What recession? Holiday sales expected to rise amid boost in ad spend

Shoppers appear unfazed by a potential recession, tariff uncertainty and an impeachment inquiry in Washington. The National Retail Federation, which released its annual holiday sales forecast Thursday, says retail sales will increase between 3.8 percent and 4.2 percent during the last two months of the year, compared with the year-earlier period. That’s a total of as much as $730.7 billion for the crucial holiday period.

“It’s a strong forecast despite all that uncertainty,” Matthew Shay, president and CEO of the NRF, said on a call with reporters. He noted that last year’s holiday spending was “unusually low” and increased in the low-2-percent range only. At the time, consumers were navigating factors such as the government shutdown and early tariff talks.

Whether shoppers spend or not, retailers will be ready with ads. During the first half of 2019, such marketers spent $7 billion, or 4 percent more on advertising than the year-earlier period, according to Kantar data. Kantar executives expect advertising over the holiday to increase.

“The holiday season is still a critical period of the year for retailers,” says Jon Swallen, chief research officer at Kantar, noting that advertisers need to keep pace with or out-spend competitors.

In a report, Kantar outlined digital media as a key spending area for advertisers, in keeping with the growth of Cyber Monday and online shopping during the Thanksgiving holiday weekend. The NRF predicts online buying, and other non-store sales, will increase between 11 percent and 14 percent this year. Kantar also highlighted paid social as a key channel for building brand awareness.

Last year, retailers spent $3.7 billion on holiday advertising—a 6 percent decline from the same period in 2017, Kantar found. Walmart, Target and Amazon were the top three advertisers in the 2018 holiday period, spending $562 million. Amazon increased its 2018 holiday ad spend by 84 percent to $138 million, according to Kantar’s report.

Swallen notes that the current political climate may not affect advertisers’ holiday plans as much as economic uncertainty may. Typically, issues related to the economy, such as tariffs or taxes, have more of a direct impact on consumer confidence and a shopper’s willingness to spend than the controversy around impeachment, for example, he says. This holiday, a marketer’s ability to navigate seamlessly from digital to physical stores will be critical.

“The advertisers that succeed in this environment are those that can play both games—in store and online,” he says. “Those are the ones that end up as winners, and those are the ones that end up with a larger share of wallet.”