Traditional Media Rules Retail -- For Now
U.S. retailers, always on the lookout for hot trends, appear to be deliberately behind the times when it comes to advertising.
Executives speaking this week at the Reuters Consumer and Retail Summit in New York made it clear their top choices for reaching out to customers remain television, print and direct mail.
To be sure, as with all businesses, retailers are taking a hard look at putting more money into running advertisements on the Internet, the fastest growing area of marketing.
But executives said they were taking a cautious approach, preferring to devote most of their spending to more traditional forms of marketing.
It has worked for us and continues to work for us, Movado Group Inc. Chief Executive Efraim Grinberg said of the print campaigns for the company's luxury watches. The advertisements feature celebrities such as model Claudia Schiffer.
From an imaging perspective, it allows the consumers to spend as much time as they would like with the advertising and the imaging that we're trying to convey to them, he said.
Grinberg said this fall the company would begin running print and television advertisements featuring star U.S. athletes Derek Jeter of the New York Yankees Major League Baseball team and Tom Brady of the New England Patriots National Football League team.
By contrast, the watchmaker has so far been hesitant to move its advertising to the Internet, Grinberg said.
I personally use the Internet a lot, but I think the Internet also gives you the opportunity to shut off what you don't want to see, he said, while adding that some of the company's fiscal 2008 budget would likely be allocated to new media.
Other executives attending the summit agreed that they were prepared to spend more of their advertising budgets on the Internet, following the broader trend of American business.
But they also said they remain committed to reaching consumers with proven advertising tools.
At end of the day, TV is still the biggest ... widest impact on consumer, said Neil Friedman, president of toy maker Mattel Inc.'s Mattel Brands.
Another traditional advertising medium, direct marketing, is still widely used by retailers -- sometimes in less traditional ways, such as the creation of magalogs, or catalogs that resemble magazines.
Such tremendous changes are taking place in TV and print, but our focus has also been direct marketing, said Ethan Allen Interiors Inc. Chief Executive Farooq Kathwari. We've changed our approach to direct mail.
He said the company's mailings previously would have displayed a sofa, for instance, with a price listed next to it. Now a catalog will show rooms of furniture in stylish settings, selling a lifestyle as much as the sofa, chair or table that is pictured.
Kathwari said the company spends about $70 million annually on marketing, with 25 percent to 30 percent on television and 30 percent to 40 percent on direct mail. The remaining budget is allocated to print and radio.
While the home furnishings retailer has launched an e-mail campaign that reaches 4 million households twice a month, it has chosen not to run banner ads on the Internet.
It's a question of resources, he said.
Staples Inc. Chief Executive Ronald Sargent said the office supplies retailer has made direct marketing and loyalty programs central to its promotional campaigns.
But he conceded that it can be difficult even for experienced retailers to keep pace with the changes taking place in marketing, thanks in part to the Internet.
I came out of first retail and then the catalog business. I thought I knew a lot about direct marketing, he said. You talk to these people and you can't even understand what they're saying: data mining? viral networking?
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