Holiday Cheer from Retail May Be Quiet

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By: Jennifer Saba

The outlook for retail advertising during the holiday season is uncertain ? at best. When asked during a Knight Ridder Q3 conference call in mid-October about holiday activity, Steve Rossi, president of the newspaper division, responded with the proverbial shrug: They just don’t know what to expect.

Over at Sears, Matt Spahn, director of media planning, was coy about holiday spending, though he did say his plans have not changed significantly from what they were last year. “In terms of newspaper advertising, those plans are and have been very aggressive in trying to compete in a marketplace. I would not say they have come up or down for the holiday,” he revealed.

Robert Coen, director of forecasting at Universal McCann, hasn’t reached any clear conclusions, though he’s leaning toward a soft landing: “Retailers are just trying to do their best to move goods. They’re investing little in advertising, not just in newspapers but other media.” Coen thinks the election will keep media prices high, though he says that this year will probably be better than last year. “But last year was pretty lousy,” Coen adds, noting that in 2003 holiday advertising was up just 1.7%.

Retail Forward predicts that Wal-Mart should see a lot of holiday activity. Too bad the retailer tends not to advertise with newspapers.

It doesn’t help that consumers have been wishy-washy about future spending plans. Leo J. Shapiro and Associates, a Chicago-based survey consumer research firm that specializes in retail, found that from August to September households who expect to spend more during the holiday season dropped precipitously from 27% to 16% ? the largest reversal the firm had seen in more than 10 years. But consumers felt more confident in October, says George Rosenbaum, chair of Leo J. Shapiro, who explains that 20% of households plan to spend more this holiday season.

But even that piece of good news could have an adverse affect on newspaper advertising. Retailers track closely consumer confidence and spending potential and when there’s a see-saw effect ? essentially big swings from month to month ? they tend to slash prices. “Probably the newspapers do better when retailers are panicking because they promote more,” Rosenbaum explains.

There’s a catch-22 though: Retailers have also gotten much smarter about how and when they spend their money, explains Bob Shamberg, the newly appointed CEO of Newspaper Services of America. (In October he replaced Scott Harding, who jumped to direct-mail giant Advo.) “Retail numbers have been fair to soft. Retailers will probably go into the season with a disciplined and conservative ad plan,” he says. “I just think there is a great correlation that as retailers get more and more information [about the effectiveness of their advertising], they have more and more discipline.”

He did say that the free-standing insert category, which has been gaining popularity, will gain, but only in the low single digits for the holiday season. And overall, the picture is not promising. “There are not a lot of signs that suggest this year is going to be fantastic,” Shamberg says.

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