The company wants to refocus its marketing activity on below-the-line advertising and will divide the task between an in-house team and the Mancunian artwork and photography supplier Capricorn.
The move heralds the end of its relationship both with its above-the-line shop, M&C Saatchi, and its direct marketing operation, Lida.
The decision follows Ruth Start's appointment as Matalan's advertising manager in June. She previously worked as the north-west marketing manager at easyJet and, while she was there, the company kept its advertising in-house instead of employing a large above-the-line agency.
M&C and Lida won the Matalan account in June last year. At the time, both client and agency claimed the business was worth £30 million, with the spend split equally between above- and below-the-line marketing. Matalan spent £11.5 million above the line in the 12 months to March, according to Nielsen Media Research.
The appointment was overseen by Euan Sutherland, the recently appointed Matalan marketing director, who had worked with M&C during his time at Curry's. Edge and cdp-travissully had split the brief.
A Matalan spokeswoman said: "Matalan has always been about passing on value to the customer and, as such, it will refocus on low-cost advertising and direct marketing, especially direct mail."
The decision is not expected to affect Matalan's media planning and buying account, held by Feather Brooksbank.