The 2025 State of Budget Allocation in Retail Media

As retail media continues its rapid growth, marketers face a critical challenge: determining precisely where to allocate their growing budgets. Budget allocation in retail media is akin to advanced stock market trading—it requires careful analysis, vast amounts of data, and strategic foresight to ensure the highest returns.

Compared to other major digital advertising channels, which typically have just a handful of options, retail media presents an entirely different level of complexity. With over 200 Retail Media Networks (RMNs) available, budget allocation is already a difficult task. While much of the current spend is concentrated on Amazon, marketers recognize the rising competition and increasing costs on the platform. They also see untapped opportunities across other retailers. But how and where should they invest, and which ad formats and placements will maximize their returns?

With retail media spend projected to exceed $62 billion in the U.S. alone this year, the importance of strategic budget allocation cannot be overstated. Marketers must weigh several critical factors, including return on investment, measurement methodologies, competitive ad placements, and evolving media strategies. The ability to navigate these complexities will determine success in the coming years.

In this post, we will examine key trends, factors influencing budgeting decisions, and the major hurdles marketers must overcome to succeed.

Key influences on budget decisions

Marketers’ decisions on budget allocation are influenced by various factors, including measurement approaches, internal alignment, and recommendations from external partners. One notable insight from our exclusive 2025 State of Retail Media report, created in partnership with Path to Purchase Institute, is the increasing reliance on Media Mix Modeling (MMM) as a key decision-making tool – a trend that has sparked significant debate.

Alex Juday, SVP Revenue & Commerce Strategy at Incremental, raises concerns about this trend:

“One [finding] that stood out to me was that MMM was highlighted as the most important influence on budget allocation for retail media. That is a bit alarming to me as I’ve talked to very few people in the last year (besides MMM companies) who believe that MMM accurately assesses retail media performance. We have to move past force-fitting retail media into a methodology that isn’t fundamentally built to understand it.”

Beyond MMM, many marketers are turning to incrementality testing and attribution modeling to inform spending decisions. The need for better insights has pushed brands to work more closely with their RMN partners, leveraging their evolving analytics capabilities to guide smarter investments.

What’s holding back smarter budget allocation?

Despite growing investments, marketers still struggle to prove the impact of their retail media spend. Persistent challenges around incrementality, ROI measurement, and fragmented analytics make it difficult to justify budget shifts effectively, according to our 2025 State of Retail Media report.

Colin Lewis, Editor-in-Chief for Retail Media at InternetRetailing, highlights these ongoing concerns:

“When asked about factors that could lead to reduced investment in retail media, it’s unsurprising that challenges like ‘difficulty proving investment incrementality,’ ‘lower ROI compared to other channels,’ and ‘analytical limitations’ are prominent. This echoes the common concerns voiced at retail media conferences worldwide—how can ROI be accurately demonstrated, and do our tools effectively showcase these results?”

Marketers continue to grapple with the fundamental question: how can they confidently allocate budgets when measuring effectiveness remains so difficult? This uncertainty has driven many brands to explore new solutions, including AI-powered analytics and deeper partnerships with retail media providers that offer more sophisticated attribution tools.

Budget trends: Where marketers plan to invest

Retail media budgets continue to grow, with spend diversifying across various ad formats and platforms. According to our report, sponsored products/brands ads and other on-site placements remain top priorities for marketers, while emerging channels like social commerce are gaining traction.

However, allocating budgets strategically isn’t simple. Brands must navigate a crowded and competitive landscape of RMNs. A recent analysis from eMarketer highlights this reality, showing that Amazon alone captures 77.3% of retail media ad spend, leaving a fragmented market where dozens of smaller RMNs compete for the remaining share.

The competition among smaller RMNs underscores the importance of aligning spend with networks that cater to specific categories—such as Ulta or Sephora for beauty brands—to efficiently reach the most relevant audiences. Additionally, as retailers build out their own media offerings, many are providing advertisers with exclusive first-party data and enhanced targeting capabilities, making strategic budget allocation even more crucial.

Channel performance and evolving spend

The way brands balance and rebalance their retail media budgets is constantly shifting. Kaitlyn Fundakowski, Sr. Director of E-Commerce at Chomps, emphasizes the need for ongoing reassessment:

“The channel performance and media mix is insightful and has seen a lot of key changes over the past few years. I think this is so dependent on organization and brand scale, and needs to align to broader brand growth initiatives for ultimate success. We are always relooking at the balance of spend as we grow. It is ever-evolving for growing brands.”

This insight reinforces the need for agility in budget allocation. Brands must continuously refine their spending strategies in alignment with growth stages and broader business objectives. Additionally, the concentration of ad spend on major platforms further highlights the necessity of exploring smaller, niche RMNs for targeted, high-impact advertising.

Marketers who can master a more data-driven, flexible approach to budget allocation will be best positioned to adapt to retail media’s ongoing evolution. The right balance of proven strategies and experimental spending can ensure long-term success in this competitive space.

Conclusion: Strategic budgeting is more important to retail media success than many realize

The overwhelming majority (95%) of marketers are not involved in budget decisions. They are handed a budget and asked to spend it wisely for the biggest return. However, the ones who do control the purse strings understand just how impactful it can be. Ultimately, marketers must embrace more thoughtful and flexible budgeting strategies to navigate the complexities of retail media. Balancing proven tactics with emerging opportunities while overcoming measurement challenges is no easy feat.

As retail media continues to evolve into commerce media and fragment across networks, success will depend on staying agile, informed, and aligned with data-driven measurement strategies. Marketers who refine their approach will be best positioned to maximize returns in an increasingly competitive landscape.

If you missed our previous discussions of the findings from our 2025 State of Retail Media report, check them out here:

• Our deep dive into retail media measurement and incrementality.
• Our deep dive into retail media CTV.

If you would like to learn more about how Skai’s retail media solutions can help, please reach out to our team.