Who will win the battle of U.S. retail media?

Investing.com -- Walmart (NYSE:WMT), Costco (NASDAQ:COST), and Target Corporation (NYSE:TGT) continue to race to capture a larger slice of the fast-growing U.S. retail media market, which could double to $100 billion by 2028 and account for nearly one-fifth of total media ad spend.

Analysts at Bernstein believe Walmart has the greatest upside potential, backed by strong e-commerce momentum and expanding third-party (3P) marketplace activity.

“While we don’t expect WMT to catch up to AMZN’s size in e-commerce or 3P marketplace anytime soon,” analysts wrote, they see an opportunity for its e-commerce gross merchandise value (GMV) in the U.S. to double from $100 billion to $200 billion by full-year 2030 (FY30).

Walmart has already brought on most of its first-party (1P) vendors, setting the stage for retail media growth driven by its 3P sellers. Bernstein estimates the company’s retail media revenue could grow from 3% to 5% of GMV, potentially becoming a $10 billion business in the U.S.

“We see retail media, along with core e-commerce cost reductions, as key levers for WMT to improve its e-commerce profitability and structurally improve its earnings quality in the coming years,” the team led by Zhihan Ma continued.

Meanwhile, Costco is playing catch-up, but Bernstein points to meaningful upside from a low base. Despite structural hurdles—such as a low stock-keeping unit (SKU) count and the need to preserve the member-first experience—Costco’s track record in building alternative revenue streams is reassuring. 

Bernstein expects the company to grow retail media revenue from around $340 million today to more than $1 billion over the next five years.

“Growth in retail media should add at least 10bps of upside to operating margins ex-membership (before reinvestment), which is meaningful for a 2–3% margin business,” the analysts noted.

They see room for Costco to increase its 1P e-commerce penetration from 9% of sales currently to 15% by fiscal 2029, while expecting its third-party marketplace, Costco Next, to stay limited in scale and carefully curated.

For Target, analysts highlighted the company’s advertising unit, Roundel, which already represents 9% of its e-commerce GMV.

The company aims to double the business to $4 billion by 2029, implying a high 11% share of GMV, well above Amazon’s 7% benchmark. But while this is supported by Target’s mostly 1P business and strong digital presence, Bernstein flags concerns around sustainability and scale.

“We wonder whether some of TGT’s retail media revenue has been cannibalistic to traditional trade/promo spending and whether TGT’s invitation-only approach for Target Plus will limit its marketplace and retail media growth over the medium to long term,” the analysts wrote.

Bernstein holds Overweight ratings on Walmart and Costco shares, while Target is rated Underweight.