Holiday Advertising-Spend Outlook: Flat to Down

Best Buy to Hold Firm While Gap Looks Up and JCPenney Remains Even

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NEW YORK (AdAge.com) -- With projections for ho-hum holiday sales rolling in, agencies and media companies could again see fewer ad dollars from the nation's retailers. But not everyone will feel the sting as some big names loosen purse strings and try to rebound from last season's grim quarter.

JCPenney said its budget is flat as a percentage of sales, compared to last year.
JCPenney said its budget is flat as a percentage of sales, compared to last year. Credit: AP
As retailers grapple with tepid sales, turn to less-expensive online media and snag deals in the broadcast and print arenas, it's likely marketing spending will be flat or decline slightly. Industry experts and media buyers are taking a cautious stance, saying they're not expecting to see the double-digit declines of a year ago, though some hard-hit categories such as luxury, home, jewelry and electronics are expected to again pull back.

Retailers have been predictably cagey about their holiday spending plans, but there have been some indications as to what the season holds. Best Buy has said it would not be pulling back as it did last year. JCPenney said its budget is flat as a percentage of sales, compared to last year. And Gap Inc. has indicated increased spending could be on tap for the Gap brand, which will boast a holiday campaign from new agency Crispin Porter & Bogusky.

"Last year there was a lot of belt-tightening and fear, because people didn't know what was going on," said John Spiropoulos, senior VP-director marketplace analysis at Publicis Groupe's MediaVest, which counts Walmart as a client. "This year people have a better handle on things and can react accordingly. ... We're not expecting to see significant declines in aggregate holiday spending among retailers. We're seeing something closer to flat, with potential upside, quite frankly."

That upside could materialize if, like Target, retailers are shifting marketing money from the first half into the second half.

"My observation is that most retailers have pulled money out to save for fourth quarter, knowing that would be when consumer spending would increase," said Catherine Fox-Simpson, a partner in the retail and consumer-product practice at BDO Seidman. She added that during the back-to-school season, for example, "a lot of retailers sat on the sidelines."

In the fourth quarter of last year, with consumers pinching pennies and retailers moving into panic mode, budgets across the top 10 retail advertisers were slashed 3.3%. Walmart boosted the category by increasing spending 30% in the fourth quarter, as JCPenney, Kohl's, Best Buy, Gap, Lowe's and Home Depot slashed measured media spending by double digits, according to TNS Media Intelligence. Sears Holdings cut its budget by 7%, while Macy's managed to increase spending by 1% by moving money from the third quarter to the fourth quarter. Target's spending was flat. In total, the top 10 retail advertisers spent $1.88 billion, down from $1.95 billion the year before.

Last year's holiday season also saw a shift away from network TV, in favor of cable TV, as well as a decrease in print spending and an increase in internet and radio spending. Chris Boothe, president-chief operating officer of Publicis Groupe's Starcom USA, which works with Best Buy, Hallmark and PetSmart, said he expects trends will be similar this year as retailers continue to look for efficiencies. Radio, he pointed out, likely got a boost from retailers who were scrambling to tout sales events and make a direct call to action.

"Spending is happening in the fourth quarter. It's tighter than we thought," he said. "Marketers are spending but not spending as much, and they're coming in closer to date of air, because it helps preserve flexibility."

Historically, as holiday sales increases have slowed in the past five years, measured media spending (excluding internet spending) among the top 10 retail advertisers has mostly declined. The exception was in 2006, when, buoyed by five-year spending highs at Kohl's, Best Buy and Gap, measured media spending increased 8%. In 2007 and 2008, spending declined, and it is currently on par with 2005 levels.

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