Retail Revival? Not Likely.

Now that the tinsel and mistletoe dust have settled, let's take stock of the near future for retail advertising.

According to Calculated Risk, December retail sales were down .3% from November on a seasonally adjusted basis, but up 5.4% YoY from December 2008.

Retail SalesThis graph shows retail sales since 1992. This is monthly retail sales, seasonally adjusted (total and ex-gasoline).
Click here for larger chart.

Retail appears to have bottomed, and should begin a long, slow climb back to better times, although given anemic consumer confidence, that climb could be slower and more arduous than anyone would like, and this includes the retail segment of the advertising industry, whose fortunes have been tracking the industry it serves.

A report in Bloomberg News notes that:
Americans also bought more consumer goods, computers and telecommunications equipment from overseas, signaling a revival in overall demand and business investment.

But most analysts say that demand is weak, and that given the beating most retailers balance sheets have taken in the past year, the capital available for retail advertising, which fell 8.5% in 2009, according to a report in Reuters, is going to be low for quite some time. A recent report by Kubas Consultants envisions 2010 retail display advertising in slightly negative territory (-0.4%), while the bright spot will be online advertising, which they predict will rise 15%, based on a survey of 500 daily newspaper executives and managers.

So, growth in advertising will probably not return to pre-2008 levels anytime soon, and will likely lag slightly behind the overall economic recovery. 

Unfortunately, studies from organizations such as McKinsey & Co. and the London School of Business regarding advertising spending in a recession clearly show that the time to be advertising is now (and in the last year, but too late for that) when all of your competitors aren't, not when times are good, magazines are fat, and competition for eyeballs is at its peak. 

This means that most retailers will likely make the same mistake again when the recovery arrives – blowing big wads of cash on advertising once the consumer is already in the store, making purchases – not saving it up for the next economic downturn to be spent when it has the power to make a true positive change in market share and brand value.


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