Monday, October 20, 2008

Credit rescue too late for many advertisers

The global effort to revive the credit market isn’t working fast enough for newspapers, which are losing many traditional advertising accounts as retailers and auto dealers go out of business.

Given the growing dominance of big-box merchants like Wal-Mart and Costco – which tend not to advertise in newspapers – it is highly doubtful that new merchants will emerge to replace the departing retailers when the economy improves.

Among the chains that have commenced the liquidation of their businesses in recent days are Whitehall Jewelers, which runs 373 stores in 39 states; Linens ’N’ Things, which owns 371 stores in 48 states; Mervyn’s, which operates 149 department stores on the West Coast, and Shoe Pavilion, which has 64 locations on the Wets Coast.

Boscov’s is closing 10 of its 49 stores in the Northeast in the hope of emerging from bankruptcy, while Circuit City, the No. 2 electronics retailer, is thinking about closing 15o of its 1,400 outlets in hopes of staying out of bankruptcy.

Auto dealers are shutting their doors from Connecticut to South Carolina to Omaha to Texas to California – and almost every point in between.

In every case, it’s the same story: Tight credit and weak customer demand.

While these grim circumstances eventually will pass, it is difficult to see how new retail and specialty stories will emerge to compete with the big-box merchants who have the sales volume, buying power, superior logistics and balance sheets to power through the recession – and perhaps grow even stronger.

As for auto dealers, the Big Three domestic factories each were planning to reduce the number of dealerships even before the economy hit the mother of all speed bumps. If General Motors can scrounge enough money to merge with Chrysler, then dealer consolidation will be even swifter and more severe.

Not even Tesla Motors – the upstart Silicon Valley car company that today announced layoffs of its own – will ever fill the advertising void.

Since there already is a celebrity-packed waiting list for its sole product – a $109,000, two-seat electric Roadster – it is not likley the company ever will be inclined to buy an ad offering free hot dogs, popcorn and pony rides for the kids.


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