What's Ahead in Retail Advertising 4Q and Beyond?

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Mike Gatti, Executive Director with the National Retail Federation, tells SALES-FAX NEWS that although consumer spending is improving, "It's going to be awhile, years, before we see the kind of spending and confidence that we have known."

It's going to be awhile, years, before we see the kind of spending and confidence that we have known

The recently released September sales' report from the National Retail Federation shows that consumer spending for the back-to-school season increased slightly above what was forecasted. Industry experts across the board are predicting that sales will continue to move in the right direction, as we head into the industry's busiest quarter.

Mike Gatti, Executive Director for the Retail Advertising and Marketing Association (RAMA) division of the National Retail Federation (NRF), tells SALES-FAX NEWS that a sales increase of 2.3% is being forecasted for the 2010 holiday season. And Gatti admits that while it is a marked improvement over the 2008 decline of 3.9%, and the modest 2009 uptick of .4%, it is still below the 2.5% 10-year average.

What's Ahead?
While sales are moving in the right direction, Gatti stresses that both retailers and consumers remain cautious. Consumer spending is clearly improving but "It's going to be awhile, years, before we see the kind of spending and confidence that we have known," he explains. Retailers likewise remain cautious. "They are managing their inventories, managing their markdowns, and I think you are going to see a fairly promotional [holiday] season," he continues. The shopper's mentality has shifted, and, in some ways, it could be permanent, Gatti stresses. Some industry experts are quipping that "the recession is over but nobody has told the consumer, as yet," he comments.

Gatti says, people "are over wants" and are focused on necessities. Value and longevity are now as important as price. "Whenever you have an economic downturn like this, you see cocooning: eating and cooking at home, movie and game nights at home, so [consumers] start to look at what they can do for the whole family." That said, the "Family Purchase" could very well be a significant contributor to this holiday season's sales uptick, according to Gatti. Larger ticket items, such as a new flat screen television or a family vacation, splurges that would not have been considered last holiday season, will be justified this year, if they can be enjoyed by the whole family.

Pets & Generic Rule
Despite shifting sales figures in all areas, the way consumers care for their pets has not changed, Gatti explains. Pet stores and boutiques, as well as groomers, have been essentially "recession-proof", he explains. "People did not skimp on their pets. They did not change the way they fed or took care of their pets." Retail discount stores and private label brands (also known as store brands or generic brands) have also done well, Gatti says. Discounters often do well despite the economy, he notes, but the increased sales of generic brands has shifted to the point that people are not expected to switch back to some major brands, even after the economy fully recovers. "Stores that sell private and generic label items have done better than all other stores," Gatti says. "People started trying the generic and they are not switching back to the brands, now."

Traditional Media Is Strong but Mobile Leads the Way
Advertising budgets are definitely not increasing, even with the increased sales forecasted, Gatti explains. All companies, in all industries, are required to shift their approach and employ a strategy that carefully targets their customers with a mix of traditional and alternative media, direct marketing, promotions and social networking.

In the current climate, everything about retail marketing is about the relationship between the brand and the customer. In retail, the most important tool of the year, for "everybody in every category" is mobile marketing, Gatti says. Mobile "purchasing, scanning, marketing, payments, is where everyone is looking right now," he adds. Of course, he maintains, it all depends on who your customer is.

Gatti recalls the huge push not long ago for everyone, in every industry, was to go 100% digital. "TV and print were worried," he recalls. "We saw radio, TV and print really suffer," but as companies began to notice that the "ROI was not as great with digital as people thought; money is being shifted back to a more integrated approach." He continues, "Things are getting better for traditional media - at least right now."

While traditional media need not worry, as was recently feared, Gatti suggests, there is an obvious shift traditional media must be aware of, in order to take advantage of the digital advancements sweeping the industry. "What we have now is a lot more channels of communicating," Gatti says.

Role of Interactive TV
Mobile marketing will naturally lead, according to Gatti, a "little farther down the road," to interactive television by way of two-dimensional matrix barcodes, known as QR Codes. Short for Quick Response Codes, the QR Code will be enabled in mobile phones, so that consumers can scan just about anything for information, store locations, purchasing options, etc. According to Gatti, over the course of the next year to two years, we should begin to see QR Codes become standard; appearing on everything from magazine ads, buses and business cards.

When asked if these codes will pose a threat to traditional media or retailers, Gatti says it can actually be quite helpful, if used correctly: "Smart companies are using these coordinated approaches to get people to their door or site. They are asking themselves, 'How can I make it as easy as possible for the consumer to get to my doorstep?'"

"All of the traditional media are shifting, but only in the way that we use them," Gatti explains. "Print is driving people to the web, which is driving people to stores; it's this circular effect that marketers are using to their advantage." In the next couple of years, as these QR Codes become standard, for example, Gatti believes "we are going to have to really pay attention to television!"

--Joyce O'Brien

About NRF:

As the world's largest retail trade association and the voice of retail worldwide, the National Retail Federation's global membership includes retailers of all sizes, formats and channels of distribution, as well as chain restaurants and industry partners from the U.S. and more than 45 countries abroad. In the U.S., NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2009 sales of $2.3 trillion. http://www.nrf.com

Biography:

Mike Gatti joined NRF as Vice President, Marketing in 1993 and was promoted to Executive Vice President of the Retail Advertising and Marketing Association, an NRF division, in 2003 and Executive Director of RAMA in 2006. He became Senior Vice President, Communications, in 2008.

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Mary Ann Cavlin
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