30-35% drop in retail advertising spends across South India

Overall the retail ad spends have dropped between 15-20 %, both in TV and Print, jewellery & retail being the highest contributors to the drop

e4m by Deepa Balasubramanian
Updated: Sep 15, 2014 7:59 AM
30-35% drop in retail advertising spends across South India

The Indian shopping season has just begun with onset of festivities. The early indication and expectation of marketers suggests that ‘acche din’ are ahead for retailers and are expecting a 30-35 per cent growth in the business over the next few months in South India (except Kerala).

However, the AdEx report from Jan-July period in 2014 has seen a downfall in the advertising spends when compared to the same period in 2013. Overall, the retail ad spends have dropped somewhere between 15-20 per cent both in TV and Print.  Jewellery is the highest contributor to the drop, in both mediums contributing 25-30 percent decline.

In this backdrop, exchange4media spoke to industry experts who are of the opinion that beset with an ongoing decline in retail advertising spends, the retailers need to rethink their marketing strategy and figure a way out to increase their spends in order to reach out to their consumers. Experts say jewellers such as Malabar Gold, Joyalukkas, Josco, NAC, GRT and textile brands such as Chennai Silks, RmKV, Pothys, Nalli have all seen decreasing their advertising spends. There is an overall 30-40 per cent drop in the retail advertising spends across South India, according to experts.

Retail market in Tamil Nadu is one of the most evolved when compared to its neighbouring states. Narendra Kumar Alambara, COO, Sovereign Media Marketing remarked, “The retail brands in Tamil Nadu have been able to grow in a way that customers from every district and every city within Tamil Nadu come to these retailers to shop. But, the drop in ad spends especially from jewellery and retail sector, though not very significant, is evident when compared to last year. The end-of-season sale advertisements have also seen a decline.”

Alambara further added, “Jewellery ad spends would have dropped around 10 per cent in Tamil Nadu. Having said that, the actual retail spends take place only from September or October, when the festivity starts. So, we still need to wait and see how much spending happens this year.”

Reghu Ramachandran, VP, Asianet Communications and Varghese Chandy, Chief General Manager, Marketing & Advertising Sales, Malayala Manorama are also of the same opinion.

In Kerala again, jewellery tops the list in contributing to a drop in ad spends followed by textile. Jewellers especially have cut down their spends as the import duty imposed by the government have eaten into the profits.

“The import duty is gone up by 10 per cent. Another reason is the service tax in Kerala is 5 per cent as compared to one per cent in neighbouring states. So they are unable to pass on the increased cost to the customers. Having said that, jewellers have an understanding with the Kerala government and the tax is calculated in compounding rates.  For example, suppose one pays Rs 100 as tax this year, the next year the tax will be increased by 20 per cent and the increase takes place year-on-year,” said Ramachandran.

Ayurveda for instance has been on a decline in spending in ads since the past few years. Asianet, which use to have close to 35 ayurvedic advertisers till last year, today they have only three to four ayurveda brands advertising on television. Experts also said that the gold sales fell down drastically after last year’s Onam and this in turn will affect the advertising spends.

Chandy added, “If the advertisers have not spent much during Onam which is also the wedding season, then nothing better can be expected.”

In Kerala, unlike other markets, retail as a category, spends more on print and only the top retail brands spend heavily on television.

Retailers Speak

Retailers say that the spends are almost the same when compared to last year and there is no drop. With an overall market size of mobile phones around Rs 220 crores in Chennai, mobile phone retailer, UniverCell which contributes a significant share of the business however is not in agreement with the drop in retail advertising spends that has taken place across South India.

Soumya Menon, VP- Brand Strategy, UniverCell said, “UniverCell’s overall spends have remained unchanged. We are finding it very effective to use the stores as medium to attract the customer and have increased our investment here. We have also invested in many finance options this year that is giving us great results. We are using mass media very effectively. Though TV is very selective for us which is less to 20 per cent of our spends, print works well for us. But, during big seasons we find additional reach and impact with TV.”

Srinivas N, Head- Marketing, RmKV Silks remarked, “Firstly, at RmKV, we do not call our communication expenses as spends. We call it as investments since these are key to building the brand. Our communication investments have not reduced and have been consistently increasing year on year. As last year, this year also we will be spending somewhere between 7-8 per cent. Our constant endeavour has always been to be in the top three of any of the markets that we operate in.”

Shift in medium of advertising & 10+2 ad cap

Experts feel that in some parts of South India such as Chennai and Bangalore, retailers are moving from print to targeted television. Targeted television refers to the geographically divided TV channels that are present in the market that help advertisers to choose which area to reach out to. Advertisers also feel that due to the constant reduction of readership and circulation of print, this remains an area of concern. Also the regular policy changes in OOH media and the lack of legal sites is also a challenge faced by advertisers while deciding their ad spends.

For instance, RmKV leaned towards spending on TV as their audience is pan Tamil Nadu and has come at the expense of print and outdoor. Srinivas N added, “Indeed TV plays a very important role in the case of multi-store retail brands. However, the investments and the role of the medium vary from campaign to campaign depending on the brand and communication objectives. Having said that, this year’s preference has been towards TV.”

Speaking about the 10+2 ad cap and its impact on retailers, Menon said, “10+2 ad cap has made TV more expensive and we are having to chose which markets we invest in. Earlier with the same budget we could support more markets but now that’s not effective and we have to restrict our reach.”

Srinivas added, “The 10+2 ad cap has definitely had its impact due to the rationing of FCT available which means the cost of campaign increases not only for us, but to most brands. We recognise the same and this means the usage of TV has to be planned and bought better. We have been prudent to use the medium in a selected and concentrated manner.”

Since the establishment of new government, consumer purchasing behaviour and the up-coming major festive season, experts are positive about the rise in ad spends at least by next month.

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