Many small businesses are spending less on traditional advertising and favoring new, more efficient approaches. But in some categories, like furniture, business dynamics are forcing them to slash ad expenses in order to survive.
Mom-and-pop furniture storefronts and small chains were among the biggest, most-reliable local print and TV advertisers for decades. But in recent years, competition from large companies has crushed the category. Bureau of Labor Statistics data show employment among furniture retailers has plummeted 24%, representing 140,000 jobs, since 2006.
At the same time, the top 100 grew revenue almost 10% last year, according to Furniture Today magazine. The result: A growing number of going-out-of-business sales for long-established small local furniture stores, such as New England's oldest, C.A. Hoitt, in Manchester, N.H., which is closing after more than 100 years.
Just For Kids Furniture in Lancaster, Pa., is also in the process of closing. Over 30 years, the store survived shorter downturns, "but five years is just too long," said President Bob Poling. He said business is off 50% from its high in 2006, and the store had to cut its TV and print advertising accordingly, aggravating problems.
Mr. Poling blames factors besides the economy and housing market. His store couldn't afford or get financing to offer the four-year payment plans bigger players did, even if the pricing for items on his one-year plans was hundreds of dollars less.
Competition from online retailers that don't have to charge sales tax also hurt. "Showrooming," where customers check out the merchandise at a store but buy online, cut so much into sales of baby seats and strollers that he stopped carrying them even before deciding to call it quits.
Retail, in fact, accounts for most of the $7.8 billion in small- and medium-size-business ad spending lost from 2005 to 2010, according to the Internal Revenue Service—a tale of the big players muscling out the little guy. Its data show that in retail and wholesale trade, the share of revenue for corporations doing $250 million or more in business rose six percentage points to 62% from 2005 to 2010. Ad spending for the under-$250 million crowd plummeted 20% during that period.