Sathish:
“What is one thing retailers today should not ignore?”
Ricardo:
“There are really two areas. One is AI in retail broadly, which is true for almost any industry, but especially retail, because retail has the most to gain from all the different flavors of AI. The other is retail media, also called commerce media networks, which is a real margin and profit driver, especially for larger retailers. The two are starting to intersect more and more. Depending on your point of view, it is either a crisis moment where AI deflects the significance of a retail media network, or AI augments it and helps drive it. Either way, those are two things every retailer has to participate in to drive the business forward.”
Sathish:
“If a smaller retailer has never heard of retail media, where did it come from?”
Ricardo:
“It started when Amazon added paid promotional spots on its product search pages. You would do a search and suddenly see sponsored placements at the top for relevant products. It began on marketplaces, where products came from multiple sellers, not from a vertically integrated retailer selling only its own products. For a seller, it became almost a necessity to advertise to win the click, because if you did not, someone else selling the same product would. Then Walmart did the same with Walmart Connect, then Target, the big box retailers like Best Buy, and grocery chains like Kroger and Albertsons. As it evolved, retailers realized the real product was the first-party customer data they had. They know exactly what you bought from them, and they tied that into the ad units, online and in-store, to do highly targeted advertising for brands.”
Sathish:
“Does adding retail media risk losing conversions by sending traffic away?”
Ricardo:
“The risk shows up mainly with non-endemic advertisers, products you do not sell. There you are directing people to another website, so it should change how you price it, because you are risking a sale on a product you do sell. But you have to consider why that consumer was on your site to begin with. If they were genuinely shopping, you can expect them to come back because they never finished their mission. In most cases, the ad opens a new tab, so it is a temporary distraction, and the brands buying these units are usually doing it for awareness, to stay top of mind. You might price an away-directing unit higher because of that risk, and an endemic unit lower because you expect it to convert. If you already have a high bounce rate, expect this to add to it. If customers normally stay and convert well, the risk is lower.”
Sathish:
“Which industries gain the most from retail media?”
Ricardo:
“If you look at where the investment is going, grocers benefit the most, because of how their customers shop. E-commerce is still a smaller share of grocery sales, so promoting products carries less risk of customers clicking away, and grocers want you in the store anyway, because the cost per transaction is lower. You do not see many apparel brands taking advantage of it. People always use automotive as an example, because car companies advertise anywhere and everywhere. A car is a highly considered purchase, and people are buying fewer new cars right now, so it is in the car maker’s interest to stay in front of you constantly. The average consumer buys a car maybe once every ten years. Over a lifetime, you buy hundreds of shirts, but only five or six cars.”
Sathish:
“How fast is retail media growing?”
Ricardo:
“I follow eMarketer, which has the best forecasts here. It has been growing at a rate of 20 to 25% year over year. What is interesting is where that growth shows up. About 70 to 75% of the market goes to Amazon and Walmart, because they are the two biggest marketplaces, and if you sell there, you have to spend something on advertising to stay visible. Some analysts say it is hyped up because everyone is fighting over the remaining 20 to 25%. But the total pie is not fixed. It is growing significantly every year. Even if Amazon and Walmart capture three-quarters of it, the amount left for everyone else is still a sizable dollar amount, which is why it is worth pursuing.”
Sathish:
“How is AI changing retail?”
Ricardo:
“You cannot go to a retail event without 95% of the sessions being about AI. Part of the challenge is legacy technology. A retailer that has been around for 20 years probably still runs 20-year-old technology, because the cost and time to replace it are high. They might have ten technologies that need replacing, but can only tolerate two projects a year, and they usually cannot risk changes during the holiday season. What retailers are learning this year is that every time they start an AI project meant to replace people, the project fails, and the technology does not deliver. When they instead expect AI to augment the team, to make work easier or let people do things they had no time for, those projects succeed. The hardest and best approach is to redefine a process from scratch using AI, rather than just asking how AI makes the old process faster. That takes longer, but it is far more transformative.”
Sathish:
“Is agentic AI a threat to retail media?”
Ricardo:
“I am not in the camp that says agentic AI is an existential crisis for retail media. They will coexist for quite a while. One view is that it changes how consumers discover products, because they narrow their search in an AI conversation before they reach a retailer’s website. The other view is that we are assuming too much. In traditional search, many consumers never clicked the result link. They would see the product and the retailer, open a new tab, and go directly. The AI only changed how they narrowed from infinite products down to a half dozen, not how they decide which retailer to visit. ChatGPT briefly had instant checkout and then took it away, and Google is doing a lot of work to let people buy inside the AI conversation. I see that as a new sales channel, not a takeover. Everyone said the same when e-commerce arrived: that stores would die. Twenty-five years later, e-commerce is maybe 15 to 20% of sales, and AI-driven shopping is still around 5% of traffic. Every new channel takes a piece of the total and coexists with the one before it. You cannot ignore it, but you should treat it as one more channel your business has to operate in.”
