Beyond inventory: The next frontier in retail media growth

Retail media has experienced buoyant growth over the past few years, driven by demand and supply side tail winds. However, achieving the next wave of growth will require careful thinking as existing inventory will inevitably begin to run short.

From side hustle to centre stage: The rise of retail media

The retail media market has been booming. Globally, the sector enjoyed annual growth of around 23 percent since 2020. In the UK alone, advertiser spend on retail media is expected to top £4.8 billion in 2026 – up from an estimated £4 billion this year[1]. And the data suggests it is capturing a greater share of advertising budgets (16 percent today versus just 11 percent in 2022).

Hugh Ayling

Director, KPMG’s Consumer & Retail Strategy

KPMG in the UK

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Tom Williamson

Manager, Consumer Goods & Retail, The Strategy Group

KPMG in the UK

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Not surprisingly, the market has become increasingly crowded. At last count, there were more than 270 retail media networks (RMNs) active globally and at least 28 active in the UK.[4]

In part, the rapid growth of the sector has much to do with its innate attributes. Unlike traditional advertising channels that primarily drive awareness, retail media delivers full-funnel benefits – from upper-funnel brand building to lower-funnel conversion optimisation – all within environments where consumers are actively shopping.

This unique value proposition, combined with superior measurement capabilities and direct sales attribution, has attracted significant advertiser investment, with inventory being expanded to keep pace with demand.

Consider, for example, how increasing privacy regulation has impacted demand for first-party data assets. Or how the acceleration of ecommerce has increased the number of digital surfaces where brands can connect with consumers. Going forward, many expect AI to propel the targeting of retail media to a new level in the next few years.

Growing pains: Why RMNs risk running out of headroom to grow

After five years of rapid expansion, there are signs that the sector’s growth trajectory may be slowing. As noted in chart 1, growth rates are expected to soften to7 percent (CAGR) between now and 2028. And our experience indicates that the growth levers are rapidly evolving.

As the market matures, retailers are finding they can no longer rely solely on expanding their advertising inventory to drive revenue growth.

Tom Williamson

Manager in KPMG's Consumer & Retail Strategy team

The low-hanging fruit of converting existing physical and digital shelf space into advertising opportunities have largely been harvested. Physical and digital shelf space is finite. And the marginal value of additional inventory is diminishing.

Similarly, those seeking new growth through offsite expansion are finding limitations. Recent analysis suggests that retailer margins for offsite channels (such as non-retail social, CTV, Digital out of Home and so on) offers materially lower margins – 20 to 40 percent versus the 80 to 90 percent retailers can achieve on their own channels.[5] For many, ongoing integration challenges are eroding the slim margins they are already achieving.

Even where growth is on the rise, increasing levels of competition make the fight for market share fierce. For example, in 2024, most brands dealt with 6 RMNs. This is expected to jump to 11 RMNs by the end of 2026.[6] Yet data also suggests many brands are seeking to reduce their complexity with just 35 percent saying they worked with a new RMN in 2024, down from 58 percent the year before.[7] In particular, smaller retailers late to the party are finding it increasingly difficult to capture meaningful advertiser budgets.

New frontiers: Strategies to fuel the next wave of retail media growth

Based on KPMG’s extensive experience working with the UK’s top retail media players and CPGs, here are five ideas to consider acting on to drive sustainable long-term value creation.

Increase share of retail media spend through executional excellence

The IAB reports that 62 percent of retail media buyers are dissatisfied with their RMNs’ performance measurement.[8] Consider how you can offer greater depth and transparency on campaign measurement using clean rooms to validate closed loop impact supported by granular multi-touch insights across channels. Providing brands with more self-serve and programmatic buying tools can also help improve the brand experience.
Expand media channels and inventory to access more elements of the media budget.

Operationalise your current in-store assets and explore opportunities to extend your reach and drive full-funnel coverage through a unified omnichannel plan. Explore new trends such as Live Commerce and Shoppable video to achieve higher engagement and conversion across existing platforms. Where offsite investment is planned, use closed-loop measurement to capture more of a brand’s upper-funnel budget spend.
Tap into supplier’s other marketing budget lines.

Explore opportunities to offer ancillary services such as NPD research and more insightful consumer behaviour data insights, building on existing performance measurement and reporting capabilities. The idea here is to use your unique access to shoppers and first-party data to enable highly targeted shopper research to be conducted by suppliers at pace.
Grow the brand/advertiser base by unlocking less mature brands and expanding into non-endemics.

Leverage your knowledge of customers, access to deterministic audiences and extensive measurement capabilities to grow demand beyond your traditional endemic CPG customers. Identify new categories (such as finance, travel or telco), win over untapped suppliers and enter into new adjacent categories by taking a proactive go to market approach.
Unlock the retail media flywheel

Consider the development of a marketplace which has the potential to significantly accelerate retail media growth by expanding the advertising inventory beyond a retailer's owned-brand products to include third-party sellers' offerings. This has a flywheel effect, multiplying available ad placements and revenue opportunities. Marketplaces create a self-reinforcing growth engine where increased seller participation generates more diverse product listings, which in turn attracts more consumer traffic and engagement, making the platform more valuable to advertisers seeking broader reach and targeting options.

Considerations for growth: Key considerations going forward

While each organisation will need to develop their own unique strategy based on their maturity, ambition and constraints, here are five considerations to help shape your thinking.

The path forward

The shifting market for retail media and the looming inventory ceiling represents both a challenge and an opportunity for retail organisations active in the sector.

Those retailers who recognise the need to proactively develop sophisticated, data-driven and experience-led retail media capabilities will establish sustainable competitive advantages that extend far beyond incremental advertising sales.

Hugh Ayling

Director in KPMG’s Consumer & Retail Strategy team

At KPMG, our team of strategy, consumer and retail professionals have deep experience helping retailers and brands develop comprehensive retail media strategies that unlock sustainable growth. Contact us today to discuss your unique growth objectives.