Ecommerce Has Slowed, But Retail Media Is Outpacing Digital Advertising

22 Sep 2022

Ecommerce momentum has tailed off since last year, but global ecommerce and retail media still have plenty of room for growth, according to GroupM’s 2022 Ecommerce and Retail Media Forecast.

GroupM estimates ecommerce will account for 19% of global retail sales this year, and that ecommerce rate will grow to 25% by 2027.

Global retail media spend will likely reach $101 billion this year, a 15% YoY increase from $88 billion in 2021.

Total global retail media spend will hit $160 billion by 2027, which represents a 60% growth rate over five years, GroupM predicts.

Growth will largely be driven by the world’s biggest retail players: names like Alibaba, Amazon and Walmart. But there will be increased competition in the category over the next one to three years as more retail networks emerge and more non-endemic brands get into retail media advertising.

The ecommerce slice

Global ecommerce sales for 2022 will total $5.4 trillion, according to GroupM. Ecommerce sales in the US and China make up 52% of that figure. Just seven markets – the US, China, Japan, Germany, the UK, Canada and Australia – account for nearly 61% of total ecommerce sales, or $3.3 trillion.

The global ecommerce total is expected to grow to $9.1 trillion by 2027.

If history is any indication, ecommerce sales growth over that period will be concentrated among the top 20 players in global ecommerce. In 2016, the top 20 ecommerce companies by gross merchandise value (GMV) accounted for almost half of global ecommerce sales; by 2021, their share was up to two-thirds.

It’s important to note that GroupM’s definition of ecommerce includes many categories average web users may not think of as typical ecommerce, while excluding others. GroupM includes online sales of autos, auto parts and gasoline, but it doesn’t count online ordering for “last mile restaurant delivery” and other food services.

Advertising services like Criteo, software providers like Shopify and sales completed through Google Shopping or social platforms like Meta and TikTok are also not included in GroupM’s projections for ecommerce or retail media sales. That’s out of concern about double-counting sales, since a sale driven by Criteo, Google or Meta is a sale attributable to the merchant, too.

Retail media spending

GroupM’s projection of $101 billion in retail media spend for 2022 represents 18% of total global digital advertising and 11% of total global ad spend.

And the $101 billion figure would be equal to 1.8% of global ecommerce GMV for 2022.

GroupM considers 5% of ecommerce GMV to be a reasonable goal for ecommerce platforms to set for their share of retail media ad revenue.

This 5% GMV goal is based on GroupM’s analysis of Amazon’s ad business; although Amazon does not distinguish between streaming video ad revenue and ecommerce ad revenue in its reporting, GroupM estimates that Amazon’s retail media revenue is roughly 5% of its total GMV.

Retail media revenue for most of the other top ecommerce companies currently falls between 0% and 3% of their GMV, which puts the 5% goal within reach, according to GroupM.

The 60% growth rate of the retail media market from now until 2027 will be driven by the proliferation of retail media networks and the shift of incremental spend from other media channels, even from non-endemic brands not carried in stores, as advertisers discover and test retailer platforms, according to the report.

But that 60% growth rate, and the $160 billion in total retail media spending it projects for 2027, may even be underselling the retail media potential, said Kate Scott-Dawkins, GroupM’s global director of business intelligence.

GroupM’s projected 60% growth rate for retail media over the next five years would likely outpace digital advertising’s overall growth rate, which was 24% in 2021, Scott-Dawkins said. Since retail media is growing at a faster clip than the rest of digital, retail media will continue to earn a larger share of total ad spend.

“We think our retail media forecast is a bit on the conservative side, and this market could grow even more quickly,” she said. “If that share increased even 1% each year, you quickly get to a place where it’s $200 billion in 2027.”

Source: Adexchanger, Anthony Vargas