You know when you're fighting with someone over a minor issue, but it isn't really the minor issue you're mad about; it's really a bigger underlying problem that's causing the dispute? That could be what's happening with this newest beef Macy's (NYSE: M) has with Amazon (NASDAQ: AMZN) over Amazon possibly advertising on space Macy's has used for almost 60 years.
To be fair, Macy's isn't fighting with Amazon over just any marketing sign. It's fighting over its 2,200-square-foot billboard space in Herald Square, on which it's been advertising since the early 1960s and sits adjacent to Macy's flagship store. Millions of tourists see this sign every year.
The problem is that Macy's lease to advertise on this space expired Aug. 31. Macy's tried to renew the lease in May, but the billboard's owner, Kaufman Realty, had been entertaining talks with another party, a "prominent online retailer." This retailer is assumed to be Amazon.
Macy's filed a lawsuit in New York State Supreme Court in Manhattan against the Kaufman Organization, claiming that Amazon is not allowed to advertise there per Macy's original lease from 1963. The lease includes a restrictive covenant prohibiting any competitor of Macy's from ever advertising in that space.
Attorneys for Macy's make the point that if Amazon were allowed to advertise in this former Macy's space, it would be like Pepsi advertising on a Coca-Cola building or Mercedes advertising at a BMW dealership. Mark Cohen, a retail studies professor at Columbia University, said, "It's nothing less than a giant middle finger being pointed at Macy's."
Kaufman, the landlord in the lawsuit, claims it can lease the space to any advertiser it likes. Said a Kaufman spokesperson: "While the restrictive covenant will be up to a judge to make a decision, we want to make it clear that we've had no communication or negotiations with Amazon relating to the 1313 Broadway space."
King Kong vs. Godzilla
So far, it looks as though Macy's is King Kong and Amazon is Godzilla in this battle over retail territory -- both billboard space and revenue growth. (Godzilla beat King Kong, but they both survived.) Amazon started challenging Macy's a few years ago and was winning that battle as Macy's started closing stores from lackluster sales. Retail Dive reported that 53% of Amazon Prime members switched from Macy's to Amazon.
During COVID-19, online ordering and e-commerce thrived (Amazon), while Macy's was further devastated. But Macy's has recently been gaining back market share. Clothing and accessory sales were up almost 40% in August 2021 from the same time last year. Macy's is taking a step in the right direction.
But was it really Amazon in talks for the sign?
Just because one might assume that talks with a "prominent online retailer" mean Amazon, the online retailer might not be Amazon at all. In fact, the Kaufman Organization denies it's in talks with Amazon and flat-out said the online retailer that wants this space isn't Amazon.
The Millionacres bottom line
Amazon and Macy's are true foes, and as such, it would be pretty cheeky of Amazon to try to take what has been Macy's billboard territory for decades.
If the retailer in talks with the landlord for this space turns out to be Amazon after all and Amazon does indeed advertise on this iconic spot, Amazon's statement to Macy's would be loud and clear. Amazon would practically be yelling, "I won the battle for retail dominance."