Retail media spending is projected to exceed $100 billion by 2027, representing one of the most significant revenue opportunities in retail history. Yet in my advisory work with retailers across North America, I’ve observed a troubling pattern: most retailers are failing to capture their fair share of these CPG dollars because they’re approaching retail media with outdated infrastructure and thinking.
Too often I see retailers think about retail media transactionally; they think about it in terms of selling media impressions to maximize direct revenue. As I’ll explain below, that’s a shortsighted approach.
The retailers winning in this space are creating distinct and measurable business value that CPG partners can’t get anywhere else. And it all comes down to one fundamental shift: moving from demographic targeting to behavior-triggered automation.
The Batch-and-Blast Problem
Most retail marketing departments are still running campaigns the same way they did five years ago. That might be fine for less technical roles, but marketing has come a long way in that short time.
Simply segmenting an audience into “high spenders” or “millennials” and creating a generic offer for them, blasting it out and measuring impressions is better than one-size-fits-all approaches, but it’s not really that advanced or impactful.
Bluntly, it’s just putting some personalization lipstick on a mass marketing pig.
So it shouldn’t be a surprise that CPG brand manufacturers are increasingly unimpressed by this approach. They can reach “millennials” more cost-effectively on social media.
The value that retailers can offer CPGs is unique: the ability to influence shopping behavior at the moment it matters most, backed by closed-loop attribution that proves their investment drove actual purchases. So that’s where retailers need to focus. That’s the silver bullet that drives CPG ROI and increases retail media spend.
The retailers that understand this truth and have taken steps to capture that opportunity have done so by building systems that track what individual shoppers actually do (first-time brand purchases, declining category spend, lapsing purchase frequency), and layer in the ability to respond automatically in real time with personalized messages and discounts.
The resulting performance difference is mind-tingling. In my work analyzing these implementations, I’ve seen email open rates of 73% and customer retention improvements of 89% compared to traditional demographic targeting approaches.
The ability to land on the right side of that performance gap is exactly what CPG partners are looking for, and it’s why behavior beats demographics every time.
The Power of Closed-Loop Attribution
Going further, we can’t discount the value of being able to tell a CPG partner — at an aggregated and anonymized level — which audiences saw their ad, which came to the store and which purchased their product.
The challenge is that delivering this capability requires unified data, which is something most retailers don’t (yet) have. At one regional retailer I worked with, the team discovered customer data held in five separate systems. Purchase history lived in one database, digital engagement in another, loyalty program data in a third…
This is organized chaos. It isn’t efficient, scalable or future-proof. It simply can’t be the answer.
That’s because data fragmentation makes real-time behavioral response functionally impossible. By the time data from multiple systems is reconciled, the opportunity to influence behavior has passed. A customer who just made their first purchase of a premium dog food brand represents a fleeting opportunity for related product recommendations, but only if the system can recognize that behavior instantly and act on it.
The Infrastructure that Separates Winners from Losers
In my experience, the retailers successfully monetizing retail media have made three critical infrastructure investments:
- Unified data foundation: They’ve broken down the silos between point-of-sale systems, ecommerce platforms, loyalty programs and digital engagement tools. This creates a single, real-time view of each shopper that allows much more granular and timely insights. When a customer exhibits a behavioral trigger, the system knows instantly.
- Cross-functional collaboration: The most successful implementations require marketing and merchandising teams to work in lockstep. When the system automatically offers a promotion on a new product to drive consumer interest, merchandising needs to ensure that product is in stock, priced correctly and supported with in-store visibility. Getting this correct transforms retail media from a transactional advertising play into a genuine sales and relationship driver.
- Automated journey orchestration: Instead of manually building campaigns every week or month, leading retailers create behavioral rules once and let the system execute automatically. For example, when a shopper buys a detergent brand for the first time, the system can trigger a fabric softener offer from the same manufacturer in real time. When a loyal yogurt brand buyer suddenly stops purchasing from the category entirely, an automated win-back campaign activates immediately. Better results and less work. Who doesn’t like that?
Ultimately, establishing these systems creates the kind of timely, relevant engagement that CPG partners will pay premium dollars to access. The retailers that do it are able to provide intelligence on, and access to, the consumer that can’t be replicated anywhere else. It’s a lucrative moat.
Making Retail Media a Growth Engine
Yes, it requires some work to earn a slice of the $100B+ retail media opportunity. But those that make the investment will create meaningful value across the entire ecosystem.
For shoppers, access to promotional messages that are relevant and timely makes them far more likely to find and buy products that they are happy to buy, driving sales and increasing loyalty.
For CPG brand manufacturers, this approach delivers something they can’t get anywhere else: the ability to influence purchase decisions in real time, with complete attribution proving ROI.
For retailers, it creates a sustainable revenue stream that grows more valuable as the data becomes richer and the behavioral models become more sophisticated.
It’s clear to me that behavior-triggered automation will become the standard in retail media. Retailers just need to decide whether they’re going to lead that transition or spend the next few years playing catch-up with competitors who have already made the leap.
Gary Hawkins is an author, speaker and Senior Advisor to Birdzi. Following a 25-year career as a supermarket CEO, Hawkins has become a leading voice advocating for the intelligent deployment of technology in the grocery and retail industries in his role as CEO of the Center for Advancing Retail Technology (CART). He has advised retailers in 20+ countries and authored multiple books, articles and whitepapers on customer intelligence and loyalty.
