Sales and Advertising Expenditure for Interwar American Department Stores

Abstract

Department stores represented one of the most advertising-intensive sectors of American interwar retailing. Yet it has been argued that a competitive spiral of high advertising spending, to match the challenge of other local department stores, contributed to an inflation of operating costs that eroded long-term competitiveness. We test these claims, using both qualitative archival data and establishment-level national data sets. The quantitative analysis confirms that the relationship between advertising expenditure and sales deteriorated markedly over the period, but indicates that the growing negative impact of retaliatory advertising by rival department stores was less important than contemporaries perceived.