Skai's Q1 2026 Digital Marketing Trends Report shows retail media ad spend up 27% year on year while CPCs fell across every product category for the first time. Two-thirds of advertisers focus on AI-driven execution.
Skai's Q1 2026 Digital Marketing Quarterly Trends Report reveals a first for retail media: cost-per-click fell across every product category while total ad spend grew 27% year on year.
The simultaneous rise in spend and decline in cost is unusual. In most paid channels, more money chasing the same inventory drives prices up. In retail media, the opposite happened in Q1.
Why it matters
Retail media is the fastest-growing advertising channel in Australia, with local spend forecast to rise 24.4% in 2026 according to WPP Media projections. It is on track to overtake total TV ad revenue for the first time in 2027.
Year-on-year retail media ad spend growth in Q1 2026, while CPCs fell across every product category
The CPC decline likely reflects two things. First, retail media networks are expanding inventory faster than demand. Amazon, Woolworths, Coles and now JB Hi-Fi are all growing their ad surfaces. Second, AI-driven campaign optimisation is improving click quality, meaning platforms can deliver more conversions at lower cost per click.
Skai's report also found that two-thirds of advertisers now focus on AI-driven campaign execution, but adoption is bottlenecked by trust issues around transparency, control and data sharing. Advertisers want the efficiency gains but are not comfortable handing over budget decisions to algorithms they cannot audit.
What to do about it
If you are running retail media and have not renegotiated CPCs in the last quarter, you are likely overpaying. Use Skai's data as a benchmark in your next media review. If you are not yet running retail media and sell through Australian retailers, the declining CPC environment makes this a good entry point.