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A Bad Sign:  Macy's vs. Amazon Billboard Battle

12/4/2021

24 Comments

 
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by David Hagenbuch - professor of Marketing at Messiah University -
​author of 
Honorable Influence - founder of Mindful Marketing 

With the holiday shopping season in full swing, many consumers are unaware of two titan retailers’ battle over a billboard, the results of which could impact how and where shoppers buy gifts for years to come.  The clash also could impact what businesses come to accept as moral behavior.
 
The site of the showdown is the corner of 34th Street and Broadway, New York City, at the center of U.S. commerce.  It’s there that Macy’s, which once boasted “the worlds’ largest retail store,” is taking what could be a final stand against the encroachment of Earth’s fastest-growing retailer, and one of nature’s most irrepressible forces:  Amazon.
 
Macy’s has filed a lawsuit against Amazon, hoping to keep its close competitor from commandeering a 2,200 square foot billboard that adjoins Macy’s flagship Herald Square store.  It’s a signage space Macy’s has leased for nearly 60 years.
 
The huge billboard, which features Macy’s iconic star and logo typeface set against the familiar bright red background, serves as a beacon for millions of pedestrians and potential shoppers as they walk north on Broadway and west on 34th Street.  Millions more see the sign every November in countless camera shots during the retailer’s world-renowned Thanksgiving Day Parade.
 
Amazon, an organization that can send astronauts into orbit, is capable of just about anything, but how could even it endeavor to place its name on a billboard on the side of such a storied competitor’s flagship store?
 
Key to the controversy is the fact that Macy’s doesn’t own the building on which the billboard rests; the sign is actually attached to a small separate edifice situated just between the retailer’s massive 2.2 million sq. ft. store and the intersection.  The owner of the tiny architectural interloper and its very valuable billboard is Kaufman Realty Corp.
 
With the contract it signed in 1963 expiring, Macy’s asked Kaufman to renew its billboard ad, but the company told its long-standing tenant that it intended to rent the space to a “prominent online retailer”—one who apparently has deep pockets and who most believe is Amazon.
 
Of course, both Macy’s and Amazon have physical stores and virtual ones; yet, Macy’s is in many ways the quintessential brick-and-mortar retailer while Amazon practically owns online shopping.
 
In a very real way, therefore, the billboard battle represents a titanic clash of competing marketing channels and business models, the results of which could impact consumer shopping behavior for years to come, as well as set important moral precedent.
 
Macy’s firmly believes that its loss of the advertising space, next to its flagship store, would be disastrous, as the suit it filed states, “The damages to Macy's customer goodwill, image, reputation and brand, should a 'prominent online retailer' (especially Amazon) advertise on the billboard are impossible to calculate.”
 
With net income that’s exceeded $1 billion for eight of the last ten years, Macy’s is doing well compared to many retailers, especially those that filed for bankruptcy over the last 18 months, e.g., Lord & Taylor, J.C. Penney, J Crew, Neiman Marcus, and Pier 1.
 
However, Macy’s profit margin for 2020 was a modest 2.9%.  Amazon, in contrast, had net income of $21.3 billion on revenue of $386 billion, giving it not only much greater earnings but also a significantly higher rate of return—5.5%.
 
So, although Macy’s is not quite on the cusp, it’s certainly not operating from a position of power versus Amazon, and it truly can’t afford to see its flagship store, which it’s described as its “most valuable asset,” take a serious financial hit.

However, a hit on Macy’s Herald Square store and its effect on the future of retail is only one concern of the billboard battle:  Amazon’s aggressive competitive tactic is also a breach of business’s moral bulwark.
 
Of course, Amazon has a right to buy any billboard it wants, but a key question is why the firm needs to buy that one.
 
According to Statista, there are over 340,000 billboards, or “big format outdoor displays,” in the United States.  Just a ten-minute walk north of Herald Square lies Time Square, which has probably the greatest display of outdoor advertising in the world.
 

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Granted, a sign in this spectacle of commercialism comes at a very high cost: between $5,000 and $50,000 a day, which could mean as much as $18.25 million a year.  Still, that amount of money is almost immaterial to the one of the world’s richest companies.
 
As of December 31, 2020, Amazon’s balance sheet showed cash and cash equivalents of $41.2 billion.  Even a $50,000-a-day billboard would represent less than half of one percent of those liquid assets (just 0.0445%).
 
So, if hundreds of thousands of large outdoor signs are available and Amazon can afford to rent any billboard it wants, why does it have to have the one in Herald Square that’s adjacent to one of its biggest competitor’s flagship stores?

It’s reasonable to infer an intent to attack the heart of Macy’s operations, to steal shoppers from in front of its landmark store, and perhaps even to embarrass the firm before its own customers.
 
Some might respond to such assertions of over-the-top aggression with, “That’s business,” or “Amazon is just being competitive,” or “The company is playing to win.”  There’s a difference, though, between working hard to win and trying menacingly to make others lose.  Unfortunately, Amazon’s billboard-buy seems like the latter.
 
Growing up, I loved to play sports and considered myself a pretty competitive person—I wanted to win and tried my hardest to do so.  Although I didn’t like losing, I could tolerate it—it wasn’t the end of the world—especially if I played my best and the other person/team simply outperformed me.
 
By the same token, I never liked the idea of trying to sabotage or subvert opposing players’ performance.  Instead, I thought, “Let them do their best, and I’ll do my best, and whosever best is better deserves to win.”  I didn’t have to come out on top every time; I could ‘share the podium.’  Part of competing was knowing how to win and lose graciously.
 
In contrast, some individuals and organizations compete as if it’s all or nothing, and they have to have it all, all the time.  They’ve no sense that ‘the market's big, so there’s plenty of business for everyone.’
 
Maybe it’s because of the holidays that this self-obsessed way of thinking reminds me of the Christmas classic It’s a Wonderful Life--specifically the film’s antagonist, the greedy and scheming Mr. Potter.  Although he and his bank already own half of Bedford Falls, he won’t rest until it’s all under his control, not tolerating even a minor amount of competition from George Bailey’s small Building & Loan. No one else can win; he has to have it all.
 

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My guess is that Mr. Potter would be proud of  Amazon’s attempt to pry the Herald Square billboard lease away from Macy’s.
 
Macy’s is no real threat to Amazon, which can afford any outdoor advertising it wants and doesn’t need to have that specific sign.  So, why go after it?  It seems like Amazon doesn’t want anyone else to win; it has to have it all.
 
Macy’s lawsuit claims that all past and present agreements have prohibited the billboard’s owner from ever leasing the space to any other “establishment selling at retail or directly to any consumer.”  If that claim is true and Macy’s is offering Kaufman Realty fair compensation for the lease, Macy’s has even more reason to believe its treatment is unreasonable.
 
Competition is not only necessary, it’s desirable, as it both benefits consumers and sharpens industry rivals.  However, when organizations like Amazon enlist predatory business practices, their strategies are a sign of “Single-Minded Marketing.”


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24 Comments
Brittany Mullen
12/5/2021 08:05:43 pm

I find it hard to believe that amazon doesn't want the space of the billboard just to embarrass Macy's huge brick and mortar store. I think that out of all the spaces in the world to advertise for amazon, it can choose other places. Although, since Macy did take it to court and if they deem that it is fair game, then Macy would just loose out significantly. If it came down to who can pay the most, Macy would loose the spot as well. I am interested in how this plays out and I believe that it is more than just business.

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Kyle Shively
12/5/2021 09:19:03 pm

While sometimes it is important to change tradition and the ways in which we as humans act, it is sometimes best to leave things unchanged. It is difficult to believe that Amazon actually needs the sign in order to promote their business, when they are one of the most profitable companies and already a well-known company both domestically and abroad. While this challenge could result in an attempt for Macy's to recreate their brand and marketing practices, the brand could potentially suffer, with little to no impact for Amazon. While the law states that first come are first served, perhaps it is equally important to consider history and tradition and the impact it can have on both a business, a city synonymous with this retailer, and the tourists/consumers who dream of visiting this location.

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Ava Jade Moore
12/6/2021 01:13:12 pm

I think Amazon is a little out of control during this whole debacle. Amazon already knows they are one of the top businesses in the world, so why would they need to have a billboard just to prove that? I think Macy's lawsuit is not over the top because they were there before Amazon jumped in, however, since Amazon is a top retailer, they wouldn't stand a chance between them. I also think this is similar to people today. How everything is a competition and this proves how competitive society is. I agree that this is single-minded marketing because, yes, it does incorporate the business aspect but it's not super ethical.

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Matt Higgs
12/6/2021 08:04:33 pm

I agree that Amazon is behaving single-mindedly in this scenario. They are one of the largest retailers in the world, and yet they are fighting in a seemingly petty war over a billboard. I think that if I was Amazon, I would definitely be focused on the welfare of the company, but trying to essentially steal advertising space from another company is a whole different thing. Especially since I don't believe that this space is the best use of Amazon's money, I don't think that it is a good use of their money to try to take over this advertising space.

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Nathan Stein
12/7/2021 09:21:24 pm

I believe that Amazon is acting out in this case for no reason. Macy's has had this sign for so long and while technically, Amazon can buy the sign because Macy's does not own it, they are stepping on Macy's toes for no reason in this instance. I agree with this being labeled as single-mindedly on the marketing matrix because it simply is not worth it for Amazon to buy the sign because it is a slap in the face to Macy's.

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Andrew
12/8/2021 01:48:58 pm

In my opinion this is simply Amazon being petty for no reason. Everyone knows about Amazon and who they are so there is really no need for this advertisement. Personally, I believe that this will result in decreased consumption taking place at Amazon because of this move that they pulled. I can see consumers not liking the fact that an already massive mega corporation is trying to rob Macy's of their billboard.

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Alyssa Stoneham
12/8/2021 03:13:20 pm

I agree that Amazon's decision to buy out the billboard is single-minded. Having a large billboard like this one in a place where many people see it would benefit their company. However, from a moral standpoint this decision is unnecessary. There are plenty of other billboards around the same area that would benefit Amazon just as much if not more. If Amazon takes this billboard it is more detrimental to Macy's then it is beneficial to Amazon. Macy's is not a threat to Amazon, so there is no need to intentionally hurt the company. Therefore, it is not morally right for Amazon to take the billboard from Macy's because they have no real reason or need to have it.

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Hannah Wilburn
12/8/2021 03:16:55 pm

I think that Amazon is definitely going too far in this regard. They are already one of the most profitable companies in the world, and extremely well known. They aren't in desperate need of a billboard to promote their company and increase sales, especially not a billboard that Macy's specifically has been using for decades. This seems extremely intentional and almost like sabotage on Amazon's part, and I think Macy's lawsuit is very much justified. I think that Kaufman should take more into account in their decision to rent the billboard space than just money, especially because they have had this business relationship with Macy's for so long. Losing this billboard could really hurt sales for Macy's especially because of the fact that people are gravitating more and more towards online shopping and online retailers. Even though Macy's does have a website, at least in my mind, I associate it more with an in-store purchase, therefore not having it come to the forefront of my mind when I am thinking about making purchases online. The billboard would be much more beneficial for Macys, who in reality, isn't really competition to Amazon with the amount of money that that company is bringing in.

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Sawyer Shank
12/8/2021 03:58:31 pm

This article was a very interesting read. On the surface, it seems that this is just a business decision, a matter of who has more money. By that standard Amazon has the right to buy whatever billboard they want. This is where the competitive aspect of the economy can get ugly. Dr. Hagenbuch does an excellent job of outlining what exactly Amazon is doing, and how it is in poor taste. I totally agree with his categorization of this move my Amazon as Single-Minded, and he does an excellent job of supporting that argument.

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Rick Le link
12/8/2021 05:26:20 pm

I believe that Amazon is acting "out of pocket" in this case of buying the billboard. Although it's true that Amazon can buy it fair and square. However, Macy's has had this billboard leased for nearly 60+ years! This is a case of predatory business practices, and being petty. The benefit Amazon gets from purchasing the billboard is tiny compared to how much it'll hurt Macy's. All in all, I agree that Amazon is being single-minded, and is being exactly like Mr. Potter.

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Elisabeth Kolb
12/8/2021 08:13:14 pm

When I first heard about this debate, I was very confused. For one thing, that billboard has become so iconic as a part of Macy's that it seems almost absurd to change it to anything else. In addition, Amazon has become so successful that what would they even us the billboard for? With ads spread throughout the internet already, Amazon is already known by practically every individual. It really doesn't seem like a billboard would change anything for them, expect potentially affect them negatively for upsetting people who hate to see the Macy's billboard go after it being a landmark for the past 60 years.

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Katie Wilkin
12/8/2021 09:31:57 pm

I find it very surprising that Amazon feels like it is so important to take the iconic billboard from Macy's. To me, it feels like they are doing this just because they can and not because they believe that it will further their business favorably. Amazon already has such a large online presence that an additional billboard, despite it high profile space, would provide much of a benefit to their business.

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Sarah Schall link
12/8/2021 11:01:00 pm

I also agree that Amazon is stepping on Macy's toes by trying to promote their business on the billboard. Amazon is acting extremely rude by trying to take over the billboard. Amazon's decision to buy out the billboard is single-minded because they are not respecting Macy's. They should stop trying to take over everything, and allow Macy's to advertise on the same billboard they've advertised on for years!

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Hyelim Jung
12/8/2021 11:21:23 pm

It seems that Amazon is trying to send a message about its dominance in the market by taking over the billboard. By taking over the iconic billboard, they are able to communicate that it is a new era that now officially belongs to Amazon, not Macy or other store companies. The billboard is also located in a highly cosmopolitan area that is internationally known as well, so Amazon could also be trying to be become the "face of the US or New York City" and gain more international recognition.

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Xander Duerksen
12/8/2021 11:28:05 pm

Amazon's entire approach to this seems to me to just be petty. Macy's has been in this location with that sign for a number of years, becoming a staple. Amazon doesn't have any particular need to compete with Macy's, Macy's shouldn't even be a concern for them. They've already established themselves in a massive way within nearly every industry, surely a sign won't make or break their development.

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Jeb Buehler
12/9/2021 12:25:53 am

Amazon's actions are legal in the sense that their outbidding price compared to Macy's would allow them to acquire the billboard. However, the moral practices for Amazon are not positive whatsoever. The singular billboard in a location that clearly looks like it would benefit Macy's is only going to cause Amazon themselves more problems, as this case has taken the national news and many customers will recognize the predatory actions of Amazon. Their poor ethical reflection is not something people will want to continually associate with and I believe will ultimately hurt Amazon's image.

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Dominic Lucyshyn
12/9/2021 01:51:03 am

In my opinion, Macy's and Amazon could compromise on this whole situation. Amazon could always buy Macy's if they want that billboard so badly. Even though Macy's has been there for a while, maybe it is time for some change.

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Sasha McMonigle
12/9/2021 07:32:04 am

I think Amazon has more money then they know what to do with, so they decide to pick a bit of a fight with Macy's. Knowing that they put an Amazon billboard where a Macy's billboard would benefit more, is just a low blow. I wouldn't even consider Macy's to be in the same competition as Amazon, so it's very concerning on why Amazon thought this was a good idea.

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Julia Rickard
12/9/2021 09:59:28 am

In my opinion I feel as though Amazon does not need to replace Macy's with their own billboard. Even though both businesses are well known by many, Macy's has had that billboard for so many years and it is something that should not be replaced by Amazon. Amazon already promotes themselves everywhere and a store like Macy's which is not as big as Amazon deserves to keep their billboard.

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Libby Lozano
12/9/2021 10:16:23 am

The battle between Amazon and Macy’s, in my opinion, will cause more harm than good to Amazon. The legal battle that Amazon and Macy’s are going through makes Amazon look bad. It gives the impression that Amazon is a greedy company that wants more even though they are well off. In my opinion, I think that outdoor advertising is not fitting for Amazon. Amazon’s main drive is its online factor. I think it will make more sense for Amazon to focus on online advertising since the majority of its consumers are online users and the store’s format is mainly online. If Amazon wins the case it will look bad because it will indicate to consumers that Amazon will stop at nothing to get what it wants. It would also indicate to consumers that Amazon is a company that only cares about itself and is willing to bring down other companies for its own gain. Even if Amazon loses the case they will still look bad because people will still have the view that Amazon will bully other companies to try to get what it wants.

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Kyle Luce
12/9/2021 12:31:08 pm

I agree with your assessment of Amazon's action to be Single-Minded. It seems like a very selfish decision that I don't think would be perceived well by the society at large. You would think that someone at Amazon would recognize the ethical issues with essentially bullying Macy's out of their long-standing billboard, but it doesn't seem like that is the case. I am interested to see what comes from this situation and what the public's reponse would be if Amazon happens to take ownership of the billboard.

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Lindsay
12/9/2021 12:50:49 pm

What an interesting article. I remember a couple years ago when my family and I went to NYC during Christmas we saw Macy's sign and did some Christmas shopping in their store. I was on our list of things to visit. With that said and after reading this article it is clear to me that this is more than just a sign to Macy's it's a way of attracting customers and is something that customers are familiar with. I agree that it is over the top for amazon to take away Macy's signature spot to advertise. And I agree that it appears that Amazon is trying to embarrass Macy's and assert it's dominance in the market. I just wonder how Amazon customers will respond to Amazon's actions. I know after reading this article it leaves me questioning Amazon's motives.

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Grace
2/5/2022 11:52:01 am

I believe it is difficult to see why Amazon is so upset about the way this ended up. Amazon is a very different organization than Macy's. I don't believe a billboard would help them, for they are already very popular and wouldn't honestly succeed more in business if they did have the billboard. Macy's is pretty common in having a billboard so it seems fitting that Macy's keep it. I don't see any reason as to why Amazon would act this way in response. They should just let it go since they don't need this billboard.

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Rodney McCleary
9/15/2022 01:06:45 pm

While sometimes it is important to change tradition and the ways in which we as humans act, it is sometimes best to leave things unchanged. It is difficult to believe that Amazon actually needs the sign in order to promote their business, when they are one of the most profitable companies and already a well-known company both domestically and abroad. While this challenge could result in an attempt for Macy's to recreate their brand and marketing practices, the brand could potentially suffer, with little to no impact for Amazon. While the law states that first come are first served, perhaps it is equally important to consider history and tradition and the impact it can have on both a business, a city synonymous with this retailer, and the tourists/consumers who dream of visiting this location

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