Managing the Conflict Between Retail Media Advertising and Private Label Brands

The Core Conflict

Retailers make higher margins on private label products (typically 25-35%) compared to national brands (15-20%). Every dollar a national brand spends on retail media could theoretically drive sales away from the retailer's more profitable private label. This creates tension between the retail media team (which wants to maximize ad revenue) and the merchandising team (which wants to maximize private label sales).

How Leading Retailers Handle It

Clear Category Policies

Some retailers exclude private label categories from retail media advertising. Others allow national brand advertising but restrict claims that directly compare to private label. Having documented policies prevents ad-hoc decisions that frustrate advertisers.

Organizational Separation

Separating the retail media team from merchandising and private label teams reduces internal conflicts. The retail media team's incentives are tied to ad revenue, while the merchandising team focuses on category margin. A senior executive arbitrates when conflicts arise.

Category-Level Budgeting

Some retailers set category-level revenue targets that account for both retail media ad revenue and private label margin. This forces a holistic view: is the combined profit from ad revenue + national brand margin + private label margin optimized?

Transparent Advertiser Communication

Honest communication with advertisers about what is and isn't allowed builds trust. Advertisers who feel the deck is stacked toward private label will reduce spend.

The Advertiser Perspective

National brands are acutely aware of this conflict. Brands increasingly demand transparency about how their ad spend is managed relative to private label promotion. Retailers that build trust through fair practices retain advertiser budgets; those perceived as favoring private label at advertisers' expense lose revenue to competing retail media networks.