Report: Retail Media Ad Spend on Amazon Jumped 31% in 2023

Retail media advertising spending on Amazon soared 31% in 2023, with steady gains seen throughout last year, according to CommerceIQ’s annual “State of Retail E-Commerce” report released in January. 

CommerceIQ is a retail e-commerce management (REM) platform that handles and examines sales from global consumer brands that sell on retail e-commerce sites such as Amazon, Walmart.com and Instacart.

The report additionally found that ordered revenue (i.e., the number of units ordered multiplied by the average retail price of each unit) increased 7.2% year over year, even though ordered units slipped slightly (0.5%) during the same period. This was due to a 7.7% increase in average selling price (ASP), partly driven by double-digit pricing increases in the grocery category (up 16.4%), according to a media release on the report’s results.

Other key findings from the report include:

• Sponsored Display and Sponsored Product advertising saw the largest growth in 2023. For example, in June (leading into Prime Day 2023), brands increased sponsored display advertising by 116% compared to 2022. Sponsored Brand ad spending didn't fare as well, showing decreases in each of the first eight months of the year, although it rebounded with double-digit gains in the year's final four months.
• Tools & home improvement, patio lawn & garden, health & personal care and pet products are the most competitive categories entering into 2024, with brands in these categories increasing ad spend while glance views (i.e., traffic to product detail pages) declined year over year.
• The tools & home improvement, office and baby categories declined in 2023 versus 2022 despite growth in prices, indicating softening consumer demand in those categories.
• Brands benefited heavily from Amazon's Subscribe & Save feature, with ordered revenue jumping 50% versus 2022. Amazon Prime Day and back-to-school shopping helped generate huge Subscribe & Save gains during the summer months, with revenue up 85% in June and 95% in July.
• All categories except for patio, lawn & garden and pets pulled back on inventory in 2023, likely a resulting effect from Amazon’s focus on free cash flow and warehouse optimization.
• Prime Day 2023 was more competitive for brands as compared to Prime Day 2022. Advertising became less efficient in 2023, partly due to lower discount rates and higher cost per clicks.
• While less impactful than Prime Day 2023, Prime Big Deal Days 2023 drove +23% more revenue than the Prime Early Access Sale in 2022, as well as an +86% larger boost in revenue as compared to the respective trailing 28 day period of sales.

"There are many insights to be drawn from this year's report, but it’s clear that brands still face incredible headwinds going into 2024," Guru Hariharan, CEO of CommerceIQ, said in the media release. "For example, the grocery category increased ordered revenue by roughly 5%, but pricing was up more than 16%, which raises questions about how sustainable the growth truly is. Overall we have seen gross margins fall by upward of 10% in December 2023, which amidst rising prices can only mean brands are facing an increase in COGS (cost of goods sold) that they haven’t been able to offset. Brands will need to focus on the fundamentals of meticulous inventory management integrated with their advertising strategies, and adopting new technological advancements like incremental advertising optimization that will allow them to drive growth without increasing ad spend.”

Data in the "State of Retail E-Commerce" report is based on a compilation of anonymized data from the CommerceIQ REM platform.