Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / Why CMOs Are Powering Retail Media Networks
Transcript
- Lucas: So last week I was in a meeting with a CMO at a mid-size CPG company — think specialty snacks, distributed through grocery and mass retail. She told me something that stopped me cold. Luna: What'd she say? Lucas: She said nearly 40 percent of her total digital ad budget now flows through retail media networks. Not search. Not social. Retail media. And that number was below 10 percent just three years ago. Luna: That is a massive shift. And just to ground listeners — when we say 'retail media network', what exactly are we talking about? Lucas: Great question. A retail media network is basically a retailer's in-house advertising platform. Think Amazon Ads, Walmart Connect, Instacart Ads. Brands pay to get their products featured in search results, on product pages, even on digital shelf labels in physical stores. The key distinction — and the reason CMOs are obsessed — is that these networks sit on a mountain of first-party purchase data. They know exactly what a customer bought, when, and for how much. Luna: Right, so instead of targeting based on inferred demographics or browsing cookies, you're targeting based on actual buying behavior. That's the holy grail for a CMO. Lucas: Exactly. And it gets better. Because the transaction happens on the same platform, you get closed-loop attribution — you can measure from impression to click to cart to repeat purchase. That's something brand advertising on TV or even social media has never been able to deliver cleanly. Luna: But let's talk numbers. How big is this market now? Lucas: According to a recent report from GroupM, retail media is on track to exceed $140 billion globally this year. That's roughly one out of every five dollars spent in digital advertising. Amazon alone — their ad business is now a $47 billion annual revenue stream, growing faster than AWS. Walmart's ad business grew over 30 percent year-over-year last quarter. Instacart, even though it's smaller, posted 18 percent growth. Luna: And that's just the big three. We're seeing regional grocers, drugstore chains, even club retailers building their own networks. It's a land grab. Lucas: It is. And it's not just online anymore. The next frontier is in-store retail media. Walmart has digital shelf labels that can display dynamic pricing or promotional content. Kroger has smart carts with screens that serve ads based on what you've already put in the basket. The CMO I mentioned earlier told me she's testing in-store audio ads in the grocery aisle — a 15-second spot that plays when you walk past the yogurt section. Luna: Okay, that's creepy and brilliant at the same time. But let's address the elephant in the room — cost. Retail media cost per click is typically 30 to 50 percent higher than search ads on Google. Are CMOs okay with that? Lucas: They are, because the conversion rates are also higher. When you're advertising on a retailer's site, the user is already in shopping mode. They have their wallet out. So a higher cost per click is acceptable if your return on ad spend is 4x or 5x instead of 2x. But there's a catch — and it's a big one. Luna: What's that? Lucas: Over-reliance on a single platform. If you put 40 percent of your budget into Amazon Ads, you're essentially renting your customer relationship. Amazon owns the data, the platform, and the customer. If they change the algorithm or raise fees tomorrow, your whole funnel is at risk. Smart CMOs are diversifying across multiple retail networks and also investing in direct to consumer channels. Luna: I've also heard concerns about measurement — that retail media networks are still walled gardens. They give you aggregate ROAS numbers, but they don't share individual-level data. So you can't really build a full customer profile across channels. Lucas: That's absolutely true. And it creates friction with the marketing mix modelers who want a unified view. But the trade-off many CMOs are making is: better data within the walled garden than no data at all. And the performance numbers are hard to argue with. Look, I think this trend is only going to accelerate. Luna: So what's your advice for a CMO who's just starting to explore retail media? Where do they begin? Lucas: I'd say start with one network — probably Amazon if you sell consumer goods — and run a small test. Focus on sponsored products first, because that's the most measurable. Measure incrementality: are these sales truly new, or are they just cannibalizing organic sales? Then expand to display ads and off-site retargeting. But don't put all your eggs in one basket. And definitely don't let the retailer's data advantage lull you into neglecting your own first-party data strategy. Luna: Speaking of data strategy — you know, we get so many emails from marketers saying this show has helped them make smarter decisions. We deliberately don't run ads on these episodes, and we plan to keep it that way. If you've gotten value from our conversations and want to support that ad-free choice, the link is buy me a coffee dot com slash fexingo. No pressure, just an option. Lucas: Yeah, we really appreciate it. It's what lets us dive deep without interruption. Now, back to retail media — I want to talk about a fascinating development that's happening in parallel. Luna: What's that? Lucas: Retail media consortiums. Smaller retailers — think regional grocery chains with 50 to 100 stores — are banding together to create shared ad platforms. They pool their customer data to offer advertisers a reach comparable to the big boys. I've seen two of these consortiums launch in the US just this year. Luna: That's smart. Because individually, a regional grocer might only have a few million shoppers. But together, they can offer 20 million or more. And they keep the data within the consortium, so advertisers get better targeting without any single retailer having to expose their customer list. Lucas: Exactly. And the technology to enable this — clean rooms, data collaboration platforms like LiveRamp or InfoSum — is becoming more accessible. I think within three years, it'll be standard for any retailer with a loyalty program to have some form of retail media offering. The question is whether CMOs will be able to manage the complexity of dozens of different network interfaces and measurement standards. Luna: That's where we might see a role for a new kind of agency — a retail media specialist that handles all those integrations. Some of the big holding companies are already building dedicated retail media units. Lucas: Yeah, GroupM launched a retail media division last year, and Publicis acquired a retail media tech firm. The money is clearly following the attention. And for the CMO, the bottom line is this: retail media isn't a channel anymore. It's becoming the new prime time — the place where purchase intent is highest and measurement is tightest. Ignoring it means leaving money on the table. Luna: But also, over-investing without diversification carries risk. So it's a balancing act. Lucas: Always is. That's why we talk about it.