retail

Brandweek, April 24, 2000 by Sandy Dolbow

HOT BUTTONS

Strong economy forces mid-tier to make ad dollars work harder

OVERALL

TV still attractive option to reach fast-spending consumers

DARK HORSE

What's in store for J.C. Penney and Sears as Gap, Kohl's and Target expand their reach?

Just like the Energizer Bunny that keeps going and going, American consumers keep spending and spending. They drove retail sales a record 8 percent last year, according to the National Retail Federation. And they're spending on a wide range of items, from food and clothing to building materials and drugstore items, according to March data from the Commerce Department.

Assuming the recent jolts to the stock market do not fundamentally alter consumers' spending priorities, all those wide-open wallets may translate into blockbuster budgets for television ad buys this fall. Already this year we've seen some major TV campaigns, starting with the Gap's big splash of colorful, jazzy ads during the Oscar presentations, reflecting the company's new merchandise mix. Another heavy-spending, high-impact TV effort is the edgy, retro-looking "Sign of the Times" campaign from discounter Target, touting its Philippe Starcke chairs and boxes of Tide detergent. And with regional chains such as Kohl's extending their reach into the Northeast, it all adds up to quite a scramble for consumers' attention--and what better way to reach them than in the comfort of their own living rooms. As Perianne Grignon, director of media services for Sears, said, "We're looking for robust sources of reach, and national broadcast is very robust. It remains an attractive channel for high daily reach."

And Sears, with a record $2.41 billion in operating earnings for '99 and $1.45 billion in net income, should be able to afford such reach. Last year it ditched its successful "Softer Side of Sears" campaign for a more price-oriented message, "The good life at a great price. Guaranteed," and will incorporate that theme into all its advertising going forward, at least for now. While its ad spend for 2000 will be about the same, according to company rep Lee Antonio, "We're going to make it work harder for us." That means leveraging buys, looking for the best opportunities and looking hard at target audiences. "We're being smarter about what we buy," Antonio said. But TV is still an important part of that mix.

J.C. Penney, with a 43 percent decrease in earnings for '99 and the announced closing of 45 stores this year, is a different story. Besides its financial woes and having to adjust to a new management team, the company is looking for a new lead agency, which it expects to name later this month. In January, it booted Dallas-based Temerlin McClain, which had handled the $110 million account for the past nine years. Last year, Penney switched its Arizona Jeans account to DDB Worldwide, also Dallas, which created a $20 million TV campaign targeting teens.

The mid-tier segment's troubles have been widely reported, especially the damage done by specialty stores like the Gap, with its successful Old Navy and Banana Republic units, and mass merchants such as Wal-Mart and Target, which are chipping away at their profits.

Wal-Mart's plans, as usual, are top secret. Target's "Sign of the Times" ads are still a go. "They've done well for us and we continue to reinvent [the creative]," said a rep, adding that it is it too soon to comment on the retailer's fall-TV buy. But if sales are any indication, there should be plenty of money for investing in airtime. In '98, the so-called "upscale discounter" generated more than $23 billion in revenue and $1.6 billion in profit. This year, it plans to open 70 new Target stores, including 15 SuperTarget combination discount stores and supermarkets.

Gap is undergoing a management restructuring and dealing with an 11 percent dip in same-store sales in March. But with a planned 660-store expansion set for this year, including 120 to 130 new stores globally, at a cost of about $1.6 billion, and annual sales in excess of $11.6 billion, it should have a few sheckels left over to continue its widely praised TV ads.

One player worth keeping an eye on is Midwest-based Kohl's, now making a strong push into the Northeast. Its fast-paced TV ads declaring "That's more like it," along with weekly sales fliers in local newspapers, are rapidly raising awareness about the 265-store chain that seems to be successfully dodging the jinx afflicting other mid-tier department stores.