail media depends on cross-functional coordination. When performance is measured primarily at the channel level rather than at the enterprise level, that coordination becomes more difficult to sustain. The systematic limitation we've been discussing isn't only about measurement and infrastructure; it's also embedded in how retail media organizations define success internally. When you step back, measurement challenges and incentive design are reinforcing the same structural dynamic.

(17:37):

When we step back, a clear pattern emerges. In-store retail media is not struggling because the opportunity is small or because advertiser demand is absent. Buyers are participating. Retailers are investing. The challenge lies in the fact that retail media was architected for digital environments, and physical retail operates differently. Measurement norms, marketplace economics, infrastructure deployment, and internal incentives were all optimized for e-commerce first. In-store is now trying to scale within a system that was not originally designed for it.

(18:10):

That tells us something important about what must change. First, retail media must evolve beyond its e-commerce foundations. Retail media scaled quickly because it was built around digital environments. That architecture worked really well online, but the next phase of growth will require refining performance in ways that account for physical retail influence, not just online transactions.

(18:33):

Second, measurement is the unlock, but progress is going to require breaking out of the cycle. Advertisers need comparability before they scale spend. Retailers need sustained demand before they invest heavily on infrastructure and analytics. Until both sides move together, in-store retail media remains caught in a reinforcing loop that slows measurement, evolution, and limits budget expansion.

(18:58):

Third, for retailers, competitive advantage will come from organizational alignment. Measurement standards alone will not unlock growth. The retailers that unify media, merchandising, and store teams under shared performance goals will move faster. Those that continue operating within fragmented e-commerce first structures will find it much harder to advance.

(19:20):

Retail media did not fail stores; it simply wasn't built for them. The next chapter of growth depends on whether the industry is willing to redesign retail media to reflect where most commerce actually happens.