GroupM, the world's largest media buyer, has forecasted that advertising revenue from retailer-owned e-commerce sites, known as retail media, will exceed television revenue by 2028. According to GroupM's 2023 Global Mid-Year Forecast report, retail media is expected to grow by 9.9% and reach $125.7bn in 2023.

This channel is projected to represent 15.4% of total ad revenue when it surpasses television revenue in 2028. The report also reveals that retail media is currently the third fastest growing advertising channel this year, trailing behind digital out-of-home screens and connected TV (CTV), although it surpasses both channels in size.

Retailers attracting major advertisers to their websites

Companies such as Amazon, Walmart and Target, as well as various grocers such as Carrefour, Ahold Delhaize, Tesco and Sainsbury's, are aggressively working to attract big advertisers to their websites.

For retailers, securing consumer brands to pay for advertising on their platforms offers a dual benefit - they earn from product sales and generate revenue from ads. Retail media can provide profit margins as high as 90% for retailers, which is particularly significant given the rising cost of living affecting their primary business line.

Pandemic-driven digital shift boosts retail media appeal

The increased use of digital channels by consumers during the pandemic has made retail media more attractive for brands. Advertisers are now seeking to diversify their ad spending beyond the dominant players, Google and Facebook, known as the "duopoly" in the industry.

This shift has been influenced by changes in the digital privacy landscape, such as the European Union's General Data Protection Regulation (GDPR), which led major internet companies to limit the collection of personal data.

According to Reuters, this has resulted in a rise in the value of first-party data collected by retailers, allowing them to better target a brand's advertising and measure its effectiveness.

European retailers recognise the opportunity

While US players have led the development of retail media networks, European retailers are now recognising the potential of this advertising channel. Netherlands-based grocer Ahold Delhaize aims to generate €1bn ($1.08bn) in revenue from businesses beyond grocery stores by 2025, primarily by selling ads on its supermarkets' websites and leveraging consumer data insights.

Sainsbury's, the second largest supermarket group in the UK, has already created Nectar360, which combines its loyalty scheme with marketing services. With more than 700 brands already on board, Sainsbury's expects to generate more than £90m ($113 million) of additional profit from this business by 2026. According to consultants McKinsey, retail media networks in the UK grocery sector alone have the potential to generate £1bn pounds of profit within two years.