Sears Stopped Buying National TV Ads in Critical Holiday Season

Here’s my main concern about this strategy that I shared with Suzanne Vranica @ WSJ

The holiday season is typically a time for retailers to blanket the airwaves with commercials. This year, one company was noticeably absent: Sears Holdings Corp.

The struggling parent of the Sears and Kmart stores hasn’t run paid national television commercials since late November, according to ad research firm iSpot and a person familiar with the situation. The Kmart brand has been absent from national TV networks since Nov. 24, iSpot said, while Sears hasn’t run a paid national TV spot since Nov. 25 — the Friday and Saturday after Thanksgiving.

That compares with about $8.4 million the Sears brand spent on national TV ads in December last year, while the Kmart brand shelled out roughly $6.5 million during the same period, according to iSpot estimates.

Sears Holdings Chief Executive Edward Lampert has championed the use of digital marketing over traditional TV and print advertising, arguing that digital is more cost-effective and quantifiable, according to people familiar with the situation. And at first, other Sears executives agreed the company needed to rebalance its marketing to focus more on digital, these people said.

But many executives have come to believe the company has gone too far and the retreat from traditional forms of advertising is hurting the business, these people said.

Sears said in a statement that it is always “evaluating the effectiveness” of its marketing channels. “This ongoing evaluation has meant we have made significant shifts over the past few years in where we’ve allocated our resources, including less traditional print and television, and more digital and social channels,” the statement continued. It pointed to recent marketing efforts including having its Kmart brand integrated into the late-night talk show “Jimmy Kimmel Live.”

For a retailer to back off of TV ads during the holidays is a highly unusual move, ad experts said. “Retailers establish their value and relevance with consumers during key shopping times,” said Dean Crutchfield, a corporate branding expert.

Indeed, retail rivals such as Macy’s Inc. and J.C. Penney Co. spent tens of millions of dollars during the final month of 2017. Macy’s shelled out some $32 million on national TV ads during the first 29 days of December while Penney spent roughly some $27 million during the period, iSpot estimates indicate.

Struggling Toys “R” Us Inc., which filed for Chapter 11 bankruptcy protection in September, spent about $13.3 million on TV ads during the period,according to iSpot.

Sears Holdings, of Hoffman Estates, Ill., has been slashing expenses as it struggles to turn its business around.

Sears lost $565 million in the nine months ended Oct. 28, bringing cumulative losses since 2011 to $11 billion. Revenue for the period fell 23% to $12.33 billion as the company closed stores and sold less from existing locations. As of the end of October, it operated 1,100 Sears and Kmart stores,down from 1,500 a year ago.

In December, the cash-strapped retailer extended the terms of a $400 million loan and announced new planned borrowings to cover pension contributions.

As its business has shrunk, Sears has scaled back spending on measured media. Sears spent $285.1 million on paid advertising in 2016, down from $664.2 million in 2011, according to estimates from Kantar Media, an ad-tracking company owned by WPP Plc; the estimates don’t include some forms of digital advertising.

While Sears cut its spending on TV and newspaper ads by roughly two-thirds during the period, it ramped up spending on digital marketing. By 2016, digital had surpassed newspapers and was second only to TV in terms of Sears’s spending ,according to Kantar.

In meetings over the past year or two with Mr. Lampert, Sears executives produced data showing that the deep cuts to TV and newspaper advertising had hurt sales, particularly since the majority of Sears’s revenue still comes from brick-and-mortar stores where commercials and circulars are particularly effective at driving foot traffic. According to retail research firm eMarketer,11% of Sears sales come from e-commerce.

But the executives were overruled, these people said.

Author: Dean Crutchfield

In an award-winning career, Dean has created new brands, built businesses and revitalized some of the world's most iconic brands.