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And it's unclear how much China and India, along with other major emerging markets such as Russia and Brazil (the so-called BRIC markets), can offset a weak U.S. economy. "Clearly there is a lot of nervousness," said Nirvik Singh, Grey Global Group's Mumbai-based president, Southeast Asia.
General Motors Corp. recently lowered its forecast for sales in China, the world's second-largest car market after the U.S., because higher fuel prices have curbed demand. But GM still expects sales growth to top 10% in the mainland, far better than the dismal scenario the company faces in the U.S.
There are "concerns about how the U.S. market is flowing and in the shift from trucks and SUVs to cars, since that has been our bread and butter in the past," said Steve Betz, general director for Chevrolet at Shanghai General Motors, a joint venture between General Motors and Shanghai Automotive Industry Corp. GM executives at Detroit headquarters are "very appreciative that we are doing so well," said Mr. Betz.
Haven for luxury brands
In addition to durable goods such as cars, luxury brands are trying to carve out growth in Asia to make up for lagging U.S. sales. American luxury marketer Coach has opened dozens of new stores in China, Hong Kong and Macau, invested in advertising and created product lines specifically for the Chinese market, such as a special handbag to celebrate Elle magazine's 20th anniversary in China.
"Mainland China will become a significant market for luxury brands during the next several years, as income and consumer-spending levels catch up to the retail development that is already present in this market," said Thibault Villet, Coach's president, Greater China in Hong Kong.
Still, there are concerns in Asia about exports, inflation and other ominous indicators, such as signs that Shanghai's own real-estate bubble is about to burst. One of Shanghai's largest foreign real-estate investors, Morgan Stanley, is trying to sell some of its high-end residential properties, suggesting the there market has peaked.
Even so, some marketers are surprisingly upbeat. "We don't see a slowdown yet," said Frank Braeken, Unilever's chairman for Greater China in Shanghai. He said he believes any impact on China's growing middle class, the target market for most package-goods marketers, will be limited, because this segment continues to grow in size and wealth every year.
Paul Heath, Ogilvy & Mather's Hong Kong-based president for Asia/Pacific, said he is cautious. "Definitely, winter is coming, but it's going to be more severe in the U.S. and Europe than in Asia. We're not feeling any dramatic changes in our clients' behaviors."
While the region's two powerhouses, China and India, will not go into recession, Mr. Heath said: "We may see a slowing down in their growth. How advertisers handle that slowdown depends on their sector and how badly they are hit elsewhere."
Experts expect financial services and real estate to be the areas most affected by events in the U.S. "There is no indication spending on luxury goods in China is going down," said Rupert Hoogewerf, publisher of the Hurun Report, a monthly magazine best-known for its "China Rich List," which ranks wealthy individuals. "In fact, I think [economic problems in the West] just make marketers in China even more excited about this market."
There are plenty of rich Asians ready to snap up new cars and luxury goods, particularly in China, which last year had 800,000 millionaires, including 250 people worth $1 billion or more. India, home to a rising middle class, also has more than 100,000 millionaires, and is adding to that number faster than any other country in the world.
"I'm not worried," said Prasoon Joshi, McCann Worldgroup's Mumbai-base regional creative director for South Asia and Southeast Asia, even though he acknowledged that many advertisers, particularly U.S. companies, have already cut back in India. "I've noticed more money is going to short-term rather than long-term brand-building investment, but I'm sensing companies have already cut budgets as much as they are going to in India."
Recent data about China indicates ad spending will slow down, said James Lee, a Boston-based research analyst at Sterne Agee who specializes in Chinese technology stocks.
Optimistic ad-spend forecasts
Even so, ad-spending forecasts are optimistic. Thanks to hosting the Olympic Games this year, China's ad market will be boosted 22% to $35 billion, and 2009 growth of 19.5% is forecast, according to Group M. The WPP Group media division expects India's ad market to grow by 20% this year, to $5.6 billion, and 19% in 2009.
In Europe, the U.S. implosion is viewed as part of a global crisis that is overtaking other markets, too, such as the U.K., where its biggest mortgage lender, HBOS, holds one in five U.K. mortgages and is seeking rescue in a merger with Lloyds TSB. And the U.K.'s third-largest travel group, XL, went bust least week, leaving thousands of travelers stranded around the world.
"I think the Lehman and AIG dramas are the inevitable consequences of imprudent lending over several years in pursuit of an extra buck," said Bob Willott, editor of Marketing Services Financial Intelligence. "[Consequences] are not limited to U.S. companies alone as capital markets operate globally. There are certainly signs of cutbacks by some U.S. brands on their U.K. and European marketing spends. But the impact varies from agency to agency and there is probably worse to come. ... Some U.K. marketing agencies are seeing little if any change in client activity so far, while others are facing deferrals or significant cuts."
Mike Hughes, director general of the Incorporated Society of British Advertisers, said, "We've been looking for the cliff edge but it's not in sight yet. We are not seeing wide-scale cuts, but some sectors are pruning carefully. Consumption of big-ticket items are down, so marketers are watching expenditure in these areas."
Mr. Hughes said marketers are also allocating budgets differently. "Secondary brands and high-cost activities like test marketing and product innovation might be put back a quarter."