Large language models (LLMs) offer a compelling approach to entity matching (EM) in label-scarce settings, yet their matching quality is sensitive to records with ambiguous or sparse attributes due to the absence of external factual grounding. Retrieval-augmented generation (RAG) directly addresses this grounding gap by retrieving and injecting relevant external knowledge. However, naively applying RAG to large-scale EM is expensive due to per-pair retrieval calls over large knowledge graphs (KGs) and the increase in input tokens caused by enriching prompts with retrieved contextual knowledge. To address the above limitation, we introduce a CE-RAG4EM (Cost-Efficient RAG for Entity Matching) framework that reduces overhead through blocking-based batch retrieval and generation. We investigate the benefits of this framework through a systematic analysis of RAG systems for entity matching, focusing on blocking-aware batch optimizations and retrieval granularity. Extensive experiments on nine widely used real-world entity matching benchmark datasets show that CE-RAG4EM under a zero-shot setting achieves comparable or improved matching quality while substantially reducing end-to-end overhead. The results demonstrate that our CE-RAG4EM closes the knowledge grounding gap of the LLM-EM baseline and yields significant improvements in F1 scores on datasets with ambiguous or numerically sparse attributes, while its batch retrieval and inference substantially reduce the overhead and maintain competitive matching quality compared to naive RAG4EM. Our analysis identifies clear performance-overhead trade-offs across blocking-based batch sizes and retrieval granularity, showing how matching quality and computational cost shift with each design choice. These findings offer concrete guidance for building scalable, efficient RAG systems for entity matching that balance accuracy and cost.

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