Magazine article Editor & Publisher


Magazine article Editor & Publisher


Article excerpt

Consumers are reaching for their wallets again, but retailers and newspapers worry that sales could turn cold

Happy days may not be here again but, at long last, it's starting to look like a modest recovery. Analysts revised upward second-quarter Gross Domestic Product growth, following strong defense and household spending. Healthy back-to-school sales suggested the return of the consumer and indicated a good holiday season for retailers. But job growth remains stagnant, and most tax refunds have probably already been spent -- partly on those back-to-school items -- while not significantly reviving the economy. Sears, Roebuck & Co. CEO Alan Lacy hedged his recent remarks about the holiday shopping season, saying he expects it to be better than last year but not stellar. With the weak job market and a slowdown in home- buying and refinancing promising an uneven recovery, this holiday will be "far from a slam dunk for retailers," Frank Badillo, senior economist for Retail Forward, wrote recently.

Tepid shopper interest last year forced retailers to cut their year-end forecasts and resort to heavy promotions to move merchandise. This helped newspapers eke out a 3.8% gain in Q4 retail advertising, on a par with the industry's 1999 spending level. Is another promotion-heavy season newspapers' best hope? "I think we'll see promotions again this year," says Kathleen Brookbanks, managing director of media planning and buying firm OMD Midwest in Chicago, which places ads for retailers like Dell Inc. and J.C. Penney Co. Inc. "When they're depending on taking business from others, they go back to what works for them, and newspapers will do well."

Or will they? Bob Shamberg, president and COO of Newspaper Services of America in Downers Grove, Ill., sees less of the last-minute ROP push of the sort Kmart did a few years ago. "Because retailers get much better information, they have somewhat less interest in throwing a lot of advertising at what might be profitless revenue," he says.

Retail ads pull the sled

Retailer woes are no small matter for newspapers. Retail advertising accounted for 47.4% of total newspaper ad revenue in 2002, and 29.2% of those retail ad dollars came in the fourth quarter, according to the Newspaper Association of America (NAA). And even the more optimistic forecasts warn of risks to the coming shopping season.

The National Retail Federation believes that after two years of worrying about terror attacks, war, and job losses, people are ready to buy again. The NRF predicts 5.7% growth to $217.4 billion in holiday retail sales, which it defines as November and December sales in stores in key categories. That's more than double the 2.2% growth the NRF recorded for 2002. The association points out that spending by businesses should account for a large part of the holiday spending, though, and cautions that job and international political tensions could weigh on results.

Retail Forward forecasts holiday sales to grow a more mediocre 4%, up just slightly from its last-year figure of 3.7% growth. The Columbus, Ohio-based consultancy predicts continued declining sales at mall-based department stores and steep price cutting by apparel stores, with the strongest growth coming from supercenters, warehouse clubs, and dollar stores -- outlets that traditionally spend the least on newspaper advertising as a percentage of sales.

Consumer polls raise additional concerns. A September poll by Leo J. Shapiro and Associates LLC in Chicago shows spending intentions are about the same as this time last year, which, remember, finished with a meager holiday sales haul. The firm's research shows that data generally show spending intentions are a leading indicator of retail sales. "At this point, we're really not expecting as strong a Christmas as what others think," says Owen Shapiro, a vice president at the research company. BIGresearch LLC in Worthington, Ohio, a market intelligence firm that takes the pulse of 8,000 consumers every month, also contends consumers aren't convinced the economy's getting better. …

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