Retail media and incentives: the intersection driving profitability

For large retail businesses, retail media isn’t just a way to boost profits—it's a high-margin business approach transforming the industry. Compared to the core products retailers sell, retail media offers significantly higher margins, making it a powerful way for businesses to reach consumers directly within retailer-owned ecosystems.

Although many discussions about retail media highlight its advertising potential, an important aspect often missed is the impact of promotions and loyalty programs. Rather than being just a complement to retail media, incentives play a critical role in driving engagement and conversion. Without a well-integrated promotional strategy, retailers risk leaving value on the table—both for consumers and for their brand partners.

Let’s first examine what retail media is and why it has become a crucial component in today’s commerce.

Retail media allows brands to advertise to consumers on a retailer’s owned platforms, reaching them at the point of purchase. Unlike traditional digital ads, which can feel disconnected from the shopping journey, retail media integrates seamlessly into the experience—whether through sponsored search results, personalized recommendations, or in-app promotions. There are four key components to a retail media strategy:

Retail media delivers significantly higher margins than a retailer’s core business, often exceeding 70%. This high-margin revenue stream has transformed retail, allowing businesses to monetize their owned ecosystems while giving brands a direct path to consumers at the point of purchase.

Consider the impact at scale. Take a $1 billion retailer operating at a 5% margin ($50 million in net income). Now, introduce retail media revenue with an 80% margin. If just 1% of total revenue comes from retail media ($10 million), that translates to $8 million in additional net income—a 16% boost to overall profit. For retailers navigating tight margins, this isn’t just incremental growth; it’s a fundamental shift in how profitability is achieved.

A retail media network (RMN) is the advertising platform through which brands purchase advertisements and campaigns or access customer data. RMNs usually feature a campaign purchasing and setup tool, allowing brands to buy and create campaigns that will appear before the retailer's customers.

Retail media networks are widespread, with an estimated 52% of all major retailers  incorporating a retail media play and 20% of all digital ad spend moving through retail media networks.

The largest RMNs are run by the world’s largest retailers. The following table shows the top five retail media networks in the US based on their RMN revenue in 2023.

The grocery industry has always been a major retail media industry, given the very low margin of food products. Food brands have always paid dearly for shelves at eye-level, on the endcap of shelves, or near checkout, a trend which has accelerated and expanded into digital grocery experiences.

Retail media is also growing rapidly in other industries, including apps with high user attention (like the ads you see on the Uber app while traveling, or promoted restaurants when ordering on Uber Eats).

Promotions and loyalty programs aren’t just complementary to retail media—they are fundamental to its success. According to RetailX’s Retail Media Sector Report, 74% of customers discover new products through offers and coupons, far surpassing the impact of social media ads (36%). This highlights a key insight: promotions drive engagement, and engagement fuels retail media revenue.

The relationship between retail media and incentives is symbiotic. Retail media networks make promotions and loyalty programs more effective by:

Several major retailers have seamlessly integrated incentives into their retail media strategy:

Talon.One enables retail media businesses to offer even more value to their retail media brands through the following ways:

As retail media continues to grow, promotions and loyalty will play an even bigger role in shaping its success. Retailers that effectively integrate brand-funded incentives into their RMN strategy will not only drive higher engagement but also unlock new revenue streams.

With solutions like Talon.One, businesses can create a seamless, data-driven ecosystem where retail media, promotions, and loyalty work together to maximize customer value and profitability.