Retailers Can’t Shake the Circular Habit (WSJ)

The world may be going digital, but the brightly colored advertising inserts that spill out of newspapers every Sunday somehow missed the memo about the decline of print.

Newspaper circulars are hanging on even though they draw fewer and fewer eyeballs as readership shrinks. And they are expensive to produce, costing up to $1 million for a single run.

Chain stores would love to be free of the expense and have tried dozens of experiments over the years to find an alternative, with little or no luck.

Aware that it can’t go cold turkey on circulars, the department store Kohl’s Inc. this spring plans to scale back. Kohl’s is hoping to save money by using shopper ZIP Code data to better target its circulars.

First, Kohl’s will use purchasing history to divide its shoppers into four groups: loyalist, underengaged, infrequent and new. Then they will be cross-referenced by their ZIP Codes. Only areas with the highest concentration of loyal shoppers will get circulars.

The plan aims to cut by half the number of circulars the company mails to residents in the test markets. If the approach is rolled out nationally, the retailer could cut its budget for producing and distributing circulars by 40%, estimates William Setliff, Kohl’s executive vice president of marketing. He then wants to use the savings to better reach the other three types of shoppers through channels that might be more relevant to them such as radio, broadcast, social media and digital advertising.

That is if all goes well. History shows it won’t be easy.

“Retailers are constantly testing alternatives to circulars,” said Gerry Storch, the chief executive of the Hudson’s Bay Co. and former CEO of Toys “R” Us Inc. “The difficulty is finding something as effective.”

Despite the withering of the newspaper business, the inserts still land in about 50 million households a year, according to Borrell Associates, a market-research firm.

Publishers have a lot on the line in keeping it that way. Circulars account for about a fifth of newspaper advertising revenue, Borrell Associates says, though the amount varies widely by paper. At the E.W. Scripps Co., which owns newspapers in 13 U.S. markets including Memphis and Knoxville, circulars accounted for about a quarter of advertising revenues in 2013. (Scripps is in the process of merging with Journal Communications and spinning off the combined newspaper business.)
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