The 2018 Distripress Circulation Monitor (DCM) shows that the world of distribution remains under immense pressure, but that there are some very significant and positive changes.
Taking a longer view
To put things into a longer-term perspective:
* In 2014, the business was getting to grips with the prospect of terminal decline.
* In 2015, the mood had moved on from despair and denial regarding what was happening to a grim determination to face up to all the challenges.
* In 2016, there was much more optimism evident, as companies were testing new business models and finding a way forward.
* In 2017, the pressures which had been building up over previous years exploded into the open. The result was a series of company closures, mergers, acquisitions and consolidation, together with some unexpected partnerships. Both business confidence and business performance among Distripress members was falling.
The latest 2018 report shows that confidence is beginning to recover, the underlying business indicators are looking a little more robust and Distripress members are looking more creatively and positively at the potential for opportunity in the ongoing disruption.
The three big themes
There are three big themes running through the 2018 survey: convergence, fragmentation and diversification.
1. Convergence
This has four distinct dimensions.
* Firstly, at a macro level, the consumer trends shaping media look very similar around the world. These include such developments as the growth of voice applications and the so-called “internet of things”.
* Secondly, media companies themselves are crossing old boundaries as they engage with audiences across multiple platforms. This is manifesting itself in a flurry of M&A activity as well as the growth of interesting and unlikely partnerships.
* Thirdly, at a more granular level, publisher and supply chain issues are becoming more similar from country to country. How to develop a more flexible retail network as consumer shopping habits change? How to grab the consumer’s attention in-store with more creative retail promotions? How to defend retail space against the expansion of other categories which are more buoyant or profitable than News & Magazines (N&M)? How to drive down cost-to-serve as the volume of product going through the supply chain declines? How to simplify in-store handling processes to make N&M a more attractive category for retail staff to handle? How to make a co-ordinated offer to the consumer across print and digital platforms and across subscription and single copy channels? And how do members manage to take a slice of some of this cross-platform action?
* Fourthly, all these issues are reflected in micro-convergence within companies themselves: breaking down legacy departmental silos as platforms, channels and processes overlap increasingly. This is seen in the growing theme of organisational change.
2. Fragmentation
Yet while the questions being asked are becoming increasingly similar around the world, the answers being found can be very different. To put it another way, the drivers of change are converging, but the outputs are fragmenting. This fragmentation process is operating in two ways.
* Firstly, the sales trends of newspapers and magazines are showing an even wider range of performance, country by country, than in past DCMs: increasingly erratic and unpredictable.
* Secondly, the business models of members all the way through the supply chain (publishers, wholesalers and distributors, retailers and service companies) are becoming more varied and individual as companies test new ways of working and grow new revenue streams, which leads on to the third theme: diversification…
3. Diversification
This has two dimensions: revenue and geographical diversification.
Firstly, as the core business of single-copy print sales slows or declines, new revenue streams are being sought.
* For publishers, that means growing subscriptions over single copies, building digital platforms next to print that complement rather than cannibalise, ecommerce and live events. It also means trying to accelerate the strategic shift from advertising revenues to content / circulation revenues.
* For wholesalers and distributors, it involves trying to take a bigger piece of the broader N&M distribution picture (eg. getting involved in print subscriptions and digital editions, offering consumer marketing services to publishers, etc), taking on non-N&M product through their existing networks, or using their skills in parallel industries.
* For retailers, the big revenue development lies in growing an online dimension that sits next to their bricks-and-mortar presence, which is also changing in its size and profile at the same time. The other big area is to tweak the product mix and consumer offer, which is where N&M is coming under the spotlight at the moment as retailers flex the range and space devoted to the category.
Secondly, geographical diversification is also accelerating, which, in theory, plays to the strengths of Distripress members. A number of the major digital players, notably Amazon and Apple, are looking to grow outside their mature, core domestic markets to further-flung growth territories. The rationale is twofold: (1) grow top line sales and (2) defend against the rapid growth of Asia Pacific-based companies who are moving west.
The net result of all this is a “test and tweak” environment, where every organisation is trying to do an increasing number of new things at the same time, without forgetting about nourishing what still works at the moment: trying to diversify, but not so fast as to destabilise the core business – a really difficult balancing act to get right. Then add in the cross-currents of tech change…
Tech trends sweeping the world
The background to the current wave of disruption is a growing array of tech developments in three key areas: consumer, distribution and retail. The DCM report covers this is some detail, but essentially…
* Consumer tech includes voice-activated assistants, the internet of things and artificial intelligence as the core transformative technologies.
* Distribution tech covers robotics, artificial intelligence and blockchain.
* Retail tech is in some ways the most far-reaching. Retailers are really getting to grips with all the technologies seen in ‘consumer’ and ‘distribution’, but with their own particular spin. Store staff who are digitally enabled with handheld devices through to robots who can answer questions and show where goods are stocked: in-store digital directories, ordering systems and digital demonstrations; shopping apps which drive and aid the whole “shopping experience” across all platforms. And so on.
Getting on with the “Day Job”
While everyone in the supply chain has to be aware of the “Big Picture” of what is happening now and what might become a reality in the future, there is still the “Day Job” of running the core business. Day to day challenges include headcount, organisational change, publisher promotional budgets and profitability levels, the rate and nature of supply chain changes, etc.
Yet what is clear in this year’s survey is a much more lateral approach to the business challenges. Instead of focusing exclusively on making the existing supply chain and retail network work better (still absolutely essential), much more thought is being devoted to bringing new retailers on-stream and to diversifying company activities much more radically than in the past.
What this year’s DCM project shows more clearly than ever before is that the membership of Distripress is polarised between two extremes: between those who see only terminal decline for their business and who are cost-cutting their way into a short-term future; and those who think that the current disruption is an opportunity to innovate or, at the very least, to grab market share from weaker competitors. The encouraging conclusion of DCM 2018 is that there appear to be more proactive innovators than reactive decline-managers than ever before. They are the ones looking for the opportunity in disruption.
The Distripress Circulation Monitor is available to non-Distripress members, in both digital or print formats, at a cost of 450 Swiss Francs. Contact Tracy Jones (Managing Director): Email tracy.jones@distripress.org Mob: +44 7710 080591
