Through a special arrangement, presented here for discussion is a summary of a current article from the newmarketbuilders blog. The article first appeared on the Licensing Industry Merchandisers' Association (LIMA) blog.
Marketing spends and store openings were long seen as indicators of retailer and marketer health; the more they went up, the better everything was going. Now, many of the majors claim that they can cut and convert current resources without compromising their ambitious growth plans.
Revolving Doors
Retailers such as Macy's and Abercrombie & Fitch are trading low-margin U.S. locations for better stateside digs and more lucrative overseas options. Abercrombie & Fitch shuttered 71 of its U.S. stores last year, and another 180 are on the chopping block between now and 2015. According to the company, the remaining U.S. stores are hitting margins that are in line with those of their international flagships. As drastic as the U.S. reductions may seem, A&F's total store count decline could be negligible, thanks to its aggressive international expansion plans.
Macy's closure of several namesake and Bloomingdale's locations in January was another shift-to-lift strategy, as new and replacement store openings were announced simultaneously with the closures. According to Macy's CEO Terry Lundgren, the company is committed to managing a portfolio of stores that focuses on their "best and most productive locations."
Marketing Mods
Bob McDonald, chairman and CEO of Procter & Gamble, told analysts last month that the company will cut costs by $10 billion over the next five years, with $1 billion of this coming from external marketing spending. P&G believes that it will actually enhance its one-to-one reach by shifting dollars to lower-cost digital marketing channels.
Ivan Wicksteed, newly-minted CMO of Cole Haan, is taking a scorched-earth approach to one of fashion's marketing mainstays, print advertising. In Mr. Wicksteed's words, he "pretty much killed the entire print budget" in his first week, redirecting it toward content development, social media and digital marketing. Mr. Wicksteed summed up the shift by saying, "It's not a significant increase from last year; it's just a different use."
In Walmart's fourth quarter earnings call on February 21st, CEO Bill Simon claimed that Walmart reached more consumers through more channels during the holiday, while lowering overall advertising expenses for the year by 10 percent. Walmart's alliances with Facebook, its steady stream of tech acquisitions and the digital magic that it's been cooking up at @walmartlabs certainly point to digital as a driver of the decrease.
In retail, cutbacks have traditionally signaled the beginning of austerity programs. Now, retailers and other marketers are finding a new world of ways to snip and shift without sacrificing their long-term brand vision.