Has Brexit cancelled Christmas?

The pressure is on for brands to compete for advertising success. But what is it about the festive period that encourages brands to spend increasingly eye-watering sums year on year? And has Brexit impacted brands' willingness to splash their cash on adverts this Christmas?

The first sign of Christmas in the past few years has come in the form of the highly anticipated John Lewis TV advert, which this year is estimated to have cost up to £7m. Indeed many major brands such as Burberry, M&S, Waitrose and Sainsbury’s have been influenced by these heart-warming advertising campaigns and have followed suit, spending increasing amounts to perfect their own Christmas adverts. This year alone, UK companies are estimated to have spent £5.6bn on marketing campaigns in the lead up to Christmas.

Why do brands spend so much?

The evidence suggests that Christmas adverts are well worth their price. In the short term, they transform passive viewers into shoppers thereby maximising seasonal sales. In the long term, they strengthen a brand’s reputation by communicating the character and values of the brand and securing it in the mind’s eye of the public.

Sales sales sales

Online sales have increased by 8.9% from March 2015 to March 2016 and overall consumer spending has increased this year. With such a rich retail environment, it's no wonder that brands are intent on targeting shoppers at Christmas, when their appetite for consumerism grows as quickly as their bellies. Sales figures for John Lewis show that 20% of their annual sales and 40% of their profits are made during the Christmas period alone, highlighting the effectiveness and potential reward of consumer advertising which is on-point at this time of year.

Retailers are also increasingly inclined to pour more money into social media as Christmas approaches because they understand the strength of an effective social media campaign in increasing awareness about their products. Indeed, a 2014 survey suggested that 26% of consumers report social media as being one of the main ways in which they become aware of products and brands, and 52% said they use social media to connect with brands.

Reputation

But the campaigns are not merely tools to encourage festive sales. They have an increasingly significant role in building the brands themselves. A key feature of the big brands' festive adverts is storytelling. They are not directly selling a product to consumers, but are instead selling the character of the brand. This has a longer term goal than just peaking sales throughout the Christmas period. These adverts are effectively setting the brand up for the coming year.

The uncertainty of Brexit

How has Brexit affected retailers’ advertising spend this Christmas?

The prospect of leaving the EU has caused uncertainty for many retailers. ITV has announced an expected drop of 7% in its advertising revenue in the final three months of 2016. This suggests that many companies that usually spend liberally to ensure their products are advertised in prime slots over Christmas are holding back this year.

However, this trend may not necessarily be indicative of a general downturn in advertising spending. It could be merely a reflection of the general shift away from the traditional advertising areas of TV and print media towards digital media, such as smartphone advertising and YouTube.

In fact, overall ad spend this Christmas has seen a significant increase of £300m in comparison to last year and is the most spent in any festive season. It's possible that in the current turbulent climate there's a stronger case than ever for investment in Christmas advertising due to its ability to secure sales far into the New Year. Thankfully then, it seems that “Brexit hasn’t cancelled Christmas”. Amidst much political uncertainty, perhaps the one thing we can bank on is festive advertising continuing to be big business for retailers.