'Is Retail Media Distribution or Advertising? It’s Both'

Can we really call retail media advertising? It’s a question raised recently by marketing professor Byron Sharp, who suggested retail media should be seen more as a distribution channel than an advertising channel. He argues that if we consider paid search or display ads on platforms like Amazon.com as advertising, we must also acknowledge that shelf slotting fees and endcap displays serve a similar role.

However, asking whether retail media is primarily about distribution or advertising oversimplifies things. If you take Sharp's own definitions of what distribution and advertising are, retail media doesn't cleanly fit into either of those buckets.

Instead of a binary choice, I would suggest it’s both — and further examination of the key differences between its two main categories raises serious questions about how its return on investment should be measured.

But first, let’s take a step back and look closer at the definitions. Sharp often refers to things like Google search as distribution rather than advertising. The reason is that by his own definition, advertising is something that builds mental availability so that when you're about to buy something, a particular brand suddenly flashes into your mind. Distribution is something that makes it easier for you to buy things when and where you want to purchase them. Google’s role is far closer to the latter than the former in this regard.

Other forms of advertising, such as a video with a compelling storyline, are designed to build an emotional connection with a brand’s consumers. Think Coke’s “Holidays Are Coming” campaign. This builds the mental availability of the brand over time.

But retail media doesn’t fit neatly into either of these definitions. It’s a squishy term. There's a range of things that we call retail media, which I will try to put into two main categories: shoppable media and retailer-powered media.

Shoppable media refers to transactable media enabled by retailers or marketplaces, where the ad unit acts as a “listing” that consumers can purchase from directly. You buy through the ad unit itself. The most obvious example of this is Amazon, but you also get shoppable ads now on platforms such as Instagram or TikTok.

This feels far more akin to Sharp’s definition of physical availability, which emphasizes making brands easier to find and buy. However, the concept becomes murkier when we consider offsite shoppable media, such as Sponsored Product listings on the open web or shoppable social ads, like those created through the Amazon-TikTok partnership.

Retailer-powered media, on the other hand, involves any digital ad formats that leverage first-party retailer data for targeting, although the ads themselves are not directly shoppable. In other words, advertisers can find out what someone is looking at on retail sites, such as Amazon, and target them on other digital properties and channels with a particular product or service they think will be relevant.

For example, there are many partnerships in connected TV (CTV) aimed at supporting this type of retail media right now, including the recent deal between Disney Advertising and Walmart Connect, which takes all of Disney’s CTV inventory and connects it to Walmart's first-party data.

This form resonates more closely with Sharp’s idea of mental availability — making a brand top-of-mind for consumers so that they think of it at the point of purchase.

The crux of the problem lies with shoppable media. If we adhere to Sharp’s concept of physical availability, it’s hard to dispute that a Sponsored Product listing facilitates easier product discovery and purchasing. On the flip side, shoppable video ads, particularly in CTV, embody both definitions: they excel in fostering mental availability through longer formats while simultaneously enabling direct purchasing options.

Shoppable media can’t be cleanly separated from either distribution or advertising — it exists on a spectrum or as a hybrid of both.

However, if we keep pulling on this thread, it raises more complex questions. For example, if a segment of retail media leans more toward distribution than advertising, then should we assess the ROI of shoppable retail media against other media types or against investments in expanding distribution? Or can we compare the ROI of retail media to other forms of media that don’t also expand distribution?

For example, when you buy a linear TV ad, you're just paying for the advertising. The cost of distribution or shelf space (be it physical or digital) to capture that demand isn’t part of that media cost. However, when you buy a retail media ad, you're not just paying for the ad itself, but also receiving as part of that distribution and placement within a specific retail environment. One could argue that this makes it difficult to compare retail media’s ROI to other mediums that don't have the distribution cost baked into it.

These questions underscore the need for a more nuanced understanding of retail media's multifaceted role in today’s marketing landscape. You only need to ask the people who work in the sector to see just how many skills are required to excel in this interconnected world of commerce and media. Managing distribution, assortment, pricing, digital shelves and advertising require very different skill sets. Therefore, it’s no surprise that the people working in retail media’s complex landscape are often compared to triathletes. There are a range of expertise areas required to keep pace.

Whether we conceptualize retail media as distribution or advertising or both may seem like arguing over the definitions of words, especially in a sector enjoying unprecedented growth. However, once you begin to peel back the onion, you’ll see a host of interconnected challenges that we're still grappling with as an industry, ranging from where retail media should sit within organizational structure to how it should be funded and accounted for by finance. Until we fix these challenges, the retail media juggernaut risks being blown off course.

Skye Frontier is executive vice president at Incremental, the leader in retail media measurement.