As the noise around a US recession grows louder, advertiser demand is expected to take a hit, and retailers banking on ad revenue from retail media might need to look elsewhere for spare change.
Retail media, growing at roughly 20% YoY, has become a core component of planning between brands and retailers, making it less susceptible to media market volatility. However, since it’s a relatively new marketing channel and hasn’t been through a significant recession yet, it’s hard to say definitively, experts told Retail Brew.
Separately, advertising research firm World Advertising Research Center (WARC) has cut its global advertising forecast by $19.8 billion, citing overall macroeconomic uncertainty.
As advertisers face intense scrutiny to justify ad spend, three experts told Retail Brew that while retail media isn’t immune from a recession, it may be more resilient compared to other advertising channels. The throughline is advertisers tend to rely on performance-based ad channels with measurable ROI during economic downturns.
Cautiously optimistic: “I don’t think it’s recession proof, but retail media is more recession resistant than other channels,” Andrew Lipsman, independent analyst at Media, Ads + Commerce, told Retail Brew. “The primary reason for that is that in recessionary times, there tends to be a flight to certainty—in this case, a flight to performance advertising—where CFOs are demanding higher accountability for media spend. So, retail media, by virtue of being very measurable and also tying directly to brand sales, is one that’s least likely to feel the effects.”
Neil Saunders, managing director at consulting firm GlobalData Retail, agreed that retail media might have a better chance to attract ad dollars given its ability to provide performance results.
“A recession will cause all companies to review marketing spend and this will put some pressure on retail media,” Saunders told Retail Brew in an email. “However, what firms will look for is the effectiveness of their marketing spend and they will try to consolidate it into channels that drive the best results.”
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“On this front, I think retail media may be more recession-proof than other media,” Saunders added.
However, he warned that a recession would likely put “weaker players” within retail media at risk given the intense competition within the space.
Grim outlook: Retailers have recently reported a 13 percentage point drop in confidence to increase retail media revenue amid fierce competition. To make matters worse, Lipsman said that if consumer demand for retail goes down, then advertising will likely follow suit. “So, it will move in correlation to depressed retail sales,” he added.
Even if retail media experiences a modest decline in spending, it’s still projected to maintain double-digit growth rates, unlike other traditional ad channels that may stagnate or contract during a recession, Lipsman added.
“But it also certainly could affect things like Facebook and YouTube and some of the big digital channels that play more to the upper funnel,” Lipsman added.
Gartner Senior Director Analyst Greg Carlucci said he is still more optimistic based on stats from Gartner’s 2024 CMO Spend Survey. Carlucci said that retail media networks accounted for about 8.3% of total paid media spend, and over one-third of CMOs surveyed by Gartner in 2024 said they would increase their investment in retail media.
“The exact percentages will change when the new data comes out in a few months, but…paid media is the largest share of the [overall marketing] budget,” he said. “And retail media is one of the fastest growing digital channels for consumer goods companies.”