Despite Strong Economy, Retailers Prepare for New Reality
Last year was a very good year for major ad buying verticals, according to Kantar Media’s recently released summation of 2018 activities. Most categories experienced growth. The total increase came in at 4.1% and amounted to $151.7 billion. Analysts are cautiously optimistic about 2019, but your retail clients aren't taking any chances. They're preparing for a new reality. Here are the details.
Spending by Major Vertical
Kantar Media shows the total measured media spending by major vertical, in billions, for 2018 as follows. The changes from the previous year appear in parentheses.
- Retail $17.812 (+5.4%)
- Automotive $14.280 (-3.3%)
- Telecom $8.563 (+1.0%)
- Financial services $8.468 (+11.0%)
- Insurance $7.705 (+12.8%)
- Travel and Tourism $7.020 (+22.2%)
- Restaurants $6.782 (+6.6%)
- Political/Organizations $6.742 (+93.2%)
- Pharmaceuticals $6.463 (+4.8%)
- Media $6.207 (+27.3%)
While automotive was the only sector to spend less on advertising last year, we can imagine that another category — political and organizations — will also experience a dip in 2019 before roaring back to life in 2020.
For now, consumers are feeling positive about the economy. We can expect the continued optimism to drive spending in the travel and tourism and restaurant sectors. In 2019, NRF analysts believe retail spending will jump from between 3.8% and 4.4 percent. The additional spending will likely be accompanied by increased ad spending.
Preparing for The New Retail World
Despite the rosy economic outlook, some retailers are preparing for a new kind of future. BDO analysts recently asked retail leaders to rate themselves, especially with respect to the power that Amazon has in the marketplace. Overall, only 37% say they are thriving. Another 54% are surviving, while 9% are struggling. By retail business format, here are the percentages of thriving business types:
- Department store 17%
- Discount store 25%
- Big box 35%
- Specialty 40%
- Pure-play e‑commerce 84%
The thriving businesses believe that having exclusive products, better prices and outstanding customer service differentiate them from the competition. This belief may explain why only 17% of department stores, many of them with me-too products, are thriving.
The BDO survey also asked businesses how much they’d invested in marketing in the past year. Here's what they said:
- Significant investment 49%
- Some investment 47%
- No investment 4%
At least 21% of thriving business owners also believe that their marketing efforts give them a competitive differentiation. On the other hand, 15% of thriving business owners say they are suffering from weak marketing.
Share these details with your clients and discuss how a change in their marketing could help them thrive. You should also run a digital audit on them to show how their digital presence compares to their business category or specific competitors. The report is available from AdMall at SalesFuel.com.