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Oct 16, 2023

Retail’s resilience leading to higher ad spend in 2023

Dayna Lang
Author Dayna Lang

It's well documented that there is a current downturn in the US economy, and as a result, a drop in ad spend almost across the board. One sector that is proving to outlast the others is retail. 

By far, the retail industry has consistently spent the most ad dollars of any industry in the US and this is set to continue. eMarketer predicts that retail’s “outsized role in digital ad spending will help offset the impact of a broader slowdown in growth in the US digital ad market.”

Analysts predict that retail spending on digital ads will grow by 12.2% in 2023, which is above the average spending rate of 7.8%. Retail is predicted to spend $73.55 billion on digital ads this year, meaning the industry will make up 27.9% of total digital ad spending in the US.

42% of digital ad growth in 2023 is expected to come from the retail industry. Given the rest of the ad world is seeing a slowdown, these massive numbers demonstrate the sheer resilience of retail in the face of economic downturn. 

Perhaps retail is the answer to tempering some of the impact of the current economic situation. 

Ad spending growth by industry

Retail ad spending is shifting and growing 

As stated above, retail is by and far the biggest ad spending vertical in the US, and accounts for 27.9% of the almost $264 billion in US digital ad spending expected this year.

It’s above average growth is expected to hit 12.2% this year and 14.2% in 2024, continuing to grow and hold its critical spot in the ad market. 

Video ads also contribute to the industry’s gains in display ad spending. This year, retail spending on video ads is expected to grow by 20.9% and another 19.5% in 2024. However, retail’s video budget will continue to be lower than other industries (sitting at 50.7% compared to 57.1%). This is because lower-funnel search ads are still a mainstay for most retail.

Another consideration for retail is the growth of mobile ads. Overall, ad spending on mobile and non-mobile platforms is keeping pace with past years, increasing by only 12.2% this year. But the focus on mobile ads is starting to shift, with the share of retail ad spend on mobile forecasted to increase slightly from 63.5% in 2023.

Unsurprisingly, apparel and accessories retailers are expected to have the highest digital ad spending in the industry. Over the next few years, this sector is projected to slightly increase its share of retail digital ad spending to nearly 30%. 

Sky Canaves eMarketer report definitively states that “No other industry comes close to retail.” This is clearly demonstrated by the ownership the sector has over the entire advertising industry. 

For perspective, that’s over $34 billion more than the next closest industry, which is consumer packaged goods. This share of the ad market is only set to grow, peaking at 28.6% of the market next year. 

An important consideration when looking at this industry growth, is ecommerce. Retail digital ad spending increases come hand in hand with an almost doubling of US retail ecommerce sales from 2019 to 2023. 

As ecommerce grows, so does the retail industry’s ad spend. This shows the power of retail in the economy, both online and in-person. And, the consistency of spending within the sector over the past few years, and predicted steady increase in spending, shows that retail is a safe bet for ad agencies and marketers going forward. 

 

To see more from illumin, be sure to follow us on Twitter and LinkedIn where we share interesting news and insights from the worlds of ad tech and advertising.

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