Apart from a few obvious exceptions, the U.S. retail economy is on track to return to normal levels in the fourth quarter, advertising experts said Tuesday. Retail, of course, drives advertising, meaning that Q4 offers the best prospect for a return to growth for radio and other media for the first time since world health officials declared the coronavirus a global pandemic on March 11.
“The big headline is that for quarter four of 2020, retail sales have the potential to actually be normal,” C. Lee Smith, President and CEO of SalesFuel, a media sales consultancy, said during the webinar “Accelerating 4th Quarter Revenue: Planning For 2021,” presented by BIA Advisory Services and SalesFuel. Excluded from that prognosis are the still struggling travel, events and restaurant categories. And the outlook assumes there won’t be any major setbacks in COVID-19. In addition, another round of federal coronavirus relief to prevent furthers layoffs would also be a helpful contributor, Smith said, especially in the airline, cruise and hotel industries.
Tom Buono, CEO & founder of BIA Advisory Services, pointed to several leading economic indicators that portend a “normal” fourth quarter for retailers. After losing 20 million jobs in April to COVID, U.S. unemployment is improving with 9.1 million jobs added back since May, although there are large variances by state. Retail sales, the economic indicator most closely tied to advertising, are strengthening and certain businesses are rebounding, although the retail sector remains a mixed bag. And despite a history-making 32.9% decline in GDP in second quarter, experts see a strong third quarter recovery taking shape and solid economic growth through 2021.
“As [we’re] starting to look at where do we go for the remainder of the year, we have a nice trend happening in certain markets but there’s a lot of uncertainty out there,” said Buono. “This year is somewhat unique in that we have political that’s going to really help in the latter part of the year.”
Despite the punishing blow the pandemic dealt the U.S. economy, several retail categories have already returned to normal spending levels. After shelter-in-place orders caused clothing sales to plunge 80% in March, they have slowly drifted north to normal levels.
With 23% of annual sales made in November-December, casual and athletic clothing is seen as an opportunity for media sellers, with 19.5% of U.S. adults planning to purchase athletic footwear within the next year. And with consumers continuing to dress down as the work from home trend lingers – yoga pants instead of khakis – active wear sales have been surging since April 2020.
Spending on retail and food services has also returned to normal levels, Smith said, citing U.S. Bureau of Economic Analysis.
And some categories have even surged above normal benchmarks. Electronics/appliance sales are already 21% higher than their pre-COVID levels. And with 23% of those sales taking place in November-December, this category is fertile advertising territory. That’s especially true for radio, one of the media electronics shoppers are more likely to respond to.
Other notable Q4 targets where at least 20% of sales occur during the last two months of the year are jewelry stores, wine shops, toy/hobby shops, bookstores and, in the northern U.S., HVAC dealers.
When selling to local accounts during the crucial fourth quarter, Lee offered a handful of suggestions:
- Target advertisers with the most to gain (and lose) during Q4.
- Promote COVID-19 safety in creative messaging, such as curbside pickup, delivery options and private appointments.
- Help them take full advantage of Cyber Week (see separate story).
- Bring them new ideas.
- Use traditional media to generate interest in digital offerings.
- Reduce risk and make every dollar count (use co-op dollars).