Retailer perceptions: the newsstand front lines

To a publisher newly venturing into it, the US newsstand marketplace must seem an impenetrable obstacle course, where the rules and price of admission are constantly changing.

Truth is, many domestic publishers feel this way as well - although by now, this state of affairs has almost come to seem the norm.

Unfortunately, the signs point to further complications. The major wholesalers, already in precarious financial straits, are now being hit with rising gasoline prices, as well as continually accelerating retailer demands. Retailers expect more and more services from wholesalers, as well as bigger and bigger fees from publishers for gaining entry to stores and maintaining display space.

Further, a growing number are forcing wholesalers to accede to scan-based trading — despite the industry’s protestations that most retailer scanning systems can’t accurately track by-issue magazine sales for circulation auditing purposes, and despite the reality that wholesalers are in no position to absorb the costs of the "shrink" associated with SBT.

No doubt about it, retailers hold all the cards. Which brings up an important point: as critical as it is to fix the distribution infrastructure, it is equally imperative for the industry to overcome retailers’ negative perceptions of the magazine category.

Not worth the trouble?

Simply put, many retailers have begun to wonder if magazines are more trouble than they’re worth. After all, in the US, most magazines are sold in supermarkets, discount chains and other outlets where the magazine category represents a tiny slice of total sales volume. So it’s perhaps not surprising that retailers are increasingly impatient with magazines’ special needs.

The magazine returns system is not only a category aberration, but is perceived as generating unnecessary in-store labour costs. The category’s resistance to SBT, however well-founded, isn’t washing with retailers who are themselves under severe pressure to eliminate operational inefficiencies. Most dangerous of all, retailers are bombarded with lucrative program offers from other product categories, and many think that magazines’ performance isn’t stacking up.

Yet, what they hear far too often from newsstand industry players are self-serving agendas, rather than useful data about the category’s overall value, or how it can be enhanced.

"One of the reasons we’re losing space, quite frankly, is that many retailers believe that our category is under-performing," confirmed Gil Brechtel, the new executive director of the International Periodicals Distributors Association, during a recent conference of Kable newsstand and fulfillment clients. "It’s not true, but that’s the perception. They also say that there’s too much ‘noise’ in the system - that parochial messages abound. When a publisher rep goes into see a category manager, he is presenting a parochial view. When a wholesaler goes in, he also has a parochial view… Right now, there’s no single industry voice communicating the category’s benefits to retailers. In other words, our industry is dysfunctional. We have met the enemy, and it is us."

IPDA, a 30-year-old organization run by a board of major magazine and book national distributors, with publisher and national distributor members, built and maintains the single-copy data infrastructure, develops technology for communications with retailers, and funds industry studies, promotions and events. Now, according to Brechtel, the association is also determined to help the industry develop and convey a unified, consistent message.

Honing the message

The core message: magazines are profitable for retailers. And there’s ample evidence to back it up, according to MPA-analysed retail benchmarking data:

* Magazines’ average gross margin (including trade allowances) is 33.6%, compared to a 27.6% average gross margin across all supermarket product categories.
* Wholesaler in-store magazine services actually reduce retailers’ store labour costs. (Retailers’ labour costs for magazines are 27% lower than the average labour cost across supermarket categories, even including the checking in of new product and checking out of magazine returns.)
* Magazines’ contribution margin is 25%, versus a 17% overall store average contribution margin.
* Magazine purchasers spend more in supermarkets, and make 50% more trips to the stores during the course of a year, than those who don’t purchase magazines. Magazines also drive sales of other products through recipes, coupons and ads.

Sounds like a story that retailers should have been saturated with long ago. But the good news is that retailer category managers are eager to receive such ammunition, so that they can use it internally to help compete for space with other categories.

IPDA is also pledging to be retailers’ central contact for answers about the category; to assist them in best practices implementation and to provide them with increased access to the major publishers; regular dialogue on category performance in their stores and analyses comparing their own performance with the category versus their competitors’. Further, the organization is introducing systems that will automate handling of universal product codes (UPC’s) by all parties in the manufacturing and distribution process (code errors cause publishers to "lose" sales in the scanning process) and prepare the industry to participate in the data pool systems that will be used to streamline data communications between retailers and all suppliers in the years ahead.

According to Brechtel, in interviews, retailers often say that they do not view the magazine publishing industry as visionary. Rather an understatement, thus far. But hats off to the intrepid players who keep pushing the industry to focus on the future, rather than the past.