During the recession, many retailers pulled back on advertising and grew comfortable doing very little marketing. But the economy is now humming along and it may be time to boost advertising to take advantage of the uptick in consumer spending.
Economists say small and independent retailers should see a strong fourth quarter, provided tariffs don’t offset the gains.
Unemployment hit its lowest rate in 20 years at 3.9 percent in July.
Independent shops that don’t watch the bottom line as closely as the larger chains may want to learn from their analyses. Many say the high end customers are spending more.
Several 12 volt chains said they began boosting their advertising significantly about two years ago and they’ve continued to add to their advertising budgets since. Most are using social media ads and Google AdWords (now Google Ads).
Freeman’s Car Audio, Charlotte, NC said its high income consumers are starting to spend more.
“The stock market remains high and even though we see some folks are afraid of stability, we can definitely see the higher income brackets are starting to really spend money. In our marine business, we saw the average ticket increase probably 20 percent this year and I would expect that to filter into the middle classes. We’ve seen this before. As long as the stock market is doing well you start to see it with upper income customers and it trickles into the middle income,” said General Manager David Wall. He is boosting advertising this year by about 10 percent to to capitalize on the trend.
With six stores in areas with different demographics, he can track trends from store to store. “It starts at the stores located in the highest income areas and it works its way out to the other stores,” said Wall.
Dean Magnussen of Sound Warehouse, Salt Lake City, UT, has also been increasing advertising and says the economy is driving sales. “I think the economy’s just good. I think it’s kind of that simple. We have a mix of advertising and marketing we do and I know that it pays dividends.” The 3-store chain is up by “mid teens” in sales over last year.
The stores are seeing increases even in basic single and double DIN audio-only radios. “I don’t get it,” said Magnussen.
Columbus Car Audio, OH said, “Our ‘A’ customers are spending more money. An A customers would be someone 35 to 55, probably male, who drives multiple vehicles and changes vehicles frequently, and has recreational vehicles. Those guys are spending more money,” according to Todd Hays.
Columbus has been steadily increasing advertising in recent years. Two years ago, it had its best year ever and this year it is on track to beat that 40 year record. The company sells $5 million a year out of two stores.
The Specialists, a chain in Arizona also said it is seeing a increase in “higher margin tickets.” It boosted advertising about 3 years ago and has maintained that new level. Others such as Proline Car Audio, NY have been steadily increasing their ad spend each year.
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It’s only humming for Trump and China. Consumers end up paying the price.