MagSell’04

1. Polarisation

The retail sector is polarising between supermarkets (Tesco, ASDA) on one hand and specialist stores (HMV, Waterstones, Borders) at the other. The generalist (WH Smith) in the middle is getting squeezed.

2. Price deflation hurts retailers

Prices are being driven down but major costs (minimum wage, business rates, utilities) are going up thereby squeezing profits. The only relief is to increase market share, offer new categories or improve efficiencies.

3. Why are magazines attractive to retailers?

Primarly as a footfall driver. Magazine publishing is a buoyant dynamic sector producing highly attractive, aspirational product. On the supply side life is made easier by a clearly defined supply chain.

4. Why are magazines unattractive to retailers?

They are relatively low margin products and the downside of the supply chain is that it is monopolistic and can therefore be insensitive. It is also a labour intensive and operationally difficult category to manage and retailers are frustrated by the lack of publisher organisation manifested in last minute changes to copy supply and pricing.

5. Change not always bad

Perhaps with one eye on the anticipated upheaval in the magazine supply chain, Alan Giles, chief executive of HMV Media, recalled the abolition of the net book agreement in 1994. This was preceded by much angst and apocalyptic warnings – none of which came to pass. "The introduction of price competition simply pushed out of the market those who were not very good at what they did."

6. Supermarket focused

The UK is supermarket focused and is buying more things there. According to Clare Harding of Deloitte, for every £1 of household expenditure, 49p is spent with one of the main grocery retailers.

7. Women don’t like shopping!

The primary shopper in each household is the woman …. and she finds it a chore. So supermarkets have pushed the concept of the "one stop shop". Consequently non-food expenditure in supermarkets has increased dramatically making supermarkets an increasingly competitive environment for non food operators.

8. Where will future supermarket growth come from?

Due to competition law, Clare Harding expects no further consolidation between the big players. Therefore multiples will look to open up new markets such as convenience stores (eg Tesco Metro). Small convenience store chains and independent petrol forecourts are ripe for acquisition.

9. Shifting balance of power

With multiples taking an ever increasing share of magazine sales they will start to exert more power than the main publishers. They will be in a stronger position to push for what they want: higher margins, faster turnover, reduced shrinkage and sales based replenishment (ie no need to hold stock.)

10. How specialist titles can compete with the big boys

Mark Palmer, marketing director of specialist chocolate manufacturer Green & Black told delegates how they built market share in the fiercely competitive confectionary market and wondered whether niche publishers might learn some lessons. His advice was: differentiate your brand; be very clear about who you are targeting by segmenting your possible readers; go for strategic distribution – don’t try to conquer the world, but put the product where it will sell; identify what it is about the product your customers like and then invest in that relentlessly; make small marketing budgets count by clever targeting; don’t slavishly follow the market leader; you will end up copying them but with less budget. Finally celebrate your differences and work at beating competitors with a better proposition not with a bigger marketing spend.

11. Publishers should communicate more with retailers

There was a general consensus amongst the retailers present that publishers invest in promotional activity but rarely come back to analyse results. Tesco magazine buyer, Gill Page referred to twelve key performance indicators they use to monitor magazine sales and invited publisher to come, visit and discuss.

12. Meticulous planning and preparation is key to success

Kate Austin, md of specialist publisher DJ Murphy, recounts how their title Horse & Rider managed to successfully compete with titles from emap and IPC. The first step was to study the market – sales trends and reader perceptions along with an honest SWOT based assessment of the competition. The second step was to perfect their own product offering through more focused editorial, increased pagination and better paper stock. They then sat down with Seymour (their distributor) to develop a clear set of retail objectives and strategies; part of this process was to devise fresh and innovative promotions. The result: a 29.9% increase in RSV, year on year.

13. Retail sales value (RSV)

Matt Salmon, publisher of Prima Baby, wanted to maximise retail sales value – something which he considers to be the only true retail currency when it comes to securing listings and facings. The tools he used were price and frequency increases. Earlier in the year they price tested the magazine at a new price point of £2.20. They saw a less than 1% decline in sales so rolled it out across all regions. The other key driver of RSV is frequency. Since 2000 Prima Baby has increased its frequency from six to eleven issues and its RSV has increased by 38%.