Retail’s got a big problem. Media’s got a bigger one.
Major retailers suffered disappointing holiday numbers
January 10, 2017
Holiday spending was up 3.6 percent this year, according to the National Retail Federation.
That’s the good news.
Here’s the really bad news. It was largely an online spending surge.
Online sales shot up 12 percent this past holiday season.
Brick and mortar retail took a serious hit. Sales actually fell 4.8 percent from last year.
Now we’re seeing the fall out.
Macy’s, the nation’s largest department story chain, says it will close 100 stores across the country over the next few years. Long-troubled Sears and K-mart are also closing stores.
The Limited, the women’s clothier that’s a staple in malls across America, abruptly announced on Monday that it will shutter all its 250 of its stores.
These are only the latest in a rash of closing in recent years by all manner of retailers, with more to come. Such diverse brands as CVS, Men’s Wearhouse, Chico’s and American Eagle have closed or are planning to close stores.
And that means big problems for media.
Retail is a top-10 ad spending category, accounting for 11 percent of all U.S. ad spending, including 15 percent in November and December, according to Kantar Media.
Last year during November and December, retailers spent $4.35 billion on holiday advertising.
Retail is an especially important category for local media year round, from TV to radio, out of home and newspapers.
And retail annually accounts for one-fifth of dollars spent on total digital advertising.
With more store closings, cuts in ad spending will be seen across all media.
We already saw signs of that this holiday season.
Kantar Media reports that during the first three weeks of the holiday shopping season, 10 of the top 11 retailers reduced ad spending, eight of them by double-digit percentages.
Increased online competition
The biggest culprit, of course, is competition from online retailers such as Amazon, which accounted for more than a third of all internet holiday sales in 2016.
“Online shopping activity is continuing to make gains against brick-and-mortar revenue,” notes Jon Christens of the Chicago agency Kelly Scott Madison, which recently published a forecast saying headlines declaring the death of brick-and-mortar was premature.
But the internet is hardly the only factor.
Another is the increasing struggles of the American shopping mall.
Roughly a third have closed in recent years, and a goodly share of the 1,100 that remain are barely hanging on. Green Street Advisors to project 15 percent of American malls will shut down over the next 10 years.
The big reason: Consumer are simply not spending the time at malls they once did. From 2010 to 2013, mall foot traffic fell by 50 percent, according to Cushman and Wakefield.
The closures of flagship stores such as Macy’s has left many without anchors. The big stores bring people in, and the little stores benefit from the trickle-down effect of that foot traffic.
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