Across the board, return on ad spend (ROAS) is down across categories — all this despite rising budgets. With inflation concerns and tariffs creating additional cost pressures, what are retailers and brands to do?
What we’ve seen is a significant shift in the media strategy from savvy retailers who are finding ways to rethink how they deploy ad budgets and make every retail media dollar count.
The Shift Toward Sustainable Growth
Historically, traditional retail media strategies have been built on a “growth no matter the cost” mindset, but amidst so much market uncertainty, there’s been a quiet evolution toward profit-first strategies.
What’s the Difference?
The goals of growth strategy are visibility (share of voice) and volume (sales) — even if it means sacrificing budget to the retail media ROAS gods in the name of hitting a number.
On the other hand, the goal of profit-based strategy is sustainable growth — prioritizing margin, incremental sales, and inventory metrics that ensure long-term success.
To protect margins amid rising costs and continued volatility, many brands are shifting their ad spend to high-margin SKUs, pulling back on budget where returns aren’t measuring up, and prioritizing incremental impact (iROAS) versus top-line metrics like revenue and gross sales.
In fact, in Q1 2025, we saw many brands pull retail media spend entirely from substantial parts of their catalog due to issues like inventory availability and margin control.
The result? Their ROAS took a temporary hit, but this forced change in strategy drove a hard reset on thinking about how to plan retail media spend more intentionally and efficiently for the rest of the year (and beyond).
Context and Cost Efficiency: Capturing High-Intent Customers
To increase retail media efficiency, brands are rethinking how they purchase their media. For example, in display advertising, programmatic deals to buy third-party ad inventory in discounted bundles are growing in popularity. Instead of relying on fluctuating real-time auctions to purchase media ad hoc, brands are ponying up the cash to buy media in bulk through special partnerships with their preferred, most profitable retailers.
Another strategy that’s gaining traction is contextual targeting, where ads are served to customers who are searching for and browsing through related products and keywords. For example, a mattress brand using contextual targeting might serve ads to shoppers who are searching for home furnishings and bedroom sets — eliminating the need for custom audience targeting and enabling the mattress brand to get its products in front of the most-likely-to-purchase customers at the right time. This strategy can prove much more cost-effective in driving relevant, efficient advertising when budgets are tight.
Incrementality: Measuring Value Over Vanity
Many brands are also currently increasing their investments in retail media. And while it may seem counterintuitive to spend more in uncertain times, adjusting retail media strategy can help boost profitability by shifting media dollars to the most profitable products and categories.
Tracking incremental growth gives brands actionable insights into what’s driving new sales — so they can adjust and optimize retail media spending in real time, based on true ad performance.
For example, instead of pouring money into branded search terms (which would capture both new and existing customers), brands are reallocating ad spend toward category-level keywords that are more likely to capture new customers and drive incremental revenue.
As ROAS continues to decline and uncertainty mounts, measuring success with traditional metrics simply doesn’t cut it for e-commerce brands that want to both survive and thrive in this economy. Smart brands see that optimizing for ROAS alone is shortsighted, and that incremental ROAS (iROAS) is a more honest measure of whether their ad spend is generating new value.
Leveraging AI To Further Boost Media Efficiency
As the evolution of retail e-commerce drives the evolution of retail media strategy, it’s nearly impossible to keep up with chaos that can change consumer behavior on a dime. But with AI, brands are beginning to streamline and optimize their retail media operations faster than ever before to do more with what they already have.
Agentic AI tools designed specifically for e-commerce have given retail media teams the ability to maximize the return on every ad dollar. Instead of just reporting on ad performance, they can focus on the metrics that matter most to uncover why campaigns aren’t hitting their goals — and automate the optimization of retail media dollars across retailers in real time.
As e-commerce teams embrace AI to stretch ad budgets and free up time for more strategic thinking, we’re witnessing the dawn of a new era in retail media — those who spend the most aren’t necessarily the ones who will come out on top.