Retailers are taking their marketing and advertising spending to record levels this golden quarter, as the deepening cost-of-living crisis forces customers to cut discretionary purchases.
Retailers are predicted to plough £446m into advertising during the final three months of the year in a bid to win sales in a challenging trading environment.
Advertising spend by retailers has been tracking 8% lower than in 2021 in the first half of the year, according to new data by WARC. Overall advertising spend this year across all retail will be down 2.3% at £1.3bn.
However, with customers looking to cut discretionary spending as winter approaches and energy bills soar, the sector is ramping up spend in the golden quarter by 2.2%.
“It’s important to note that recent results compare to an exceptional 2021, during which advertising spend among retailers rose 38.1% as the sector recovered from the Covid downturn in 2020,” said WARC director of data, intelligence and forecasting James McDonald.
“We anticipate that retailers will spend £446m during the fourth quarter this year – the highest fourth-quarter total for the sector ever recorded. The true total is likely to be higher still, as the sector heavily leverages performance formats such as paid search, which are outside the scope of Nielsen monitoring in the UK.”
He added: “This strong finish to the year is expected to sustain into 2023, with full-year spend forecast to rise 4.2% to £1.4bn, topping the high recorded in 2010 for the first time.”
WARC found Christmas ad spend across all sectors will be at a record high, despite the expectation that the men’s football World Cup taking place in November and December will bring only a “muted lift” to customer spend.
The data found that total ad spend for the final quarter of 2022 is set to increase by 4.5% from last year’s record high to £9.5bn. Search advertising – including ecommerce – is forecast to be one of the quickest-growing media over the quarter, rising by 7.3% to a total of £3.4bn.
However, with weeks of political turmoil adding to rampant inflation and economic uncertainty, which has dogged much of the year, WARC said the UK was heading for a recession in the new year.
“With the economic picture worsening amid ongoing political incertitude, the likelihood of a recession is now higher than when we last assessed market prospects in the summer. We have downgraded UK ad market growth expectations for this year and next, in large part to reflect the waning climate,” said McDonald.
“Higher costs are carving into advertisers’ margins and household budgets alike, and trading conditions are at their worst since the Covid outbreak, leading to muted expectations for the Christmas quarter. Against this deteriorating economic backdrop, a 9.2% rise in advertising investment this year would be impressive given that it is near double the average rate of expansion recorded prior to the pandemic.”
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