Brexit negotiations combined with a steep decline in consumer confidence have seen recent ad spend forecasts spell doom and gloom for the industry. However in the run up to the crucial Christmas period, retailers are using their media budgets to weather the storm rather than succumb to it.
Last month’s IPA Bellwether report detailed how brands had cut spend last quarter for the first time in seven years amid political and economic upheaval. Contractions to TV budgets over the same period signalled a reluctance to commit to blockbuster ads as the industry entered the the festive season.
But conversations with big Christmas spenders and media agencies tell a different story.
Asda’s top marketer Andy Murray insists that it’s still investing in long-term brand building this Christmas, even against the uncertain political backdrop. However, he is trying to get more value from that spend.
"In today's world every penny counts. We started planning earlier and that planning element really let us save money. We've got the same production ratios as last year but we've got more for our money," he says, revealing that in the five-days his team was on location to film the TV ad it was able to make over 65 pieces of content that will run across OOH, print, digital and social media.
“Our TV spend is the same as last year. But we’re being a bit more fine-tuned, so we expect an increase in reach and frequency,” he explains, adding that its media agency Blue449 is “pushing to get smarter” in the run up to Christmas.
Iceland's top marketer, Neil Hayes, was similarly dismissive of suggestions that ad spend during the festive period was being curtailed as a result of the current political and economic environment.
"There has been no material change to plans because of what has been going on around us," he said. "Whether that is different for other businesses, I couldn't comment. Christmas happens every year and that's what we are focused on - we'll still be selling mince pies on the run-up to the 25th."
Despite the ambiguity of the Brexit extension, the looming cloud of a general election and a bleak outlook for the high-street media agencies also claim the outlook doesn’t appear too different for their clients.
“We’ve not noticed anyone hugely cutting back spend because of Brexit,” reveals Jenny Biggam co-founder of indie media agency The7Stars which counts Jigsaw and Iceland among the big festive advertisers it woks with.
Though Asda said its TV investment is unshaken, figures from the Advertising Association (AA) and Warc suggest the retailer could be in the minority of brands investing as heavily as last year in the medium.
In 2018, the AA placed overall Christmas ad spend at £6bn, with digital media commanding greater share of budgets versus TV. This year the trend is set to continue, it said, with a record £6.8bn to be spent on Christmas advertising. Though, once again, investment in TV ads is expected to fall 1% year-on-year to £1.4bn while display ad spend is forecast to reach £1.75bn.
Asda's Murray suggests that Christmas had started earlier for retailers as shoppers spread out their spend more than they have in previous years. The marketer said that it had seen search budgets increase as a result.
Mark Howley, chief operating officer for Publicis Media and chief executive at Starcom admits that his agency is seeing “a little bit of a downward” trend on ad spend but say’s it’s not coming from Christmas advertisers but other sectors trying to "balance the books" before the end of the year.
“The businesses whose years depend on Christmas are still spending. For others that maybe haven’t done so well over the full retail year, it’s their bosses that looking to make their figures balance,” he adds, pointing to the auto and telcoms sectors.
“A couple of clients have pulled spend, not massive amounts, but we can see that they’re doing so as a way of tallying up the books at the end of the year.”
It’s not just Brexit alone driving this trend, though. Howley argues that wider consumer confidence correlates closely with upticks and cuts to media budgets and could impact retailers come January.
According to the Growth From Knowledge (GfK) Consumer Confidence Index the ambiguity around Brexit caused consumer confidence to drop to -14 in October.
There was also a significant deterioration in sentiment in how people felt about their own financial situations, against the backdrop of low inflation, low interest rates, low wage growth and high employment –a reduced confidence that could give retailers a headache post-Christmas.
“Consumer confidence really affects high street spend so we’re always tracking that,” says Biggam.
As for retail clients, Biggam would argue that they’ve been relieved of the turmoil a no-deal situation would have posed this Christmas.
“Apart from everything else the timing of it would have been disastrous so I think we’re glad that threat has become less likely and if it does happen then it’s not going to do so in the final quarter of the year.”
Sir Martin Sorrell, chief executive at holding company S4 Capital, believes that brands will continue to invest despite the uncertainty and consumer caution. And any future changes to political landscape should not be met with worry over the impact on brand investment, he assured investors on its Q3 earnings update this week.
“My sense is that it’s business as usual. In the UK, there’s been investment in marketing to maintain share,” he said, pointing to the growth in marketing agencies to the tune of 3-4% in the UK.
“If clients feel their results will come under pressure there will be a perverse reaction in that they’ll get tougher and make the investments required to get on with it, rather than wait any further.
“We’ve not noticed any significant change. We’ve seen continued interest from FMCGs and discussions with major clients and progress being made on all fronts. We’ve not seen budget crushing or the reverse.”