The $179.5 Billion Tollbooth

In many ways, my first job was in retail media. As a Sales Rep for Unilever in Australia I would spend my days driving from retailer to retailer to check the shelves (and grab a few extra facings), ask the manager if I can put some 'wobblers' on the shelf to attract attention and drive their sales, maybe build an aisle-end display of John West tuna with my trusty stapler to get as many posters and starbursts on it as possible. I was the CPG retail media of the time.

Today, according to Criteo, retail media will capture $179.5 billion globally in 2025, representing year-over-year growth of 15.4%. But behind those staggering numbers lies an uncomfortable truth that every CMO needs to understand: we're not just buying advertising, we're funding the construction of marketing's most expensive tollbooth.

According to eMarketer, Amazon and Walmart control 84% of US retail media spending, a concentration that would trigger antitrust investigations in any other industry. Amazon alone generated $56 billion in advertising revenue in 2024 – making its advertising business larger than most Fortune 500 companies.

This isn't the natural outcome of superior innovation. It's the deliberate construction of economic moats.

Amazon's dominance stems from controlling three unassailable assets: 200 million Prime members generating first-party purchase data, AWS infrastructure enabling AI-driven targeting at scale, and the only programmatic path to Prime Video's 115 million monthly viewers. Walmart's $2.3 billion Vizio acquisition – completed in December 2024 according to the company's official announcement – represents the only credible threat to this hegemony, giving them control over 19 million SmartCast accounts and 20% of the US TV market.

What's remarkable isn't that these giants dominate, but that they've strengthened their grip while the market grew fivefold. Despite 250+ retail media networks launching, Amazon and Walmart have lost only 1% market share over five years. That's not competition – that's consolidation disguised as choice.

The barrier to entry isn't just technology or data. It's the fundamental chicken-and-egg problem: advertisers go where the inventory is, inventory owners go where the ad dollars are, and both are already concentrated in Seattle and Bentonville.

There are more noses in the Retail Media trough that you are paying for: platform fees, agency markups, and technology requirements. Amazon sellers pay up to 50% of their revenue directly to the platform through advertising, fulfillment, storage, and referral fees. That's not a media cost – it's a business tax. Programmatic DSP fees range from 19.7% to 66% of media spend, with some extreme cases showing brands paying $20.56 CPM for inventory priced at $10. Agency management adds another 15-50% in fees, often with hidden markups that double programmatic CPMs. Add data acquisition costs, brand safety verification, and attribution tools, and you're looking at total expenses that would make Google and Facebook blush.

And all those ROAS claims that see you redirecting to Retail Media? According to eMarketer research, traditional ROAS metrics overstate performance by up to 3x. Research shows limited correlation between reported ROAS and actual incremental sales lift. We're paying premium prices for sales that would have occurred anyway, while sophisticated last-click attribution creates false performance signals that justify ever-increasing investment (I should note that this is where Publicis' CoreAI offering with ID at the centre will be interesting to improve this attribution conundrum... one to watch...).

The strategic choice facing every brand is crystallised in two contrasting approaches: P&G's embrace of retail dependency and Nike's costly retreat from direct-to-consumer ambitions.

P&G went all-in on retail media, with CEO Jon Moeller declaring "the majority of brand choice is made in a retail environment." The company views retail media as its primary growth engine, abandoning most direct-to-consumer initiatives after failures like Tide Spin laundry delivery proved that household products giants can't easily circumvent retail partners.

Nike tells a different story – one that should terrify any brand betting everything on direct-to-consumer (DTC). After building direct sales to 44% of revenue ($21.5 billion in 2024), CEO John Donahoe admitted the strategy needed "important adjustments." Nike's dramatic withdrawal from Amazon in 2019, followed by its return that they announced just last week, symbolises the broader challenge facing brands that try to bypass retail partners.

The financial reality challenges DTC mythology. According to BMO Capital Markets research, while DTC channels offer gross margins 23.5 percentage points higher than wholesale, most companies actually achieve higher EBIT margins through wholesale after accounting for fulfilment, marketing, and technology costs. Hidden expenses including 4x higher return rates and massive customer acquisition costs often eliminate the theoretical margin advantage.

The uncomfortable truth: Nike's net income fell 5% as it pursued DTC purity. P&G's margins remain stable as it optimises for retail media efficiency. The data doesn't lie – for most consumer brands, fighting the retail media tide is more expensive than swimming with it.

I get it, the innovation argument is seductive for the people who constrain your marketing budgets: better attribution than traditional media, audience precision based on purchase history rather than demographic assumptions, and advertising at the point of purchase rather than hoping for recall. These are real advantages that explain why brands initially embrace retail media.

But examine the underlying economics, and the extraction argument becomes compelling. Platforms leverage monopolistic positions to charge tolls for consumer access, creating a vicious cycle where brands must pay increasing fees to maintain visibility. As Grace Kite from Magic Numbers amusingly put it: retail media is often just "renting" access to customers you already have relationships with.

The regulatory response is building. The FTC's comprehensive lawsuit against Amazon alleges systematic anti-competitive practices including self-preferencing and exploitation of third-party seller data. The EU's Digital Markets Act subjects major platforms to strict behavioural requirements, with fines up to 10% of global revenue. Even the UK's Competition and Markets Authority gained enhanced powers in 2024 to address platform concentration.

When regulators in three major markets simultaneously investigate the same business practices, it's usually because the practices are problematic.

So where does this leave marketing leaders trying to navigate a $179.5 billion landscape that promises efficiency while potentially extracting unsustainable rents?

First, adopt incrementality-first measurement. Traditional ROAS metrics are marketing's equivalent of fake news – technically accurate but fundamentally misleading. Implement control group testing, invest in media mix modeling for budgets over $1 million, and calculate true ROI including all hidden costs and opportunity costs.

Second, maintain portfolio discipline. Protect 60-70% of media budgets for brand building and awareness. Classify retail media as a distribution expense rather than pure marketing to prevent budget cannibalisation. The most successful brands use retail media for bottom-funnel performance while maintaining traditional channels for brand equity.

Third, negotiate transparency aggressively. Demand line-item fee breakdowns, establish performance guarantees, and conduct regular audits. With platform fees potentially consuming over half of budgets, fee structure optimization can deliver greater returns than campaign optimization.

Finally, prepare for massive consolidation. With 250+ retail media networks chasing limited budgets, a reckoning is inevitable. Focus partnerships on Amazon (50-60% of retail media budget), Walmart (20-25%), and one or two strategic alternatives. Avoid spreading resources across numerous small networks that lack scale and sophistication.

Retail media isn't going away – the $179.5 billion projection is conservative, if anything. The question isn't whether to participate, but how to participate without surrendering strategic control.

The brands that thrive in this new landscape will be those who approach retail media with clear-eyed realism about its true costs and limitations. They'll leverage its unique capabilities for bottom-funnel performance while zealously protecting brand-building investments. Most critically, they'll maintain strategic flexibility as regulatory intervention and market consolidation reshape the playing field.

Because in a world where platforms control the pipes, the brands that survive will be those that never forget they must own the water.

What's your strategy for balancing retail media efficiency with long-term brand independence? And more importantly, are you measuring what actually matters, or just what the platforms want you to see?

Brandflow is written by Justin Billingsley, who has spent his career on all three sides of the industry's table: senior client, global agency leader, technology founder. First published 29 May 2025 in the Brandflow newsletter on LinkedIn.