With disposable income under severe pressure retailers are faced with increased costs. Wages, rent, electricity, insurance and government charges are all contributing to increased overheads. Since Christmas several major retailers have reported year on year sale decreases across their store network. The inevitable internal pressure to contain costs, a looming federal election and the impact of overseas trade tariffs suggest we are in for a bumpy ride. Interest rates have reduced marginally and depending on who you listen to there is unlikely to be much relief in the short-term. Business closures have increased, and consolidation is underway in many sectors.
The longer-term outlook for Australia is still arguably positive. Increasing population, pent up and unsatisfied demand together with solid employment numbers suggest we can weather the storm. The wild card is government failure to understand the market mechanism and the importance of policies that assist business, particularly with energy costs as well as a reduction in bureaucracy and fair and reasonable industrial relation policies.
How much should I spend?
In this uncertain environment clients are reviewing how advertising can effectively play a role in boosting sales. Generally small to medium-sized retailers typically invest 7-10% of their gross revenue in marketing and advertising. Globally as a percentage of sales retail participants tend to have higher marketing budgets compared to other sectors. Digital advertising now accounts for over 70% of global retail advertising.
Paid search continues to play a major role, together with digital display and social media. Traffic can be measured as part of the eco-system through a variety of techniques, including a return on advertising spend.
It is also important that key sale events and sales are called out using main media including television, catch up tv, streaming, radio and outdoor. Their creates awareness of the sales event in a fast and efficient way providing the oxygen for a lot of other digital levers to perform to their optimum level.
Path to Purchase
Agencies and retailers are now able to overlay their traffic patterns through the stores. This allows analysis of advertising and online visitation to deliver a more complete picture of the ‘path to purchase’. Whilst it’s an ever changing ecosystem it’s important that retailers continue to build awareness for their brand. They need to highlight their ‘truth’ and what differentiates them from their competitors.
At Faith we have been assisting our clients navigate the difficult economic environment with innovative creative and media opportunities. One of the clear strategies evolving is a need to showcase what brands are famous for with their advertising spend. Offers are geared to providing real value to customers. Whilst it is easy to put a case to cut advertising spend, maintaining the revenue line is an imperative, both in the short and long term.
Importantly boosting cashflow can be achieved by strategic sale activity that is designed to bring inventory levels into balance. Quitting seasonal and slow moving lines is a tried and true strategy; This cashflow can then be utilised to grow the business as the economy improves.