Macy’s halved newspaper ad spend since ’05
The drastic plunge has hit particularly hard the metro papers that used to rely on sumptuous and highly profitable schedules from the likes of Famous-Barr, Filene’s, Foley’s, Hecht’s, Kaufmann’s, May, and Marshall Field & Co.
Macy’s acquired these iconic local stores – and others – when it acquired May Department Stores Co. for $11 billion in 2005 in a highly leveraged buyout.
In 2005, Macy’s (nee Federated Department Stores) and May together spent a collective $1.2 billion annually on newspaper advertising. By 2008, the spend declined by 51.4%. Macy’s last year bought only $583.3 million in newspaper ads, according to data from TNS Media Intelligence published by Advertising Age.
Macy’s was the second-largest advertiser in newspapers in 2008, trailing only Verizon, which put $681.9 million into the medium. Macy’s far surpassed the No. 3 newspaper advertiser, General Motors, which last year ran $320.9 million in ads.
When Macy’s bought May, one of the major initiatives in the merger plan was a new national branding strategy that would subsume the names of the various local stores under the Macy’s name. The idea proved to be controversial, inspiring revolts among consumers in many cities who unsuccessfully demanded the reinstatement of the names of their favorite local stores.
But the national branding strategy also brought about a major shift in ad spending that hit newspapers particularly hard. (The prospect was predicted here in 2006.)
While Macy’s has been chopping its total marketing budget ever since the merger, the company has increased its reliance on magazine and television advertising to the detriment of radio and newspapers.
As illustrated in the table below, Macy’s put 71% of its advertising dollars into newspapers in 2005 but only 59% of its budget into the category in 2008. In the same three years, by contrast, television advertising rose to 27% from 17%.
The diminishing commitment to newspapers has played havoc with metros across the country, where pages of lucrative run-of-press department store advertising long had been one of the mainstays of their revenue plans.
Given the sharp shift in Macy’s advertising away from newspapers in three short years, this looks to be another one of the long-term secular changes – like the shrinking demand for classified advertising – that won’t be reversed when the economy perks up.