Awareness, consideration, and conversion used to take days across separate channels and separate budgets. Inside a retail media environment, all three happen in the same session, often within minutes. The classic marketing funnel hasn’t disappeared. Retail media collapsed it into a single platform interaction, and the brands winning right now are the ones that understood this shift before their competitors did.
For challenger brands, this is the biggest structural opportunity in decades.
How Retail Media Changed the Funnel
The classic marketing funnel assumed separation: you built awareness through mass media, nudged consideration through targeted campaigns, and converted through retail. Each stage required its own investment. Each operated on its own timeline.
Retail media collapsed that model.
When a consumer searches for “energy drink” or “whole wheat pasta,” they are not browsing. They are already deciding. Sponsored placements create awareness in the same moment. Product pages and reviews drive consideration immediately after. Checkout happens seconds later. The entire purchase journey, which once spanned days and multiple touchpoints, now resolves inside one environment.
Research confirms the scale of this shift. More than half of all shopping journeys now begin on e-commerce sites. Retail platforms are no longer only the endpoint for transactions. They became the starting point for discovery.
That changes everything about how brands should approach the funnel, and most have not caught up.
Why Generating Demand Is Not Enough Anymore
In February 2025, Kraft Heinz ran what looked like a textbook brand campaign. The Mustard x DJ Mustard collaboration aired during the GRAMMYs, generated more than 1.5 million organic YouTube views, and dominated social conversation. By every traditional measure, it worked. It built awareness. It drove consumers to search for the product.
Then those consumers went to Instacart, which captures roughly 20 percent of U.S. online grocery purchases, and searched “mustard.” Heinz had no sponsored placement. French’s, Grey Poupon, and store brands occupied the top positions. Heinz had spent millions creating demand that competitors captured at the point of purchase.
This is the disconnection that retail media exposes. Generating awareness through one channel while being absent from retail platforms does not create sales. It creates a subsidy for whoever shows up where the decision is actually made.
The reason incumbents fall into this trap is structural. Their retail media budgets have historically sat with sales and trade teams, not performance marketing teams. Retail media was treated as an extension of supplier negotiations, spend allocated to maintain relationships rather than to acquire customers. That logic worked when visibility was secured through trade agreements and shelf placement.
Inside auction-based retail media environments, visibility is determined by relevance, conversion rate, and advertising effectiveness. Historical leverage means nothing. Performance decides who gets seen. And challenger brands, entering these platforms as performance marketers from day one, have taken full advantage. Bain & Company identified 120 insurgent brands in 2025 that captured 39 percent of incremental category growth, up from 17 percent the year before. Over the same period, the largest global CPG companies posted low single-digit revenue growth.
How Challenger Brands Win the Funnel Retail Media Created
Treating retail media as performance, not trade
The most consequential difference between challengers and incumbents is not budget. It is orientation. Challengers treat every retail media dollar as a media investment with an expected return. They measure incrementality, not just attributed sales. They reallocate based on what the data shows..
This is not a minor operational distinction. It determines whether the compressed funnel works for you. Brands managing retail media as trade allocation deploy budgets passively. Campaigns run according to predetermined structures. Results are reported but rarely acted on. The winners operate continuously, pausing underperformers, scaling what works, refining targeting based on real consumer behavior.
Aligning with how consumers actually search
Consumers searching inside retail platforms overwhelmingly use generic category terms. They often search for “ketchup,” not a specific brand. They search for “protein bar,” not RXBAR. The funnel now starts at that generic search moment, which means winning requires showing up there, optimized for conversion, before a brand preference has formed.
Goodles built roughly 6 percent market share in a category Kraft had dominated for decades. That growth did not come from awareness campaigns. It came from aligning retail media presence, product titles, sponsored placements, commerce content, with the exact moments consumers were already in evaluation mode. Effectiveness in the auction determined visibility. Visibility drove consideration. Consideration converted.
On Amazon, where discovery is governed entirely by relevance and advertising performance, challenger brands dominate sales in 16 of 18 CPG categories. When retail media is treated as a performance channel, challengers consistently outperform incumbents.
Operating at the SKU level
This is where most brands break down, including many challengers.
Campaign-level metrics can look healthy while individual SKUs quietly drain margin. A keyword that is profitable for one product may be destroying returns on another. A bid that looks reasonable at the campaign level may be aggressively unprofitable once product economics are applied. Analysis across retail media campaigns shows that more than 30 percent of keywords attached to each SKU generate zero revenue, yet continue consuming budget.
Winning requires operating at the level where performance is actually determined: the SKU. Every product has different margins, different cost structures, different profitability thresholds. Applying uniform campaign logic across a diverse product set produces averages that obscure both the wins and the losses.
The Execution Gap Challenger Brands Still Face
Understanding how retail media changed the funnel is not the constraint anymore. Executing against it is.
Operating with SKU-level precision across multiple retail networks, Walmart, Amazon, Instacart, Kroger, Target, is operationally intensive. Most lean teams manage three to five retail media networks at most, not because they don’t see the opportunity in others, but because the execution cost of adding each network roughly equals the effort of managing a major one. That concentration pushes spend toward the most competitive environments and away from the networks where challengers could actually own a category.
The brands that compound performance over time are the ones that solve the execution layer. They move from campaign logic to SKU-level decision systems. Budgets shift dynamically by product. Network-specific mechanics are respected. Learnings from one retail environment inform strategy across others.
That operating model, SKU-level optimization, cross-network learning, built for lean teams, is where the advantage gets locked in. Not just for one quarter, but durably.
How Retail Media Changed the Funnel: The Consumer Is Already Deciding
The digital aisle. Searching, comparing, and choosing inside the platform.
The funnel retail media created is not a concept to plan around. It is the environment your brand either shows up in, optimized and positioned, or doesn’t. Most brands still aren’t fully there, because the execution demands are real. But as AI-driven systems make SKU-level precision increasingly achievable for lean teams across retail networks, the gap between brands that operate this way and brands that don’t will continue to widen.
The question is no longer whether retail media changed the funnel. It’s whether your execution is built to win the one it created.
Game on!
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RMIQ delivers AI-driven retail media performance advertising built for lean teams.
SKU-level optimization, cross-network learning, pay-for-performance.
