In September 2007, Kishore Biyani, managing director of India’s largest listed retailer Pantaloon Retail (India) Ltd, had pledged Rs140 crore over the next three years on cricket-related marketing. Barely a year later, the amount has been slashed by a third. “We are cutting down on this (cricket) front as part of our cost-cutting plans. We will now be spending between Rs30-40 crore on cricket,” says Biyani.
Controlling costs: Kishore Biyani.
In addition, the company, the largest advertiser in the retail sector in 2007, is cutting its total advertising budget as a percentage of its revenue by 1% this year. Pantaloon reported a revenue of Rs5,052 crore for the year ended 30 June. Biyani says advertising constituted 3% of revenues last year; he is planning to bring it down to 2%.
Subhiksha Trading Services Ltd, India’s biggest discount retailer, and Shoppers Stop Ltd, the country’s second largest retailer, are also being cautious about their advertising expenses. Shoppers Stop’s advertising budget has been reduced by 15% for the year ending March 2009 and is likely to come down by 20% next year, says its chief financial officer, Chandrashekhar Navalkar. “We are controlling our ATL (above the line) costs wherever possible and since we have already built up a loyal consumer base, we are focusing on reaching out to them through direct marketing activities.”
According to an executive from a leading media buying agency that works directly with Subhiksha, who did not want to be named, the company’s marketing budget is down by 30-35% this year; next year, it’s likely to go down another 15%.
According to estimates by this agency, the retail sector accounted for 5.5% of the Rs18,000 crore revenue of the advertising industry in 2007—this will go up by 0.5% in 2008, primarily due to high spending by retailers in the first half of the year.
In 2009, while the advertising industry’s revenue is predicted to touch Rs23,000 crore, retail advertising is likely to account for only 4% of the revenues.