Walmart’s 25% Ad Spend Mandate Highlights Retail Media’s Trust Problem

Walmart is pushing brands to increase their retail media spending by 25% year-over-year as part of joint business plans, despite many brands reporting stagnant sales growth from these investments. According to ADWEEK, brands are being asked to commit to additional media spend targets or risk losing key benefits in their supplier relationship with Walmart.

The situation at Walmart highlights a concerning – though not altogether new – pattern in retail media that threatens to undermine trust in what has become many retailers’ most profitable business segment. Some brands are now taking drastic measures, including breaking annual agreements with Walmart and other retail media networks, as pressure mounts to increase ad spending without corresponding performance improvements and amid other macroeconomic pressures.

The Wall Street Pressure Cooker

Retail media has become a Wall Street darling precisely because of its impressive profit margins. John David Rainey, Walmart’s Chief Financial Officer, recently disclosed that advertising and membership together represented “a little more than a quarter of the overall operating income” for the company in Q4 2024.

This financial reality creates immense pressure to keep growing these high-margin businesses, especially as traditional retail margins remain tight. Seth Dallaire, who leads Walmart’s growth organization, highlighted the company’s “over 26% growth” in its Connect business during an investment community meeting this week.

Wall Street analysts are increasingly honing in on retailers’ media businesses on earnings calls, with the expectation that growth in this high-margin business will continue.

But as retail media networks mature, achieving the same growth rates becomes increasingly difficult without applying pressure on suppliers. This leads to what many brands now describe as a “retail media tax”—a forced allocation of marketing dollars disconnected from actual performance.

A History of Strong-Arm Tactics

“This behavior is unfortunately nothing new,” says Bryan Gildenberg, a retail industry consultant and Managing Director, North America of Retail Cities. “What is new is the scale and ambition of the asks.”

Retailers have long used joint business plans (JBPs) to secure marketing commitments from suppliers. These agreements, once focused primarily on merchandising and promotional support, have evolved to include significant advertising components.

Ken Fenyo, a retail industry consultant who previously served as an executive at Kroger, notes that this approach isn’t unique to Walmart. “I have interviewed a number of CPGs and agencies recently and many of them refer to retail media spending as a tax or cash grab. This is similar to what I used to hear when I was at Kroger.”

What makes Walmart’s situation notable is both the size of the requested increases—25% year-over-year at minimum—and the reported consequences of non-compliance. According to ADWEEK, brands that fall short of their spending commitments risk losing key benefits tied to their JBPs, including “Walmart DSP data fee discounts, onsite sponsorship deals, and early access to reporting.”

Diminishing Returns In Retail Media

The fundamental tension in retail media today centers on a troubling disconnect: brands are spending more but seeing diminishing returns.

One CPG brand executive told ADWEEK that despite tripling their spend on Walmart over the past three years, they’ve seen only moderate sales growth—in some years even experiencing a decline in market share. Another reported little to no growth in top-line sales or overall volume despite increasing investments.

This creates what one brand executive described as an impossible dilemma: “If we don’t invest, we might not be findable. If we’re not findable, it’s the equivalent of not being distributed at a retailer.”

The situation reflects a fundamental shift in how shelf space is allocated in digital environments. In physical stores, product placement is primarily determined through a combination of category management principles and slotting fees. In digital environments, visibility increasingly depends on paid advertising. This creates an environment where brands must “pay to play” regardless of the return on that investment.

A Divergence In Approaches Among Retailers

Not all retail media networks are taking the same approach. Some are focusing on improving their technology and measurement capabilities rather than simply demanding larger commitments.

Home Depot’s retail media network, Orange Apron Media, has taken the approach of focusing on the supplier experience. As I recently reported for Forbes, the company has retooled their tech stack to create a more user-friendly platform that provides better measurement and optimization capabilities for its advertisers.

What’s particularly interesting is that even within Walmart Inc.’s own portfolio, we see contrasting approaches. Sam’s Club—a Walmart-owned warehouse club retailer—has positioned its Member Access Platform (MAP) as a member-centric advertising platform focused on longitudinal measurement rather than short-term returns. Harvey Ma, who leads the division, told me in March that “if my retail media investments become a tax for a brand, what the brand needs to do then is put that money back somewhere, which is usually going to come in the form of cost.”

Strategic Considerations For Brands

For brands facing these increasing demands, the situation requires careful strategic consideration.

Some are taking dramatic action. According to ADWEEK, one CPG brand decided not to renew its JBP with Walmart in January, citing “a lack of flexibility in the deals, no growth in sales, as well as no performance guarantees.” The same brand has also decided not to renew agreements with Kroger and Amazon due to similar frustrations.

Others are pushing for more flexibility and accountability. “A lot of our largest [clients] got big pitches,” one retail media agency leader told me. “Some of them are pulling out of their JBPs altogether and being more self-serve with Walmart ads. Lots of brands pushing back on Walmart, rejecting these pitches, in favor of more flexibility.”

The Trust Deficit in Retail Media

The growing disconnect between retail media spending and performance threatens to create a significant trust deficit in the industry.

Renee Caceres, Head of Retail Media at StackAdapt and a former Walmart Connect executive, commented that “Retail media might not be a tax, but brands are still often ‘voluntold’ what to spend, where to spend it, and how to do it.”

This perception risks undermining retail media’s legitimacy as a marketing channel. If brands view these investments as obligatory “taxes” rather than strategic marketing expenditures, they’re likely to allocate minimum resources to program management and optimization—treating them as cost centers rather than growth drivers.

Investing In The Future, Or Funding Present Shortfalls?

What’s absent from the discussion to date is Walmart’s own rationale for these significant spending increases. The retailer’s recent strategic moves might offer some context.

Walmart’s acquisition of VIZIO for $2.3 billion represents a significant bet on connected TV advertising. As John David Rainey, Walmart’s CFO, noted in their Q4 earnings call, the company expects “this transaction to be – to begin being accretive to Walmart next year.” In the meantime, the acquisition creates a 70 basis point dilution related to transaction costs in the first quarter.

This raises an important question: Are current advertisers essentially being asked to fund the development of future capabilities? If so, the request for 25% spending increases might represent Walmart asking for brands’ trust and investment while building what could eventually become a more sophisticated, omnichannel advertising platform.

Mike Feldman, head of retail media at VaynerMedia, offers a more optimistic interpretation of Walmart’s approach. He suggests the retailer may be shifting from locked-in commitments to a Letter of Intent approach—representing “a MASSIVE signal that Retail Media is maturing.”

Feldman sees this as a potential evolution from ‘pay to play’ to ‘grow with us’ and from ‘give us your budget’ to ‘we’ll help you build your business.’ This perspective suggests Walmart might be trying to reframe these spending increases as investments in a better future capability, not just extracting additional margin in the present.

However, Feldman also warns, “flexible terms only matter if it’s an opportunity worth investing in.” And therein lies the challenge: brands are being asked to increase spending significantly before seeing evidence that these investments will generate proportional returns.

Walmart and other major retail media networks face a crucial choice. They can continue pushing for ever-larger spending commitments while promising future capabilities, risking further erosion of trust if those capabilities don’t materialize. Or they can focus on building platforms that deliver such compelling results that increased spending follows naturally.