Costco Velocity’s First Native Ad Format Tests a Different Theory of Retail Media

When Costco’s retail media team unveiled Reserved Display last week, the format itself was straightforward enough: personalized onsite display placements, powered by machine learning trained on actual purchase behavior, designed to surface products to members at key moments during their browse on Costco.com. The technology partnership behind it, with ad tech firm Moloco, and the planned Q2 2026 beta rollout drew predictable interest from brand and retail media teams. But the more consequential story is not what the format does. It is what it is optimized for, and why that distinction matters for CPG brands and retail media buyers trying to calibrate their approach to Costco as an ad partner.

Reserved Display is the first new ad format built natively on the Costco Velocity stack, the retailer’s revamped retail media network, introduced earlier this year. Mark Williamson, AVP of retail media at Costco, outlined four principles shaping how the engine will work in practice: an omnichannel focus using real-time signals to predict member relevance across a shopper’s journey; optimization toward actual sales rather than impressions or click-through rates; measurement focused on real incremental growth that distinguishes new demand from credit shifting between channels; and direct integration of Moloco’s AI with Costco’s identity resolution and audience-building infrastructure, so advertisers can activate their custom Costco audiences within onsite campaigns without additional setup steps.

The architecture reflects a broader commitment Costco has been building toward for several years. The unified data foundation runs on a private Google Cloud, consolidating Costco’s 100% member-identified transaction data, with identity resolution handled through MetaRouter and LiveRamp, and GrowthLoop deployed to segment members and propose customer journeys, though Digital Commerce 360 has noted that Costco is not using GrowthLoop’s AI capabilities in that deployment. The measurement layer uses Habu-based clean rooms, providing closed-loop reporting on new-to-brand and new-to-category metrics, and connects digital ad exposure to both online and in-warehouse transaction data. Reserved Display is the activation layer sitting on top of that foundation.

The Member Constraint That Shapes Every Ad Decision

Most retailers pitch retail media as margin improvement that offsets e-commerce losses or funds price investments. Costco takes a different position. Williamson has said publicly that his team does not use the word monetization and works to ensure retail media serves the company’s core purpose rather than operating as a detached revenue line. Retail media revenue, in his framing, gets pushed back to merchants who use those funds for deeper promotions, longer promotional windows, or everyday price investments, rather than accruing as a separate profit center.

Williamson, who spent time building retail media at Sam’s Club and Ahold Delhaize before joining Costco, freely admits the company is a “last mover” in this space, and frames its philosophy as a direct counter to how most networks have been built. When Costco first tested offsite advertising with co-branded units, the team braced for member backlash, reflecting a sensitivity to member reaction that Williamson describes as a core operational constraint on every media decision.

The practical result of that constraint is deliberate scarcity in what the network offers and when. Costco’s hierarchy is explicit: sales velocity comes first, and every technology choice has to prove it accelerates that velocity, or merchants won’t support it. Williamson has framed this directly to merchant partners: “If we can’t help them turn more product, then what’s the point?”

For CPG brands evaluating whether and how to participate in the Reserved Display beta, this framing has concrete implications. Costco’s buyer relationships are organized around weekly sales velocity, and retail media investment that cannot demonstrate acceleration of that metric is unlikely to earn sustained internal support at the retailer. The implication for brand teams is that campaigns built primarily around awareness, category education, or brand equity objectives will face a harder alignment challenge at Costco than at networks where media and merchandise operate as separate functions.

The Digital Program Reserved Display Is Being Built On

In the second fiscal quarter ending February 15, 2026, Costco’s personalized product recommendation carousels drove over $470 million of e-commerce sales, and newly modernized product display pages generated incremental sales on the site as well as increased traffic to same-day delivery sites, according to the company’s earnings call. Digitally enabled comparable sales grew 22.6% in the quarter, outpacing total company comparable sales growth of 7.4%, and membership fee income increased 13.6% year-over-year, driven by both membership base growth and upgrades to executive memberships, Costco reported. For fiscal year 2025, the company’s digitally enabled sales totaled more than $27 billion, with e-commerce traffic up 27% year-over-year, according to the Path to Purchase Institute’s reporting on Costco’s Q4 fiscal 2025 earnings call.

That growth has been built on the same personalization infrastructure now underpinning Reserved Display. During Q4 fiscal 2025, Costco rolled out membership-specific messaging on the Costco.com homepage, with executive members seeing content highlighting exclusive benefits, Gold Star members receiving upgrade prompts, and nonmembers shown membership acquisition information. Reserved Display extends that logic into paid advertising: rather than serving the same placement to every visitor, the format uses Moloco’s machine learning to match individual members with products based on their actual purchase history at the moment they are browsing.

That distinction matters for how brand teams should think about the inventory. Because every Costco transaction requires a membership, the retailer operates with 100% transaction-linked identity across its customer base. Digital Commerce 360 projected Costco’s total online sales in 2025 would reach $18.87 billion, which establishes the scale. What makes that scale actionable for advertisers on Reserved Display specifically is that every impression will be matched to a known purchase history rather than an inferred audience segment, which is the condition under which the format’s sales-optimized bidding is designed to operate.

What the Tech Stack Signals to Advertisers

In January, Williamson presented Costco’s complete ad technology infrastructure at an NRF-organized event, disclosing vendor choices in detail that is atypical for the retail media industry. The willingness to reveal the stack publicly was read by observers as a signal that Costco views advertisers as partners worth being transparent with, contrasting with an industry norm where retailers guard technology choices to protect competitive position.

The choice of Moloco as the engine for Reserved Display fits within a broader vendor partnership model. Where major retail media incumbents built proprietary advertising infrastructure over many years, Costco determined that vendor partnerships would get them to market faster with proven technology, which mattered more than proprietary control. The open architecture approach has implications for measurement transparency: because Costco is integrating components rather than building a closed proprietary system, advertisers can more readily understand what signals are driving ad decisions.

Costco tapped Moloco specifically because of its AI-native architecture, its use of deep neural networks, and operational machine learning trained on actual purchase behavior. The partnership aims to create ad decisioning that draws on the full picture of a member’s shopping patterns rather than a single snapshot, according to Progressive Grocer’s reporting on the announcement.

The measurement philosophy embedded in the platform also diverges from prevailing retail media norms in a way brand teams should note. Across the retail media landscape, CPG brands have pushed hard for incrementality measurement, with unified frameworks that distinguish exposed versus unexposed lift gaining traction across multiple networks, according to Mars United Commerce’s 2026 retail media landscape assessment. Costco’s approach, as Williamson has described it, is to measure real incremental growth at the campaign level and distinguish it from credit shifting between channels. For brands that have grown skeptical of ROAS figures at other networks, this orientation is meaningful, though the degree to which the beta data bears it out will matter more than the design intent.

What the Beta Rollout Means Operationally

Costco plans to launch Reserved Display with beta partners in the second quarter and expand it to all retail media network partners later in the year, adding more ad slots and formats in the second and third quarters, the company announced. During rollout, Costco is advising advertisers to run Reserved Display alongside their existing Criteo-enabled Sponsored Product Ad campaigns to ensure optimal coverage of the e-commerce site.

For large CPG brands that already have active Costco retail media programs, the beta represents an early opportunity to build measurement history on the new format before it scales to the full network. For mid-market brands with more limited Costco digital budgets, the question is sequencing: Reserved Display is an onsite display format, and its performance will likely correlate with the same sales velocity dynamics that govern every other element of the Costco commercial relationship. Brands without a strong velocity story at Costco will face the same buyer relationship constraints in retail media that they face in trade.

DTC brands in earlier stages of scaling into Costco’s wholesale channel should note that the platform requires custom Costco audiences for activation, and that audience-building infrastructure assumes existing member transaction data linked to a brand’s products. New entrants to the Costco catalog will find Reserved Display more useful once they have built purchase history on the platform than at the point of initial launch.

U.S. retail media ad spend is projected to approach $70 billion in 2026, growing faster than the broader digital ad market, according to Tinuiti’s Q4 2025 Digital Ads Benchmark Report, and the competitive dynamics across major networks are intensifying. Amazon’s share of retail media spend dropped from 56% in 2024 to 46% in 2025, with brands increasingly diversifying across multiple networks rather than concentrating spend, per that same report. Into that environment, Costco is entering with a network built around a different order of priorities than most of the platforms brands already buy. For retail media buyers managing allocations across five or more networks, that difference has a practical consequence: Costco’s inventory will reward brands whose commerce fundamentals at the retailer are already strong, and will likely underperform for brands treating it as a reach extension. The beta will establish whether that design intent holds in practice, but the brands best positioned to find out are the ones that have already done the underlying work.

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