Where Christmas is traditionally a time to loosen one’s belt, this year the opposite applies. The cost-of-living crisis has seen a shift in priorities for customers facing soaring energy bills, and marketers are having to react accordingly. “It’s important that advertisers are aware of changing consumer habits, as people are becoming increasingly careful and conscientious about where they spend their money this Christmas,” says Danny Smith, Video Investment Manager at WPP’s media unit GroupM.
Market research firm QuMind suggests that 60 percent of UK consumers expect to spend less on Christmas this year, with similar trends reported in Germany. Even retail giant Amazon has forecast its worst holiday season in years, highlighting Europe as a particularly squeezed market. But it’s not all doom and gloom – retail sales in Italy, Spain and France will only drop 0.3-0.6 percent YoY, according to GlobalData and VoucherCodes, as consumers celebrate Christmas without Covid.
“This year presents a new challenge but one that is unlikely to be quite as severe as the period blighted by Covid, where whole industries and cities had to shut down,” observes Smith. But even during the Covid years, the Christmas periods actually saw healthy ad spend as marketers deployed deferred budgets from the pandemic. “Q4 2022 therefore has tough comparisons to compete against,” comments Bhavin Balvantrai, Chief Market Analyst at advertising agency OMG UK.
So far those comparisons are unfavourable, with Q4 2022 showing an 8 percent YoY decline in the TV ad market. And research from ISBA predicts linear TV spend will fall next year, as brands reallocate budgets to CTV. But agencies remain hopeful for the festive period, when viewing figures are boosted by what GroupM’s Smith calls “extremely strong” TV schedules. “We’ve already seen I’m a Celebrity and The Great British Bake Off deliver fantastic numbers in November,” he notes.
The unlikely addition of the World Cup into Christmas schedules also represents added value for brands, although that value is hard to prove without a reference point for the same time of year. “In summer months it is easy to discern the incremental effect the tournament has on advertising revenues as there is a consistent benchmark for comparisons between years that do and do not have the tournament,” explains OMG’s Balvantrai. “It is much more difficult to do so for this year.”
Live TV is still the primary means of consuming the World Cup and advertisers are taking the opportunity to spend around the tournament, though not at the levels expected at the start of the year – plus the matches are split between ITV and the BBC, halving the commercial opportunity. “Whilst the World Cup is likely offsetting some of the reduced demand around the Christmas period, it is not compensating for the full effect of the challenges weighing on advertiser budgets,” says Balvantrai.
Nevertheless, agencies are keeping busy during the holiday season, and research has shown the markets to favour brands that continue to advertise during a recession. “Consumers are expected to scale back on the total value of their Christmas spend, but are still expected to purchase goods in volume,” remarks Balvantrai. “This means that some cohorts of advertisers, such as retail, will see strong returns on investment in advertising, and are expected to continue to invest during the Christmas period.”
But these advertisers are in the minority, Balvantrai points out – not because of consumer spending but “other external forces”, including disruptions to the semiconductor supply chain caused by geopolitical turmoil and high interest rates, as well as production dependency on China. “On balance there are more advertisers exposed to these pressures and reducing spend than those growing investment on last year.” All in all, bad news for anyone with electronic devices or Peace on Earth on their Christmas lists.