Charles C. Conaway, ceo of retail chain Kmart, admitted the company had made “a mistake” in cutting back its ad budget, as it posted widening losses for the three months to the end of October.
Kmart has been slashing its ad budget over the course of the year. Between January and August, it spent $198 million, down from $227.9m a year earlier, while rivals such as Wal-Mart have maintained marketing expenditure.
In particular, the group has reduced its use of Sunday newspaper inserts. The year-on-year drop in Kmart’s ad pages started at 7.5% in January and widened to 50% in September and October, in part to fund TV and radio efforts. However, such cuts – described by Conaway as “drastic” – have taken their toll, with a fall in the number of bargain-hunting customers on Sundays.
“There’s no doubt we made a mistake by cutting too much advertising while the competition increased theirs,” he admitted. “Clearly, we’ve learned where the threshold of pain is in advertising.”
Kmart plans to scale back the cuts to 20% in December and 30% in January 2002 – good news for its shops TBWA/Chiat/Day in New York (agency of record) and Don Coleman Advertising in Southfield, Michigan (BlueLight TV commercials).
The retailer posted net losses of $224m for the three months to October 31, compared with a $67m shortfall a year earlier.
News source: AdAge.com