Retailers of all stripes are looking for more effective ways to stretch their advertising budgets, and for many that includes looking instead to cheaper online programs, as well as more measurable direct mail strategies.
In reporting its second-quarter earnings, Kohl's said that due to higher overall media costs, it will invest in what it views as more productive media. "Chief among those are direct mail and online marketing," said Kevin Mansell, president of Kohl's. "Print insertion will decline as a percent of our expenditures."
Similarly, JCPenney noted during its second-quarter conference call with analysts that it is being "very aggressive" in using online, in-cinema and mobile messaging. Also last week, the retailer sent a "Pre Print Receiver Survey" to its customers about newspaper readership. The survey queries customers about whether they subscribe to a newspaper, as well as which newspapers they read and how often. If customers don't subscribe to a newspaper, they are asked how they find out about sales events.
"Data from this survey, as well as from other sources, will allow us to determine the best way to reach our customers," said a JCPenney spokeswoman. "As [Chief Marketing Officer] Mike Boylson has mentioned several times, we continue to move towards more and more online advertising and promotion of jcp.com as the hub of JCPenney."
The bankruptcy of some regional department store chains is likely only exacerbating the retail pullback on newspaper circulars. Goody's and Mervyn's have both entered bankruptcy protection this summer. California-based Mervyn's counts 177 stores in seven Western and Southwestern states, while Goody's counts 355 stores in 20 states, primarily throughout the Southeast and Midwest. Traditionally, circulars have been a key component of the marketing mix for each.
Wal-Mart still sold on circulars
Wal-Mart, on the other hand, said last week that its spending on circular advertising during the second quarter was up "significantly" over the last year. The strategy and message, which focuses on value, have apparently been successful, as the company continues to be one of the few bright spots in retail.
The second-quarter picture painted by media-company reports isn't a pretty one, however. Tribune Co. saw a 9% decrease in preprint revenue during the second quarter, while McClatchy Co. said its preprint distribution fell 9%. McClatchy does not break out preprint revenue, making it unclear whether the company has lost circulation or is selling fewer inserts.
Neither Gannett Co. nor New York Times Co. breaks out free-standing insert data.
According to Ad Age's most recent 100 Leading National Advertisers report, which only measured media spending up to 2007, JCPenney spent $149 million in newspapers in 2007, and increased its spending on free-standing inserts by 15.7%, for a total of $1.79 million. Kohl's spent $136 million in newspapers in 2007, a 3.6% increase from the year before. It had just begun to use FSIs in 2007, with a smaller investment that registered at just $1,000. For that same year, Wal-Mart increased its spending on FSIs by 257%, from $664,000 to $2.37 million. The big-box retailer also increased newspaper advertising that year by 13.1%, to $27.1 million.