Retail Media Got Cheaper While Everyone Was Distracted

The ad story nobody expected

Most ecommerce marketers expected 2026 to be expensive.

Search is crowded. Social creative burns out quickly. Influencer rates are uneven. Amazon competition is intense. Measurement is messier than it used to be. AI search is changing the click pool. Marketplaces are adding fees. Shoppers are price-sensitive.

So when Skai reported that retail media ad spend grew 27% year over year in Q1 2026 while CPCs fell across every product category, it was worth paying attention.

Even more interesting: Amazon DSP CPCs fell 53% year over year to $0.86, making DSP cheaper per click than Sponsored Products for the first time in Skai's dataset. Paid social also improved, with clicks up 42%, CPCs down 22%, and CTR up 27%.

This does not mean ads are suddenly easy. It does not mean every brand should pour money into retail media. It does mean the market may be more nuanced than the usual "everything is getting more expensive" narrative.

While many brands are distracted by AI shopping, TikTok Shop, Prime Day timing, and Amazon fee pressure, retail media may be entering a window where smarter advertisers can buy attention more efficiently.

The catch is that cheaper clicks only matter if they lead to profitable customers.

Retail media is not one channel

One reason teams misread retail media is that they talk about it as if it is one thing.

It is not.

Retail media includes Sponsored Products, Sponsored Brands, DSP campaigns, onsite display, offsite audience extension, connected TV, retailer-owned networks, marketplace placements, and increasingly partnerships between retailers, streaming platforms, and data providers.

Amazon is the largest player, but Walmart Connect, Instacart, Target Roundel, Kroger Precision Marketing, and many other networks are part of the same broader shift.

The promise is simple: retailers have purchase data, and advertisers want to reach people closer to buying.

The problem is also simple: every network has its own measurement, attribution windows, inventory, reporting, and incentives.

That means a cheaper CPC in retail media is not automatically good. You need to know what you are buying.

Is the click from a high-intent search placement?

Is it from a display impression reaching a broad audience?

Is it tied to a retailer's first-party audience?

Is it incremental or would the sale have happened anyway?

Is the campaign protecting branded demand or creating new demand?

Is the reported ROAS hiding margin problems?

The brands that win in retail media will not be the ones that chase every cheap click. They will be the ones that understand the job of each format.

Why cheaper CPCs can still be dangerous

Cheaper clicks create a psychological trap.

When CPCs fall, marketers feel like they have found efficiency. Sometimes they have. Other times, they have simply bought lower-quality traffic.

Retail media needs to be judged by contribution margin, incrementality, and customer quality, not only CPC or ROAS.

A campaign can show strong ROAS and still be weak if it mostly captures customers who would have bought anyway.

A campaign can show cheap CPCs and still be weak if conversion rate drops.

A campaign can drive revenue and still hurt profit if the promoted product has thin margin, high return rates, or heavy discounting.

A campaign can acquire customers who never buy again.

This is especially important around major retail events like Prime Day. Cheaper or more available retail media inventory can tempt brands to scale aggressively. But as discussed in Prime Day Is Coming Early, event revenue can hide poor unit economics.

The goal is not to spend more because clicks are cheaper. The goal is to spend where cheaper clicks create profitable demand.

DSP getting cheaper is a real signal

The Skai finding that Amazon DSP CPCs fell below Sponsored Products is notable.

Sponsored Products have traditionally been the performance workhorse for many Amazon sellers because they sit close to purchase intent. DSP has often been treated as a broader awareness or retargeting tool, useful but more complex.

If DSP clicks become materially cheaper while inventory and targeting improve, brands may need to revisit that assumption.

DSP can support several jobs:

Retarget shoppers who viewed but did not buy.

Reach category audiences before they search.

Support launches by warming up demand.

Defend against competitors.

Extend campaigns off Amazon using Amazon audience signals.

Support connected TV and upper-funnel retail media.

But DSP is not a magic performance machine. It requires good audience strategy, creative, frequency control, landing path, and measurement discipline.

For smaller sellers, Sponsored Products may still be the first priority. For brands with enough budget and a clear funnel, DSP may deserve more testing in 2026 than it received in prior years.

Retail media is moving beyond the product grid

The old mental model of retail media was simple: pay to show up higher on a marketplace search page.

That is now too narrow.

Retail media is expanding into offsite display, streaming, connected TV, shoppable media, and audience-based buying. Netflix, for example, has announced expanded advertising capabilities including targeting through Amazon DSP and Yahoo DSP in the U.S.

That matters because retail data is moving into media environments where shoppers are not actively browsing a product grid.

The upside is reach. A brand can use retailer signals to influence customers earlier.

The risk is waste. The farther the placement sits from checkout, the more carefully the brand needs to measure impact.

This is where creative quality becomes more important. A Sponsored Products ad can rely heavily on price, image, reviews, and search intent. A streaming or display placement needs a stronger reason to exist. It needs to communicate the problem, product, and next step quickly.

Retail media is becoming more like full-funnel advertising. Brands that only know bottom-funnel marketplace bidding will need to develop broader creative and measurement muscles.

The AI connection

AI shopping is changing how customers discover products. That does not make retail media irrelevant. It may make retail media more important in different ways.

If fewer shoppers click traditional search results and more decisions happen inside AI assistants, brands need other ways to create demand and reinforce trust. Retail media can help with that, especially when tied to strong product data and clear buying paths.

But AI also raises the quality bar.

If an ad drives a shopper to a weak product page, unclear listing, or incomplete catalog, the click is wasted. If product data is messy, AI-driven shopping surfaces may not recommend the product later. Retail media and AI commerce are not separate. They both depend on product clarity.

That is why Your Product Feed Is the New SEO, and Yours Is Probably Failing is relevant even for ad teams. Better product data can improve listing conversion, reduce wasted clicks, and support discovery across AI and retail platforms.

What brands should test now

Retail media may be cheaper in aggregate, but the right tests depend on brand maturity.

If you are an early Amazon seller, focus first on Sponsored Products for your highest-converting terms. Clean up listings before scaling spend. Do not pay to expose weak content.

If you have established ASINs, test budget shifts between Sponsored Products, Sponsored Brands, and retargeting. Watch incremental sales, not only attributed sales.

If you have strong category awareness but weak conversion, test creative that addresses objections directly.

If you have a larger budget, test DSP audiences against clear goals: retargeting, competitor conquesting, launch support, or offsite reach.

If you sell through multiple retailers, compare retail media performance by margin and incrementality. A lower ROAS on one retailer may still be better if margins, new-customer rates, or repeat purchase are stronger.

If you are running Prime Day campaigns, separate defense from growth. Branded defense, category capture, and retargeting should not be judged with the same expectations.

The measurement questions that matter

Before increasing retail media spend, ask better questions.

What percentage of sales are new-to-brand?

What sales would we likely have captured organically?

Which campaigns are defending existing demand?

Which campaigns are creating incremental demand?

What is contribution margin after ad spend, fees, discounts, shipping, and returns?

Which SKUs can actually support paid acquisition?

Are repeat purchase rates strong enough to justify higher CAC?

Are we measuring by product, campaign, and customer segment?

What happens when spend is paused or reduced?

Are branded campaigns masking weak non-brand performance?

ROAS is useful, but it is not enough. Retail media platforms have every incentive to claim credit. Brands need their own view of profit.

Creative still matters, even in retail media

Retail media can make marketers lazy because the shopper is often close to purchase. But as the channel expands into DSP, streaming, and offsite placements, creative matters more.

Good retail media creative should be specific.

Do not say "premium quality." Say what makes the product better.

Do not say "perfect for summer." Show the summer use case.

Do not say "customer favorite." Show the review pattern or proof point.

Do not send traffic to a generic listing when the ad promises a specific benefit.

Retail media efficiency improves when the ad, product page, reviews, offer, and fulfillment promise all line up.

If the ad says "arrives before school starts," the product page and delivery promise need to support it.

If the ad says "best for sensitive skin," the listing needs ingredients, usage guidance, and review proof.

If the ad says "fits under airplane seats," the page needs dimensions and customer confirmation.

Specificity protects conversion.

How smaller brands should respond

Smaller brands do not need to chase every retail media trend.

They should use this moment to become more disciplined.

First, identify the few SKUs that can profitably support paid traffic.

Second, clean those product pages and listings.

Third, protect branded demand so competitors do not intercept ready buyers.

Fourth, test non-brand campaigns with strict margin targets.

Fifth, use retargeting carefully, especially around promotional events.

Sixth, compare retail media against other channels like TikTok Shop, owned-site email, and Google Shopping.

The point is not to spend like a large brand. The point is to avoid leaving efficient demand untouched while competitors learn faster.

Build a budget model before the next auction heats up

If CPCs are temporarily favorable, the worst response is random spending.

Brands should decide in advance how much budget belongs to each job.

One bucket should defend existing demand. This includes branded search, branded marketplace terms, and retargeting audiences that competitors may try to intercept.

One bucket should capture category demand. This includes non-brand terms where the product has a credible chance to win based on reviews, price, delivery, or differentiation.

One bucket should create new demand. This includes DSP, connected TV, offsite display, creator amplification, and upper-funnel retail media placements.

One bucket should test. This is where brands try new audiences, formats, creative angles, and retail networks without pretending every test must scale immediately.

The percentage in each bucket depends on maturity.

A small Amazon seller may put most spend into defense and category capture. A larger omnichannel brand may invest more in DSP and retailer audiences. A new product launch may need more demand creation. A mature hero SKU may need more defense and retargeting.

The key is to avoid mixing the jobs.

Do not judge an awareness test by last-click ROAS alone. Do not let branded defense make the whole account look healthier than it is. Do not let cheap prospecting clicks hide weak conversion. Do not let retail media teams spend against revenue targets without margin visibility.

A simple budget model forces better conversations.

Retail media needs merchandising support

Paid media cannot fix weak merchandising.

If the product title is unclear, images are poor, reviews are thin, price is uncompetitive, inventory is unstable, or delivery is slow, cheaper CPCs will not save the campaign. They will simply send more people into a weak buying experience.

Before scaling retail media, check the retail shelf.

Is the hero image clear at thumbnail size?

Do reviews support the advertised claim?

Is the offer competitive for the traffic source?

Are variants easy to understand?

Is the product in stock?

Does the detail page answer the most common objection?

Are comparison points clear?

Is the brand store updated for current campaigns?

Retail media and merchandising should operate together. If the ad team promotes "best for travel," the listing should show travel use cases. If the DSP campaign targets new parents, the product page should answer parent-specific concerns. If the campaign is tied to Prime Day, inventory and delivery promises must support the event.

The ad creates the visit. Merchandising earns the order.

Know when not to chase cheap clicks

There are times when cheaper retail media should not change your strategy.

Do not scale spend on a product with unresolved quality issues.

Do not scale spend when inventory cannot support demand.

Do not scale spend into a listing with poor reviews unless the campaign goal is defensive and tightly controlled.

Do not scale spend on a discount that destroys contribution margin.

Do not scale upper-funnel retail media if you cannot measure downstream lift at all.

Do not scale across every retailer before understanding which one produces better customers.

Restraint is part of performance marketing.

The fact that a click is cheaper does not mean it is worth buying. The right question is whether the next dollar has a clear job and a plausible path to profit.

The brands that learn now will have an advantage later

Retail media will not stay easy. More brands will notice the same efficiency signals. Prime Day will pull more budget into the channel. Streaming and offsite retail data will attract larger advertisers. Measurement standards will keep shifting.

That means this is a good moment to learn while the market is still uneven.

Brands should use cheaper testing windows to understand which SKUs deserve spend, which audiences convert, which creative angles travel across retailers, and which campaigns produce customers worth keeping.

The learning may be more valuable than the immediate sales. A brand that knows its profitable retail media playbook before Q4 enters the holiday season with better odds than a brand discovering everything under pressure.

That advantage compounds when auctions get crowded again.

It also protects teams from panic spending. When the next big event pushes everyone into the same auctions, the brand with clean tests, known margin limits, and proven creative angles can move quickly without guessing.

The bottom line

Retail media getting cheaper in Q1 2026 is not a guarantee. It is an opening.

Ad spend is still growing. Formats are changing. Amazon DSP is becoming more interesting. Paid social has shown stronger efficiency. Retail data is moving into streaming and offsite media. At the same time, measurement remains messy and platform-reported ROAS can flatter weak economics.

The brands that benefit will not be the ones that blindly scale budgets. They will be the ones that pair cheaper media with better product data, sharper SKU selection, clearer creative, and stricter profit measurement.

Cheaper clicks are only useful when the business behind the click works.

That discipline is what turns a temporary media window into a lasting operating advantage.