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Ad Spend Will Make Or Break Aussie Retail Recovery

As Australia continues to open up, brands will need to advertise in order to lure consumers back into spending money, according to Deloitte Access Economics.

Deloitte forecast household spending will grow 1.6 per cent in FY22, but advertising spend is key in bolstering this.

“Advertising spend is going to be really important for getting consumers to not just leave the house, but also to open their wallets, especially for service businesses like hospitality, entertainment and travel,” said John O’Mahony, partner at Deloitte Access Economics.

“Businesses cannot rely on pre-pandemic perceptions of their brands – consumers have changed in the past 18 months, in terms of needs and outlook, and advertising needs to reflect that.”

Advertising works. It’s also great for the economy. Deloitte’s study, ‘Ad Pays’, found that each dollar spent on advertising lifted the Australian economy by $3. Deloitte also predict ad spending will lift to pre-pandemic levels next year.

But multiple global supply chain issues are working together to undo this projection.

As we reported yesterday, ships waiting to offload and load cargo at ports in Los Angeles and Long Beach have reached record levels. There are dozens just floating in waters outside the ports that have been there for weeks. Over a hundred ships are waiting to offload cargo.

This is impacting American consumer spending, with manufacturers and retailers unable to move goods in and out of the United States.

If these companies can’t get their products to market, they won’t advertise. This is spilling into the tech world, with giants like Amazon, Facebook, Apple, and Google — who all rely upon advertising dollars — suddenly under strain.

Evan Spiegel , CEO and co-founder of Snapchat sounded the alarm last week during an earnings call.

“Our advertising partners are facing a variety of supply chain interruptions and labor shortages,” he told investors.

“This in turn reduces their short-term appetite to generate additional customer demand through advertising at a time when their businesses are already supply constrained.”

This shortage tips into Australian spending. With iPhone 13 supply expected to be limited in the lead up to Christmas, and usual stocking headliners like the PlayStation 5 still not on Australian shelves a year after release, these are huge companies that won’t be indulging in their usual pre-Christmas advertising splurge.

It took seven years for advertising spend to return to pre-GFC levels after the 2008 crash. Perhaps expecting a bounce back by next year is optimistic.

 

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