Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Fight Rising Ad Costs with Retail Media
Transcript
- Lucas: So Luna, I was pulling the numbers on digital ad costs the other day, and the CPCs on Meta and Google have climbed another 12 percent since last spring. But there's a quieter shift happening underneath that. Luna: Let me guess — you're talking about retail media. Because that's the budget line that's growing faster than anything else right now. Lucas: Exactly. Retail media networks — the ad platforms run by retailers like Amazon, Walmart, Target — they're projected to pull in over sixty billion dollars globally this year. That's up from about forty billion just two years ago. And it's eating into what used to be pure performance marketing spend. Luna: That's a massive jump. And for DTC brands that have always leaned on their own channels, this feels like a real pivot. But before we go deep — and I know I say this every time — if these marketing conversations have sparked something you've actually used in your own work, maybe think about supporting the show. It's what keeps us ad-free and independent. You can do that at buy me a coffee dot com slash fexingo. Lucas: Appreciate that, Luna. And honestly, the fact that we can dig into a topic like this without a sponsor breathing down our neck is exactly why listener support matters. Luna: Yeah. So back to retail media. Why are DTC brands actually making this shift? Is it just because Meta and Google got more expensive? Lucas: Partly. But it's also about intent. When someone searches for 'wool running shoes' on Amazon, they're not just browsing — they're ready to buy. That lower-funnel intent means your ad dollar goes further. You're not paying to interrupt someone's scroll; you're showing up at the exact moment they're comparing options. Luna: And you get their purchase data, too. Which is huge — that's the first-party goldmine. Lucas: Right. On Amazon, you see not just the click, but the actual sale. You can tie your ad spend directly to revenue, which is something you're always guessing at with upper-funnel campaigns. That closed loop is why brands are shifting budgets even when they don't love the idea of selling on a marketplace. Luna: I remember when Allbirds first listed on Amazon. A lot of their core fans were like, 'You're diluting your brand.' But they saw it as a way to capture demand they were already missing. Lucas: And that's the key — it's not about abandoning your DTC site. It's about meeting customers where they already are. Allbirds still runs their own site, but Amazon lets them catch people who never would have gone to allbirds dot com in the first place. Luna: But there's a catch. Once you're on Amazon, you're kind of playing their game. You're renting their customers. Lucas: That's the trade-off. You get access to a massive audience, but you don't own the relationship. The data stays with Amazon. And if they change their algorithm or their ad policies, you're at their mercy. That's why a lot of brands treat retail media as one piece of a bigger puzzle, not the whole answer. Luna: So for a smaller DTC brand that doesn't have a huge budget, where do you even start? Just throw some product listing ads on Amazon? Lucas: Honestly, yes. Product listing ads — or PLAs — are the entry point. You bid on your own product names, sometimes on category keywords, and you only pay when someone clicks. It's relatively low risk. But the real opportunity is in sponsored brand ads, where your product appears at the top of search results with your logo and a tagline. Luna: So it's like a mini brand billboard within the search results. Lucas: Exactly. And then you can layer in display ads on Amazon's network, reaching people who viewed your product but didn't buy. That retargeting is powerful because it's based on real browsing behavior on Amazon, not just cookies that are getting blocked everywhere else. Luna: I've seen some brands complain that Amazon's ad dashboard is a black box though. You don't get a ton of granular data back. Lucas: That's true. You get the basics — impressions, clicks, spend, attributed sales. But you don't get the same level of demographic detail you'd get from Meta. So you have to be okay with that level of visibility. But the trade-off is that the signal is stronger because it's all purchase-based. Luna: And what about Walmart and Target? Are they worth a look for smaller brands? Lucas: Walmart Connect is growing fast, especially for brands that target a more value-conscious shopper. Target's Roundel is more curated — they're picky about which brands they work with, but if you're a premium DTC brand, that association can actually boost your brand perception. Luna: So it's not just about the ad platform — it's about the retailer's audience and how they align with your brand. Lucas: Exactly. If you're selling $80 sustainable sneakers, you might do better on Target's Roundel than on Walmart. But if you're selling a $20 kitchen gadget, Walmart might be your sweet spot. It's about knowing your customer and where they actually shop. Luna: One thing I've heard a lot is that retail media can inflate your numbers if you're not careful. Because you're advertising to people who might have bought anyway. Lucas: That's the incrementality problem. If you run a sponsored product ad for your own brand name, you're probably going to get the sale regardless. So you're paying for something that was going to happen naturally. That's why you need to test properly — run controlled experiments where you hold out a segment of your audience and see the true lift in sales. Luna: So what does that look like in practice? Like, a brand that sells on Amazon — how do they measure incrementality? Lucas: One way is to use Amazon's own brand lift studies, but they're not always reliable. A more practical approach is to pause your ads for a week and compare sales during that week to a baseline. It's not perfect, but it gives you a sense of how much of your sales are actually ad-driven. Luna: And then you can decide if the extra sales are worth the ad spend. Lucas: Right. And that's the nuance — it's not just about ROAS. You need to look at the whole picture: what's your true incremental profit, not just revenue. Because if you're just paying to cannibalize your own organic sales, that's not growth. Luna: So for a DTC brand that's considering retail media, what's a realistic first step? Lucas: Start small. Pick one retailer, ideally the one where your competitors are already getting traction. Optimize your product listing first — make sure your images, title, and bullet points are solid. Then run a modest sponsored products campaign, maybe $25 a day, and see what happens. Once you have some data, you can scale up or tweak your bidding. Luna: And you should probably make sure your pricing is competitive, because on a marketplace, you're right next to your competitors. Lucas: Absolutely. And that's a whole different ballgame — you're no longer the only one telling your brand story. But if you can win the click, you still have a chance to convert with your product page. Luna: What about the whole 'walled garden' concern? A lot of DTC purists hate the idea of being locked into a platform. Lucas: It's a legitimate worry. Your customer data goes to Amazon, and you don't get it back. But the flip side is that retail media is becoming too big to ignore. If your competitors are capturing that demand, you're missing out on sales. So it's about balance — use retail media strategically, but keep investing in your own email list and your own brand site. Luna: It's like you're renting their real estate, not buying the building. Lucas: That's exactly it. And the smartest brands think of it as a customer acquisition channel, not a long-term home. They use the data they get to refine their products and then try to move customers back to their own channels with inserts or follow-up emails. Luna: So what's the one thing you want our listeners to remember about retail media? Lucas: That it's not a magic bullet, but it's a tool that's becoming essential. If you're a DTC brand in 2026 and you're not at least testing retail media, you're leaving money on the table. But don't dive in without a plan — start small, measure incrementality, and always keep your own brand channels strong. Luna: Great advice. And we'll be back next week with another deep dive into the world of DTC marketing.