Retail: FSIs pinched; Costco getting great ad dollar mileage

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Retailers in 2001 are cutting media ads to shore up the bottom line, a questionable tactic when goods aren't moving off the shelves.

Wal-Mart Stores lends inspiration to such media squeezing. It generated a whopping $457 in sales per $1 spent on media in 2000, although the true king of low-cost marketing was Costco, at $65,425 in sales per ad dollar. Like Wal-Mart's Sam's Club, Costco limits ad/promo expenses to store openings.

Ad costs associated with these so-called "rev/ad" ratios are just for national ads, which are faring better than some promotional media. At mid-year, free-standing inserts have been hardest hit, down nearly 8% from August 2000 to August 2001, says Tom Holliday, president of the Retail Advertising & Marketing Association, a division of the National Retail Federation.

Also down were run of press, by 6%, and broadcast and cable. Meanwhile, sales for most retailers have been flat to declining.

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