Best Buy, Other Retailers Having Nightmares of a Blue Christmas

Marketers Revise Budgets, Emphasize Value Amid Low Profits, Confidence

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NEW YORK ( -- Alarm bells, not sleigh bells, are sounding at retailers across the country.

As Thanksgiving approaches, what has long looked to be simply a dismal holiday is morphing into something far worse: a bloodbath that could sink full-year earnings and have repercussions well into 2009. Last week alone, Circuit City filed for bankruptcy; Best Buy warned of dire holiday sales; and Macy's, Kohl's, JCPenney and Nordstrom posted sharply lower third-quarter profits. On Nov. 14, Reuters/University of Michigan Surveys of Consumers showed consumer confidence at historically low levels.
Best Buy Senior VP-Marketing Greg Johnson
Best Buy Senior VP-Marketing Greg Johnson

All of this has left retailers to recalibrate ad spending and emphasize value -- but each is trying a different approach. Best Buy is spending less and pushing a message of reliability, while Kohl's is pouring on the holiday dollars to pitch pricing. Macy's has moved some of its allocation from the third quarter to the all-important fourth and is using a mix of image ads and promotional sells. Sears is bringing back layaway, while sibling retailer Kmart is advertising layaway for the first time in years. JCPenney is holding spending steady behind a "Style. Quality. Price matter" campaign.

Best Buy Senior VP-Marketing Greg Johnson said the retailer has been forced to "dial back" spending in light of the economic meltdown. Last year it spent $136 million during the fourth quarter. "We had to right-size our marketing plan," he said. "We have maintained the heart of the plan. But some of the things ... we do each year that are a little more speculative and harder to measure, those are the things that we dialed back on."

Mr. Johnson cited sponsorships on destination websites as an example. "Being present in a lot of places was important historically," he said. "But the reality was we weren't communicating something that would drive our business. ... That investment, which is relatively significant, is something that we couldn't afford in this environment." Best Buy's creative agency is Omnicom Group's BBDO, New York; digital is handled by Razorfish, Seattle and Portland, Ore.

Shelling out
Some retailers have managed to pump up their marketing budgets for the fourth quarter, recognizing that it will be a rough-and-tumble fight for consumer dollars. Kohl's plans to spend more this year than last, when its fourth-quarter measured media spending tallied $158 million. Macy's moved marketing dollars from the third quarter to the fourth in an effort to drive traffic around the holidays. In last year's fourth quarter, Macy's spent $341 million on measured media, according to TNS Media Intelligence.

With those fourth-quarter budgets, which represent the largest chunk of any retailer's annual outlay, marketing executives are embracing a variety of approaches.

Best Buy's campaign will put the emphasis on trust, a message that has gained new relevance in light of Circuit City's bankruptcy. New TV spots feature employees sharing true stories about helping consumers pick out holiday gifts. Localized web pages for individual stores also have been created. Previous holiday campaigns have focused simply on making Best Buy a gifting destination, Mr. Johnson said. "Part of being trusted is you actually have to be a part of the community," he said.

Macy's is also seeking to endear itself to local communities with the "Believe" campaign, which revolves around the 1897 New York Sun editorial that declared "Yes, Virginia, there is a Santa Claus." For each letter to Santa mailed at a Macy's, the retailer will donate $1 (up to $1 million) to the Make-a-Wish Foundation. Part of getting that message out locally is a massive newspaper campaign orchestrated with the Newspaper Association of America, said Martine Reardon, Macy's exec VP-marketing. Full-page reprints of the "Yes, Virginia" letter and ads will be carried in more than 300 papers.

The campaign also pumps up the retailer's branding message at a time when competitors are shelving branding in favor of promotion. "Believe" plays up Macy's Christmas credentials -- the annual Thanksgiving Day Parade and the first in-store Santa -- and delivers a reprieve to weary shoppers, Ms. Reardon said.

Price points
"At some point people are going to get tired of talking about the malaise of the economy and only wanting to focus on price. They want to know that you've got some other substance," she said. Its creative agency is WPP Group's JWT, New York.

Kohl's Chief Marketing Officer Julie Gardner said it's not possible for the retailer to be too value-oriented this season. Its message, "Gifts that fit your budget beautifully," will be pushed out across a variety of media. Its agency is Interpublic Group of Cos.' McCann Erickson, New York.

JCPenney, meanwhile, is being careful to present actual price points rather than percentage-off messaging. Its tagline, "Style. Quality. Price matter. Every day matters," will be featured in promotional advertising. Total spending for the holiday season will be flat, said Chief Marketing Officer Mike Boylson. JCPenney spent $169 million in the fourth quarter last year. "This year we're making sure that we're razor-sharp about messaging and pricing," Mr. Boylson said. JCPenney's agency is Publicis Groupe's Saatchi & Saatchi, New York.
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