Editor's Note: This is part of a series of pieces looking at the year to come that Marketing Dive will publish throughout January. For more on what to expect in the months ahead, check out 7 trends that show 2020 will be a make-or-break year for marketers and Esports outlook 2020: What brands need to become winning players​.

NEW YORK — Digital advertising crossed a considerable threshold last year, surpassing traditional media spending in the U.S. for the first time, according to eMarketer estimates. A question for retailers now is whether they can capitalize on that opportunity by building their own media networks that compete with digital heavyweights like Google, Facebook and especially Amazon.

Retailers have been on the path to forging larger advertising businesses for some time now, said Joel Percy, global head of business consulting at analytic platform ciValue, on a panel at the National Retail Federation's Big Show. But the amount of activity in the space in the past few months has been noteworthy, as brands spanning sub-categories from grocery to big box stores expand their product offerings and establish internal teams to deepen their advertising expertise and infrastructure.​

"What is new is the pace and the intensity," Percy said of digital advertising activity in retail. "We're talking about spinning off businesses, we're talking about branded divisions, we're talking scaling up and hiring at a massive rate."

Take Walmart, for example, which kicked off the year by announcing a self-serve ad portal that lets marketers buy search and sponsored product placements via a bid auction-based marketplace. It was one of the most significant moves yet in a series of actions from the retailer that last year also included in-housing its ad sales and analytics work.​

The data part of the digital advertising equation, according to executives at the show, is key to the growth in media offerings from retailers.

"It's not just a shift from traditional to digital," Percy said. "There's also a real move toward data that is tied closer and closer to the point of purchase … if you want purchase data, it is still largely in bricks and mortar."​

Addressing headwinds

Retailers' bigger buy-in to digital advertising makes sense given the amount of growth in the sector. Connecting with advertising categories under their own pressures, like CPGs, is also easier to do with a pitch around good margins, experts noted.

"It's highly profitable, especially in grocery and some of the big boxes where they get very significant traffic," Hilding Anderson, head of retail strategy, North America, at Publicis Sapient told Marketing Dive on-site at the NRF show. "The margins on that ... are very appealing."

The race for a bigger piece of digital is also a potentially more pertinent business case to make given headwinds impacting retailers, with brands like Walmart reportedly losing up to $1 billion on other digital buckets like e-commerce.

Stemming from that, the surge in retail media activity, if not necessarily caused by, certainly correlates with Amazon's own rapid ascendancy in the digital advertising sphere. While Amazon was not discussed in-depth on the NRF panel sponsored by ciValue, it has played a bigger and bigger role in supporting digital's continued momentum.

In its report, eMarketer expected Amazon's ad revenue to grow 50% year-on-year in 2019 — a leap that's been accompanied by a proliferation of new advertising formats and events intended to court more brand dollars and a more diverse set of advertisers.

One of the ways retailers can better position themselves against this is to think more like digital tech companies —​ the Amazons, Googles and Apples of the world — and recenter their value proposition around data, according to Anderson.

"Increasingly, the value of data is the way that you compete," Anderson said. "Retailers are now at a point where they have to think about data as a strategic asset."

In another sign that interest in ramping up in this area, Microsoft this week introduced new tools to help retailers work with brands to push products using data and search to better compete against similar offerings from Amazon, Walmart and Target. Home Depot has been piloting the data tool since last year.

Brick and mortar still counts

On that front, retailers could have a powerful advantage with their physical store networks and legacy brick-and-mortar shopper data.

Even with Whole Foods under its belt, Amazon's store footprint is not yet "meaningful," Anderson said. Additionally, Commerce Department estimates suggest that online shopping, while a growing area of investment, still only commands 12% of the market. That provides legacy players key advantages around practices seeing increased consumer adoption like buy online, pick up in-store, per Anderson.

Brick-and-mortar purchase data could also be becoming a bigger driver of performance. On the NRF panel, Nielsen shared research that found purchase-based ad targeting — the ability to know a consumer bought a certain product during a certain timeframe —​ delivered three times higher return on investment for campaigns, besting geographic, behavioral and demographic-based targeting methods, among others.

"Those purchase-based audiences are far outperforming, from an ROI standpoint, some of the other forms of addressable advertising," Josh Goldman, VP of consumer and media at Nielsen Media, said during the talk Tuesday.

"That's great news for retailers because you have really the best kind of purchase-based information potentially available," Goldman added. "That's part of what's driving folks like Walmart ... Kroger, Target, etc. to take advantage of the opportunity."