2018 year in review: It’s been a bad year for…
The high street saw more failures and microtargeting came in for close scrutiny, while pressure grew on agencies, influencers and makers of sugary foods.
The High Street struggles for survival
Troubled consumer confidence, crippling business rates and digital disruption have all been blamed for the battering endured by the British high street in 2018. From casual dining to department store chains, high street stalwarts have fallen into the red at an alarming rate.
This was the year toy superstore Toys R Us and electronics retailer Maplin disappeared from the UK high street. House of Fraser also collapsed into administration in August owing nearly £1bn to creditors, but was rescued by Mike Ashley’s Sports Direct and is now shutting at least three and possibly more of its stores.
Closures are also imminent at Debenhams, which is set to axe 50 of its 166 stores after posting a £491.5m loss in the year to 1 September. Meanwhile, profits plummeted 99% at the John Lewis Partnership in the six months to 28 July, which chairman Sir Charlie Mayfield blamed on Brexit uncertainty and squeezed profit margins in the “most promotional market” for decades.
Declining footfall, high rents and rapid over-expansion also took their toll on the casual dining sector. After posting a £47m loss, in October Gourmet Burger Kitchen announced plans to close 17 of its UK stores, putting 250 jobs at risk.
Burger rival Byron had already announced in January a rescue plan to close 20 restaurants, while just two months later Italian chain Prezzo stated its intention to close 94 outlets, including all 33 Chimichanga locations nationwide.
Then there was Jamie’s Italian, which in January announced plans to shutter 12 of its 37 restaurants after revealing debts of £71.5m, just a month before Oliver’s steak chain Barbecoa fell into administration blaming Brexit uncertainties and a “tough” market.
The solution to the high street crisis for retail brands could lie with ‘frenemies’ joining forces to share space, in the style of Next teaming up with Paperchase, Costa Coffee, Hema and Lipsy on its latest London opening. Another route for retailers involves finding new uses for redundant space, such as introducing gyms and co-working spaces that extend dwell times. CR
Influencer marketing is forced to grow up
Influencer marketing has been firmly under the spotlight in 2018, with influencer fraud, fake followers and transparency all scrutinised like never before.
While most marketers plan to increase spend on influencer marketing, there are mounting concerns about the practice and many in the industry have argued it needs tighter regulation and a thorough clean-up.
At Cannes Lions, Unilever’s chief marketing and communications officer Keith Weed underlined the importance of trust and said that while he sees value in the content influencers can create, “the market gets undermined if people don’t trust the amount of followers someone has”.
He stated that Unilever will refuse to work with influencers who buy followers and will be prioritising partners who increase transparency and can help eradicate bad practices.
Then in August, the Competition and Markets Authority (CMA) launched an investigation to measure how transparent influencers are actually being about sponsored posts. It said there were clear examples of influencers not stating they have been paid to promote a product or service – and a number of influencers have already fallen foul of the Advertising Standards Authority (ASA) for just this.
Both the ASA and ISBA welcomed the CMA’s investigation and highlighted this is an increasingly important issue.
September then saw the ASA and Committees of Advertising Practice (CAP) launch a new set of principles on advertising disclosure called The Influencer’s Guide – which some argue still don’t go far enough – while ISBA unveiled an updated version of influencer marketing contracts as it looks to bring better “commercial discipline” to the relationship between brands and influencers.
There is clearly a lot of work to be done to help regulate the industry and weed out the fraudulent activity giving it a bad name. Given budgets for influencer marketing are only set to rise, hopefully 2019 will mark a turning point for the industry that will ensure it can shake off its shady past and evolve into a more trusted marketing method. LT
Marketers face questions over the role of microtargeting
The scandal surrounding Facebook and Cambridge Analytica thrust the issue of marketing, data and targeting into the spotlight like never before. Suddenly, this was a global talking point, seen on the front pages of all the world’s media.
The affair centred on the political consultancy’s purchase of data in 2014 from a personality test app, which acquired millions of Facebook profile details on both its users and their friends – ostensibly for academic research. Yet Cambridge Analytica subsequently used this data to create models for targeted advertising, against Facebook’s policies. The company went on to be instrumental in Donald Trump’s digital campaign during the 2016 presidential election.
Beyond the legality or otherwise of Cambridge Analytica’s behaviour and Facebook’s failure to properly police how apps were using data, the scandal has raised questions over the use of microtargeting and its role in advertising.
It has been almost impossible to attend a conference over the last year or so and not hear marketers, particularly in FMCG, talk up the benefits of one-to-one mass marketing. Marc Pritchard, the chief brand officer at the world’s biggest advertiser Procter & Gamble, spoke to the opportunities when he spoke at both the ANA and ISBA conferences earlier this year.
But such granular targeting poses challenges. Where do you draw the line between effective targeting and just being plain creepy? How effective is it to go for targeted over mass reach? And how do marketers distance themselves from scandals like Facebook and Cambridge Analytica when they have been using similar tactics? SV
Junk food brands face the music
Food and drink brands have faced regulatory scrutiny this year amid growing concerns over obesity, particularly among young children.
Perhaps the biggest move was the introduction of the sugar tax in April, which saw drinks with a high sugar content forced to put up prices. At the same time, the Committees of Advertising Practice (CAP) launched a review of how and when junk food should be advertised. And just a week later celebrity chef Jamie Oliver launched his #AdEnough campaign, demanding a 9pm watershed on junk food advertising on TV and further controls on what ads kids see online, on the street and on public transport.
All this has had an effect. London mayor Sadiq Khan has now banned ads for fatty and sugary foods on TfL’s transport network. The government has pledged to end buy-one-get-one-free promotions on sugary snacks and warned there will be a review of online ad regulations to see whether self-regulation is appropriate. That, according to the Food and Drink Federation, has created “deep-seated anxiety” through the industry.
The UK has some of the toughest rules in the world and the Advertising Standards Authority is stamping down on those brands that violate them. Cadbury, KFC, Kinder and Kellogg’s have all had ads banned.
Both the government and the industry is responding to shifting consumer opinion around junk food and how to tackle obesity. There is still lots to play for with the government consulting with action groups and advertisers on the proposed watershed and CAP’s review still ongoing. But food and drink brands must respond quickly to the way the wind is blowing, and those that win out will be those that listen to their consumers and adapt. MF
The agency holding model takes a battering
A quick glance at the most recent results of the agency holding groups tells you all you need to know about the state of their businesses. At WPP, reported revenue for the nine months to the end of September was down 1.6% year on year to £11.3bn and it has implemented a recruitment freeze.
Meanwhile, over at Publicis, revenues for the first nine months of the year are down from €6.9bn in 2017 to €6.5bn this year. And at Havas revenues have fallen 0.3% to €1.6bn.
WPP’s new boss Mark Read calls it a “structural change not a structural decline”, saying that “decisive action” and “radical thinking” are needed to turn fortunes around.
He is not wrong on the latter two points. Shares in the agency holding groups have taken a battering this year as investors take fright at a perfect storm of challenges coming in to upend their business models. FMCG companies, on which agencies, and WPP in particular, are reliant, have cut back on marketing investment as they face lacklustre growth, pressure from activist investors and new competitors.
Professional services firms are now competitors too and taking a cut particularly on the strategy and digital transformation end of spend. The digital duopoly of Facebook and Google are able to reach brands directly without the need for an agency middleman. And on top of all that, big brands are questioning those relationships in the light of issues such as media transparency and ad fraud.
Sir Martin Sorrell’s decision to quit WPP earlier this year may have been a shock at the time, but pressure was growing on both him and the model he built. Agency holding groups must find a way to simplify their offerings, listen to brands’ needs and prove their worth if Read is to be vindicated in his assurances that this is a change not a decline. SV