Because of an overstored, competitive retail environment that focuses on price, several major chains have been forced to file for Chapter 11 bankruptcy protection or have simply closed their doors.
With most stores selling the same items at the same price and, sometimes, with the same service, agencies are feeling the pressure to develop an image to make a retailer stand out from the crowd.
Despite the risks, agencies are still eager to pursue retail accounts because successful chains can produce steady revenue. And with some rethinking their marketing strategies, more retail accounts are coming up for review.
SHOPS CAN GET STUCK
Just this month, Today's Man filed for Chapter 11, surprising Cox Group, New York. Fortunately for the agency, the 35-store men's wear chain bought media direct and only owes Cox one month's worth of creative fees.
"I'm not in as bad a shape as I would have been if we handled the account in a more conventional way," said Bob Cox, president-creative director. "I intend to go ahead with Today's Man and help them get themselves right and profitable again."
Like Cox, William Eisner & Associates, Hales Corners, Wis., was caught by surprise in 1993 by client Handy Andy Home Improvement Centers, when its parent company, Belgium's GIB Group, filed for Chapter 11.
This reorganization left the agency to foot the media bill for Handy Andy's March '93 ad campaign, an estimated $3 million.
"We were caught for quite a large media commitment," said Bill Eisner, chief creative officer. "In the home improvement business, spring is like Christmas."
Eisner stayed with Handy Andy for a while, dropping the account just before the chain closed in January of this year.
15,000 TROUBLED COMPANIES
About 15,000 retail companies sought protection in 1995, up 20% from '94, says Dun & Bradstreet Corp. Industry watchers believe that trend will continue in '96.
The pressure has forced many stores to re-examine their strategies. Woolworth Corp. just awarded its $4 million to $6 million Kinney Shoe Corp. business to Bates USA, New York, which also handles its Foot Locker unit, from Arnold Fortuna Lawner & Cabot, Boston.
"There is a tremendous rethinking of the whole retail arena in terms of marketing," said Ellis Verdi, president DeVito/Verdi, New York, an agency with several retail accounts including Circuit City Stores. There's no longer a dependence on price/item ads, and retailers realize they must build their brand year-round.
Last week's annual Retail Advertising Conference in Chicago was themed "Branding: Beating the Price-Only Cycle." But some shops think retailers still consider branding their last option.
W.B. Doner & Co., Southfield, Mich., with a number of successful retailers, also has worked with those that have gone into Chapter 11 or closed, such as F&M Distributors and Ames Department Stores.
"People who are involved in retail advertising get depressed worrying about yesterday's sales," said Alan Kalter, president of Doner. "You can't do anything about yesterday, and that's all they want to react to in retailing."
When retailers are in financial trouble, however, they become much more receptive to creative ideas, he said.
For example, F&M came to Doner after filing for Chapter 11 in December 1994, seeking a campaign that would get customers into stores. Doner used President-CEO Dale Ward in some outrageous spots, where he said he would clean consumers' bathrooms or teach their teens how to drive if they shopped F&M.
ADS NOT SALVATION
Despite praise for the advertising, F&M went out of business last November.
"The last thing F&M wanted to do was safe advertising," Mr. Kalter said.
If anything, Mr. Eisner learned from his Handy Andy experience to pre-bill retailers for media expenditures even though that's not how most stores like to operate.
"The retail business is one of consignment, where you have the product first and you pay after it's sold so the agency is fronting a lot of the dollars in terms of production and a lot of the risk in terms of media exposure," Mr. Eisner said. "If [the retailer] hits a snag, all of a sudden the money's not there and everybody is scrambling."
Eisner is agency of record for Kohl's Corp.-a growing retailer-though the $15 million to $20 million account is currently in review.
That interest in Kohl's shows agencies are willing to take on retail business even if there's a risk. The main reason: consistent billings.
"Retailers are good because they are the one client that usually doesn't cut back on an ad budget to save dollars," Mr. Eisner said. "They usually spend in order to increase sales."