‘We’ve got to call their bluff’: Amidst retail media spend scrutiny, advertisers pull out of negotiations

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Retail media networks have become big business, expected to account for almost a quarter of all U.S. media spend by 2028, according to eMarketer. Still, retail media networks are asking for more ad dollars, positioning themselves as media companies to take in media dollars instead of the shopper and trade dollars they’ve been historically relegated to. But as the industry grows, so do complications in negotiating with the retail media giants.

“I’ve had two clients walk away from JBPs this year with Walmart because they felt that they got so shook down,” said one agency executive who agreed to speak anonymously and declined to name the clients.

Advertisers say they are pressured to justify an increased spend without incremental return on investment or standardization in measurement. Anecdotally, the agency executive recalled those two clients saying, “For my business, I don’t know that you can deliver that much more for me to commit. My pot hasn’t changed” about Walmart Connect, Walmart’s RMN business that it launched in 2021.

For marketing execs, it comes down to the JBP process, which could be likened to the upfront events that networks hold to lock in ad dollars ahead of the their respective television seasons.

At least two other executives, one from an agency and another from a global CPG brand, shared a similar experience with Walmart, speaking with Digiday on the condition of anonymity in exchange for candor. (Walmart did not respond in time for publication.)

The agency exec said a client (that they declined to name) pulled out of JBP commitments with Walmart earlier this year and did not come back to sign with the retailer. Meanwhile, citing lagging measurement, the CPG brand exec said, “The JBP [with Walmart], we tried to kill it and then my sales team got scared. Because, like everyone else, 50% of my sales go through Walmart.”

And that seems to be where the trouble lies. Critics argue that the negotiation process between brands and retail media networks have become less about negotiation and more quid pro quo-style deals. Here, execs say, they’re facing pressure from retail media networks, behemoths and long-tail players alike, to spend more year-over-year or risk losing in-store shelf space. 

Walmart isn’t the only RMN player that has sparked concern. Per the CPG exec, the brand has had to push back on Amazon as well, removing Amazon’s streaming TV managed services from its JBP with the retailer, opting to manage internally with the brand’s media team. (Amazon declined to comment.)

“We separated the streaming budgets from our retail negotiations so as to ensure we were not sacrificing brand-building activities that drive sales at multiple retailers to myopically focus on a single sales channel,” the CPG exec said. 

There’s pressure coming from most RMNs to spend more year-over-year, but insight around return on ad spend and incrementality has yet to be standardized. At the same time, advertisers are grappling with the influx of retail media networks — more than 250 of them at this point, according to retail media intelligence platform Mimbi. 

“If the expectation is year-over-year, as a brand, you have to increase your spending to show up [online and in-store], to what end,” asked the first agency exec. “Are we seeing the returns that match or the incremental?” 

For example, the agency exec added, if an advertiser signed a $10 million JBP with an RMN, but ultimately spent $12 million after seeing efficiencies in return on ad spend, that RMN would base the following year’s agreement on the $12 million spent rather than the original $10 million agreement. Meaning, a successful JBP could jump from $10 million one year to $13 or $14 million the next. Per the CPG exec, the hiked JBP commitment requests are normal across the industry but if half your sales come from that RMN it makes it tricky to negotiate.

Of the retail media networks, advertisers said they are fearful to lose shelf space and sales in Walmart with its notable leverage given its massive size as a retailer with more than 4,500 Supercenters, discount stores and neighborhood markets across the U.S.

“That’s the big question. Now that these brands are pulling out of their JBP’s, is there going to be — I don’t want to call it retaliation,” said a second agency exec who spoke anonymously. “That sounds really harsh — but is there going to be a consequence for not signing your JBP?” Again, Walmart did not respond to a request for comment.

It’s a concern the exec are monitoring, especially as advertisers continue to push for transparency around return on ad spend, performance, measurement and incrementality. Some of it, marketers and media buyers say, can be blamed on the retail media network industry’s lack of maturity and standardization. Notably, the Interactive Advertising Bureau (IAB) and Media Rating Council (MRC) finalized retail media measurement standards last year, setting a framework for audience measurement, metrics and best practices in measuring incrementality.

It’ll take an industry-wide effort to get more clarity in the media buying process within the retail media network ecosystem, per the CPG exec. 

“This is the thing: We’ve got to call their bluff, but we have to do it as an industry,” they said.