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Retail Grows Up, Looks to Build Image

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NEW YORK Consumer analysts saw April sales numbers last week and proclaimed that shoppers are still reluctant and the retail environment is cautious at best. But the market for retail ad reviews is robust.

Last week, Lowe's put its $315 million creative and media account into play. Limited Brands ended its $60 million media search by splitting planning and buying. Macy's chose a winner in its Hispanic ad review. And Marshalls picked four finalists in its $35 million review.

With its ability to instantly measure results, retail is always among the most restless ad categories. Ten retail accounts billing at least $20 million and worth a combined $925 million have gone into review so far this year, according to Adweek reports, the most of any top-10 category; and in 2004 there were 14 retail reviews, also more than any other ad category.

Though some reviews are a result of acquisitions or consolidation, clients, agencies and insiders all see a new reason behind the many account shifts: Retail marketing is growing up.

"Retailers in general are taking a bigger view of marketing than they have in the past, when they were very merchandising and merchant-driven," said Steven Feuling, chief marketing officer for Publicis Groupe's Starcom in Chicago and a former svp of marketing for Kmart. "What you're seeing is the evolution of the category."

Retailers are realizing that, in order to survive, they have to establish a strong brand. Drawing customers in with bargain prices is not enough; they have to establish loyal customers. And some say Wal-Mart may have been the catalyst for this. "Wal-Mart proved the power of marketing to people, taking a low-price positioning and building equity with consumers. Others saw that and realized they could stand for something," Feuling said.

"It's a post-Wal-Mart world," said Candace Corlett, principal at consultancy WSL Strategic Retail in New York. She noted that Target, Williams-Sonoma, Gap and others are all focusing on brand-building because "they need to ... articulate their values beyond price. They have to shake it up. ... Who better to create values than Madison Avenue?"

Some say this new emphasis on image-making is coming at the expense of a traditional retail marketing fixture: the in-house agency. RadioShack's decision last month to dissolve its internal unit and hire Havas' Arnold in Boston as its lead agency was based in large measure on the client's need to differentiate itself, said chief marketing officer Don Carroll.

The search for new ideas was also one of the motivations behind Lowe's decision to review its Interpublic Group creative and media incumbents, McCann Erickson and Universal McCann. "The mass retailers have always had an element of branding. But I would argue that there is a trend toward moving work from in-house shops to [outside] agencies, which is an indication that retail CEOs value brands more than they may have in the past," said Hasan Ramusevic, president of Raleigh, N.C.-based consultancy Hasan + Co., which is managing the Lowe's search (and also ran electronic retailer Circuit City's creative review, which was won by Detroit independent Doner in June 2004).

Even the in-house media department is going through a transformation-and in some cases, an elimination-because of a similar metamorphosis caused by unbundling. Retailers spent more than $6 billion on newspaper ads in 2004, per TNS Media Intelligence, and it is still largely an in-house function. But the rest is getting chipped away. Best Buy, the nation's No. 1 electronics retailer, was a pioneer in this regard, taking its $60 million national broadcast business from its internal shop and giving it to Starcom in 2001.

Of course, some sectors of retailing have always been brand conscious, particularly fashion. And even marketers in that sector agree that image is growing in importance. "We were motivated because the media agency players have changed so much since 1999, when we reviewed last. But I would not be surprised to see [more image efforts] from big-box retailers. It makes a lot of sense," said Pattie Glod, vp of marketing and media, brand and creative services for Limited Brands, operator of Victoria's Secret and Bath & Body Works, among others. "They're watching who's winning and losing."

Steve Grubbs, North America CEO for Omnicom's PHD in New York, the media agency for Gap, Banana Republic and Old Navy, thinks this is just the beginning of the trend, especially where media is concerned. "If you've done it in-house for years and years, at some point, why don't you look around and say, 'Are we doing things the right way?'"

—with Aaron Baar and Richard Williamson