The Daily: How the election outcome will influence retail and advertising

On today's podcast episode, we discuss what will happen if either Donald Trump or Kamala Harris win the US election and how that will affect inflation, high growth digital advertising channels, and regulatory priorities. Tune in to the discussion with Senior Director of Podcasts and host Marcus Johnson, Senior Director of Briefings Jeremy Goldman, and Senior Analyst Zak Stambor.

Subscribe to the “Behind the Numbers” podcast on Apple Podcasts, Spotify, Pandora, Stitcher, YouTube, Podbean or wherever you listen to podcasts. Follow us on Instagram

Episode Transcript:

Jeremy Goldman (00:02):

Is he really going to exert the political pressure that he needs to, to have people reverse themselves in some way? It almost seems like that's a better hope for TikTok to stick around, but it's not something that we can certainly count on.

Marcus Johnson (00:23):

Hey gang, it's Monday, November 4th. Jeremy, Zak, and listeners, welcome to Behind the Numbers Daily, an eMarketer podcast. I'm Marcus. Today, I'm joined by two people. Let's meet them. We start with our Senior Director of all things briefings. He is based in New York City. We call him Jeremy Goldman.

Jeremy Goldman (00:40):

Hey there. What a boring week ahead, right?

Marcus Johnson (00:42):

It is? Kidding.

Jeremy Goldman (00:47):

I'm being sarcastic.

Marcus Johnson (00:48):

It's going to be busy. We're also joined by our Senior Analyst who covers everything retail and e-Commerce. He is based in Chicago, just north of the city. We call him Zak Stambor.

Zak Stambor (00:59):

Hey Marcus. Hey Jeremy.

Marcus Johnson (01:01):

Hey fella. So fact of the day. So we've got a couple of basketball fans on this episode, so I thought I'd go basketball. Who was the first player to dunk a basketball? Just to dunk one, not necessarily in a certain league. You guys know? I had no idea. Do you know how early it was? Maybe a year, perhaps you could give me?

Jeremy Goldman (01:21):

1954.

Marcus Johnson (01:23):

Earlier.

Zak Stambor (01:23):

I was going to say something right around. Yeah, I'll say 1958.

Marcus Johnson (01:27):

According to Jacob Uitti of The Guardian, it's believed that the first ever dunk in organized basketball occurred in 1936 when six-foot-eight Texan Joe Fortenberry performed one in the Berlin Olympics for the US basketball team on the way to winning the sport's first ever gold medal. Close to a decade later in 1944, the first dunk was reported in college basketball when seven-foot center Bob Kurland of Oklahoma A&M threw one down. And then I couldn't find one for when the ABA or the NBA or any of the men's professional leagues the first dunk in one of those. But on July 30th, 2002, Lisa Leslie made history as the first player to dunk during a WNBA game. It was five years after the league was created.

Zak Stambor (02:17):

Did you know basketball was in the Olympics in 1936? I would've thought it was later than that.

Marcus Johnson (02:24):

Yeah.

Zak Stambor (02:25):

Wow.

Marcus Johnson (02:26):

It was surprising. Best dunk ever? There's only one right answer here, gents, okay. And if you'd get it wrong, you're off the episode. I'm kidding. I need you.

Jeremy Goldman (02:34):

Is it Spud Webb?

Marcus Johnson (02:35):

Oh my goodness. No. Although that's pretty impressive. What is he? Four foot two?

Jeremy Goldman (02:40):

No, he was five seven and he was amazing.

Marcus Johnson (02:43):

Yeah, he was. Guesses, Zak?

Zak Stambor (02:46):

I mean, I think you have to go Michael Jordan free throw line.

Marcus Johnson (02:50):

I knew you'd go Michael Jordan. The Chicago people.

Zak Stambor (02:53):

Of course.

Marcus Johnson (02:54):

Best dunk ever. Vince Carter. Sydney Olympics when he jumped over seven foot two Frédéric Weis. Do you remember this dunk?

Jeremy Goldman (03:02):

Okay, that's probably right. But it's also not something that you can quantitatively prove.

Zak Stambor (03:07):

I don't even think it's his best dunk though.

Marcus Johnson (03:07):

No, it's the best. Oh my goodness. He jumped over, his head goes between the guy, ah, with you guys.

Zak Stambor (03:16):

You just wanted to bring up Frédéric Weis because the Knicks drafted him and he was awful.

Marcus Johnson (03:20):

That's also true, yes. Anyway, today's real topic, how the outcome of the US presidential election will affect some critical economic factors for retail and advertising.

(03:38):

All right gents. So you've been working on a project that looks at what happens if Mr. Donald Trump is president again, and what happens if Ms. Kamala Harris becomes president? And what different aspects of our lives, of advertisers lives, will look like in those differing universes.

(04:00):

And you've gone through a bunch of different topics, but there's a few we want to focus on today. Inflation is where we'll begin. It's something that we have talked about quite recently actually. I think actually the three of us we're talking about it as it pertains to consumer sentiment and how prices going up makes people feel. So we have covered it quite recently, but what does inflation look like in the world of a Trump presidency or a Harris presidency?

(04:24):

Well, just to set the table, from mid-2022 to mid-2023, so for that year, inflation fell from the 9% high we all remember to 3%. From mid-2023 to mid-2024, it hovered in the kind of three to 4% range. But as we've hit four, it's dipped below 3% for the first time in three and a half years. So with inflation now at 2.4% as of September, I don't have the October numbers yet, Zak, let's start with Ms. Harris. What happens to inflation if Kamala Harris becomes president?

Zak Stambor (04:56):

Yeah. So we just got the Q3 GDP numbers, which include within that the PCE numbers, which is the Fed's preferred inflation indicator, and it was down at 1.5% in Q3. Or if you pull out the volatile areas for the core number, it's 2.2%.

Marcus Johnson (05:14):

Okay.

Zak Stambor (05:15):

So we're right around the Fed's target and there's very little reason to believe that that downward trajectory would change with the Harris administration. There's nothing too dramatic that she's proposing that is likely to pass that would change that trajectory.

Jeremy Goldman (05:38):

This is something that The Wall Street Journal pointed out, which is not really a liberal leaning publication generally, is that leading economists increasingly in October feel that Trump's policies are more inflationary than they believed them to be in July, the more he talks about and articulates his plan. So I don't know, I just think that's interesting. I think it's always good to try to trust experts. There are some people who think that there's no material difference, but generally a significant number, it moved from 56%, I believe, thought that Trump would be more inflationary to moving to 68% in October.

Marcus Johnson (06:16):

Yeah.

Jeremy Goldman (06:16):

So it's clearly moving in that direction from leading economists that follow this stuff very closely.

Marcus Johnson (06:21):

And Harris is at 12% right? And so 68% say Trump, 12% say Harris, and then the rest said it won't really have any impact on inflation.

Zak Stambor (06:30):

Yeah, just kind of a shrug emoji. But the Trump campaign has very few policies, but the policies they do have out there, the ones that Donald Trump talks about all the time, are very inflationary. And so there's good reason that economists think that his policies will spark inflation. And that starts with tariffs. Tariffs raise prices. It's one plus one equals two. Just tariffs raise prices. And we saw this last time around when Donald Trump was president and he slapped some targeted tariffs on washing machines, and then consumers paid more for washing machines. And they also paid more for dryers because manufacturers use the opportunity to hike prices on dryers in addition to washing machines. And these tariffs are likely to be widespread and not targeted. And so prices will rise.

(07:28):

And then the other policy that he's talked about quite a bit is mass deportation, which will have a negative labor supply shock, which will also drive inflation. And perhaps could also lead to stagflation because it would likely lead to slower economic growth.

(07:46):

And then the one final piece that also is inflationary is Trump talks quite a bit about putting his thumb on the scale of an independent Fed. And there's a whole slew of political science research out there that shows when a central bank is independent, it is able to keep prices in check far more than one in which it's not independent and somebody's steering the ship who perhaps shouldn't be.

Marcus Johnson (08:17):

All right gents. So that's kind of where things are in terms of inflation, what that indicator will look like under both the candidates. Let's move to another one that you talk about, Jeremy, more on your side of things and you writing about what happens to high growth digital advertising channels like CTV and retail media? For context, how high growth are they at this point? Where are they going to go up or down from, to give people a look, to level set folks? CTV is a $29 billion business growing at a 19% clip this year and retail media is nearly twice as big, 55 billion, growing even faster than CTV, growing at 26% this year. So Jeremy, what do these channels, these high growth digital advertising channels like CTV and retail media and others look like if Kamala Harris becomes president?

Jeremy Goldman (09:12):

So Zak and I worked on these, we've been calling them reporticles, they're a little bit longer than a typical article, but we made them available to everybody just because we think that they'll be helpful if folks have not gone out and voted yet. So we think that from a retail media standpoint, retail media has a strong return on ad spend or ROAS. That's why it has grown over the course of the last few years. But it obviously does eat into the margins of people who are buying retail media, and if your margins get to be a little bit tighter because of inflation, which could very well happen, then do we see, it's an interesting paradigm where people, advertisers are going to be spending still quite a bit on their advertising channels, but they're going to be moving more towards performance marketing channels that have a high ROAS. That includes retail media.

(10:08):

But retail media is expensive, which then means that if you haven't had success in the channel, we could likely see less people jumping into that channel. And that means imagine a few more incremental retail media dollars come from existing buyers but it's harder to get new people to encourage them to get into retail media if it is really tough on your margins that are already being squeezed. So it's a little bit of like there's going to be multiple pressures in both directions on retail media.

(10:39):

CTV I think is a little bit different. In part it has grown quite dramatically as you pointed out over the last few years, but there's a number of indicators that Harris might push for more privacy legislation that could extend to CTV and targeting. We think whoever wins this election, it might very well be tied to CTV and really strong targeting in a few key states. So it will certainly have a moment in the spotlight, but it's going to be harder to buy those types of targeted ads if you have some, and again, this is all theoretical, but some clamping down on data brokers who trade off of that data that allows for targeting and we think you could see a bit more of that under Harris than Trump.

Marcus Johnson (11:25):

I mean it kind of sounds like things are going to slow down either way. It doesn't seem like with one candidate necessarily winning that things are going to take off and continue the kind of growth that we've seen. Is that fair to say that there is probably going to be more tepid growth for different reasons based on whichever candidate gets in?

Jeremy Goldman (11:47):

I mean, Zak, I'm curious what you think about this, but I think that what we tried to do with this analysis is focus on what is likely to happen knowing that there's so many variables we don't yet know, like Harris can call for certain legislation, doesn't mean she can necessarily get it, especially if she has a Republican senate.

Marcus Johnson (12:04):

Right.

Jeremy Goldman (12:04):

There are some things that Trump can do. But again, a president is just one input in terms of all these other factors. And I know we'll talk a bit about antitrust, which they have some impact on antitrust and regulation, but they certainly can't control the whole entire discussion. There's a lot of checks and balances in our system, which kind of works out in our favor.

Zak Stambor (12:27):

Yeah, I think that's exactly right. I mean, what led to dramatic inflation last time around had really nothing to do with either, well, it had a little bit to do with the pandemic response, but it had far more to do with the supply chain disruptions that were the result of the pandemic response around the world. And so the president, or even the broader US government, really doesn't have that much to do with that. So while we can look at what the president may influence, there's a lot of other factors at play that could lead to any number of things occurring.

Marcus Johnson (13:07):

Yeah, it seems like we're expecting growth to slow whoever becomes president. Even if I become president. That's not true. Life would be pretty terrible, although everyone would get free peanut butter under a Marcus Johnson presidency. So just think about that for 2028.

Zak Stambor (13:23):

Well would it be chunky or smooth?

Marcus Johnson (13:25):

It could be anything you want, Zak.

Zak Stambor (13:27):

Okay, fair enough.

Marcus Johnson (13:27):

That's why people would vote for me enough. I know the way to the American's heart. Go on.

Zak Stambor (13:31):

So I mean, I think if Harris wins, I don't think growth will slow that dramatically. I think we'll kind of see the same sort of trajectory that we've been seeing, in terms of consumer spending at least. And consumer spending is pretty strong.

Marcus Johnson (13:46):

Yeah.

Zak Stambor (13:46):

Again, to go back to the GDP numbers, consumer spending was like 3.7%, which when you look at inflation, it's well ahead of inflation. And so consumers just keep chugging along and the consumer seems incredibly resilient. If she's able to increase the minimum wage, which is one of the things she would like to do, that would give some people a little bit more spending power, which again could keep the economy just keep chugging a lot.

Marcus Johnson (14:13):

Yeah. Yeah.

Jeremy Goldman (14:15):

There's also, of course, we're speaking during earnings season. The results, I know mainstream and Wall Street are not the same thing, but we've seen very good results from those companies. So that's another kind of argument that things will be in positive territory in a lot of ways for at least some time to come. But those companies, whoever is president next, are going to have more difficult quarters to anniversary and increase their gains over just because now they have a little bit more favorable territory they're being compared to year over year. Next year I don't know if you're going to be able to say the same thing in Q3.

Marcus Johnson (14:52):

Yeah. Yeah.

Zak Stambor (14:55):

If Trump wins and inflation rises, we will likely see a similar sort of scenario to what we saw in 2022, where retail sales jumped but real sales declined. Consumers pulled back on discretionary spending and it was just kind of a tough situation for retailers. And so we'll likely see something along that sort of scenario if Trump wins. Whereas if Harris wins, it'll probably be somewhat of a status quo.

Marcus Johnson (15:23):

Yeah. Yeah, in terms of consumer spending, I agree with you. In terms of ad spending, some of this is just the law of large numbers. Like CTV for example, is getting to the point, it's getting to the size now, I mean it's 7% of all ad spending in the country this year and obviously growing next year. And so that's going to go from 19% growth this year to 13% growth next year. Still very good. It's double digit on tens of billions of dollars, but then retail media, that's slowing a bit, but not as much as you'd expect given that it's a $55 billion space, 26% growth this year, it's 24% growth next year. And that's like I said before we even know who's going to be in office.

(16:01):

Let's end, gents, by talking about regulation. And Jeremy, I think in the piece that you wrote, you were saying that the future of tech regulation, TikTok's potential ban, the direction of antitrust actions like what's going on with Google and others, hinge on who takes office, you write. So I'll start with you. What are some of the things you want to point out regulation wise or in terms of regulatory priorities if both Ms. Harris and Mr. Trump win?

Jeremy Goldman (16:27):

Yeah, it was a really interesting thing in particular to look at the fate of TikTok, but we looked at a number of different variables here and ultimately we kind of came to the conclusion that Trump more recently has said that he plans to save the app if re-elected. He does have pressure from a major [inaudible 00:16:47] investor who has given him quite a bit of support in terms of saving it. But then he still faces some pressure from groups like Project 2025 that are calling for TikTok's ban on account of national security. But then there's just ultimately a question of a lot of Republicans voted for the bill that Biden signed a while back, so is he really going to exert the political pressure that he needs to have people reverse themselves in some way? It almost seems like that's a better hope for TikTok to stick around, but it's not something that we can certainly count on. For Harris-

Marcus Johnson (17:25):

And just really quickly, it's also particularly hard because he supported the ban in 2020 and now he's opposing it and so it's not like he has this track record of being against the thing or for the thing. And so it's even more hard to have a gauge on what he's going to do if he gets elected when it comes to TikTok.

Jeremy Goldman (17:41):

Right. It's not like this would be the first time a politician has reversed themselves, obviously.

Marcus Johnson (17:45):

It wouldn't?

Jeremy Goldman (17:46):

Either of these candidates. But yeah, it's an interesting water to shift and I think that just because Harris had quite a brat summer and her campaign has done quite well on TikTok, is she going to really use any type of political goodwill just because her voters are going to increasingly be Gen Z and female, and TikTok over indexes on both of those? But she doesn't have to essentially do anything or intervene. She can just be like, "It's out of my hands," and not really take any action. And I don't think will get dinged in terms of goodwill necessarily. So once you're in the office, you obviously don't have to worry about a number of things that you had to worry about beforehand.

Marcus Johnson (18:29):

Yeah. Yeah.

Zak Stambor (18:29):

The other piece of TikTok though is TikTok Shop where a whole lot of stuff is coming from China.

Marcus Johnson (18:35):

Yeah.

Zak Stambor (18:35):

Which to go back to tariffs will have 60% tariffs on it. So TikTok Shop, Temu, Shein, all these platforms, may have a hard time just existing in a Trump administration or they'll have to shift gears quite a bit.

Marcus Johnson (18:52):

Yeah.

Zak Stambor (18:53):

They've sought to do that to some extent, but they would have to embark on some pretty massive changes in order to make their business models work because it's all about cheap stuff.

Marcus Johnson (19:03):

Yeah. Yeah.

Jeremy Goldman (19:04):

Temu and Shein though, Zak, I see it a lot more. I think with TikTok Shop, they've spent so much money to try to make it a thing and if they don't have to try to make it a thing nearly as much, if a new strategy is foisted on them, maybe that actually winds up being in their favor. If they wind up staying in the market, but without Shop, I'm not entirely convinced that that wouldn't be good for them just because they propped it up as you know with so much money to try to make this market.

Zak Stambor (19:32):

Yeah, no, I totally agree. I think if they can shift the product mix a bit or a lot, it would undoubtedly make it a more powerful platform.

Marcus Johnson (19:41):

So Zak, how about for you? What are you paying close attention to when it comes to regulation and what happens if either of these candidates gets elected?

Zak Stambor (19:50):

Yeah, so if Harris wins, it's a little bit nebulous in terms of what exactly she's going to do if she sticks with the status quo. We've seen a very activist regulatory state and so we likely will see more scrutiny in terms of mergers, which there's a whole lot of them. One of the things that she has talked a bit about is a proposed ban on price gouging. It's not the strongest policy that she has put forth. It's only in the case of disasters, although some have suggested a president could basically call anything a disaster and move on that. But in that case, there's probably going to be continued high scrutiny of the mergers, like the Kroger-Albertson's deal, which I think is pretty unlikely to actually happen if she takes office, and the Mars-Kellanova deal as well, because those deals likely would lead to higher grocery prices.

Marcus Johnson (20:56):

Well, that's all we've got time for for today's episode. If you want to go and read all of the different factors that the gents wrote about as it pertains to how the outcome of the US presidential election will affect three critical economic factors for retail and then three separate ones for advertising, then the link to both of those pieces, the retail piece and the advertising piece from Jeremy and Zak are in the show notes, of course. That's what we've got time for for today's episode. Thank you so much to my guests for hanging out with me today. Thank you to Jeremy.

Jeremy Goldman (21:20):

Thank you so much. Go vote everybody.

Marcus Johnson (21:22):

Yes, indeed. Thank you to Zak.

Zak Stambor (21:24):

Yeah, thanks for having me.

Marcus Johnson (21:25):

And thank you to Victoria who edits the show. Stuart runs the team. And Sophia does our social media. Thanks to everyone for listening in. We hope to see you tomorrow for the Behind the Numbers Daily, an eMarketer podcast.