Imagine a world where week by week, month by month we could predict exactly how many consumers were going to buy any given magazine; and not only that, but we knew precisely when they were going to buy them and which shops they were going to buy them from. Newsstand utopia? Well perhaps, but clearly very unlikely!
The reality is that magazine purchasing is a complex process, further complicated by the fact that today’s consumer is undoubtedly smarter, more sophisticated, more ‘savvy’ and less forgiving than ever before. So, while the headlines that dominate the trade press tend to be focused on the challenges posed by the supply chain and its alleged inefficiencies, the reality is that it does a pretty good job under difficult circumstances and the real challenge for the industry is trying to meet the needs of this increasingly demanding consumer.
The impulse factor
Consumer behaviour in magazine purchasing differs significantly from other product types, as a greater number of purchases are made on impulse. In research conducted on behalf of PPA (How Magazines Work at Retail), it was found that the proportion of magazines that are pre-planned is less than for other products. The research showed that 74% of magazine buyers agreed that they knew they were going to buy a magazine before they entered the shop, compared to 89% of respondents when considering other non-magazine purchases.
It is fair to say that consumers are generally buying in a more erratic way nowadays and tend to have a repertoire of different stores that they buy from, depending on their mood and circumstances at any given time. Looking at a snapshot of the changing retailer market shares for magazine sales over the past six years shows a dramatic shift in share towards the supermarkets, largely at the expense of the independent sector. Tesco has done particularly well, growing its market share from 7.8% in 2001 to 13% in 2007.
| Retailer Shares of Total Magazine Sales | ||
| Retail group | 2001 | 2007 |
| Tesco | 7.8% | 13.0% |
| WHS High Street | 10.4% | 8.6% |
| WHS Travel | 4.0% | 4.4% |
| Sainsbury’s | 4.8% | 5.7% |
| Asda | 3.3% | 4.8% |
| Waitrose | 1.0% | 1.3% |
| Co-Op | 4.4% | 5.6% |
| Martin McColl | 4.4% | 3.3% |
| Independents | 40.4% | 31.8% |
| Others | 19.5% | 21.5% |
| Source: Seymour Distribution | ||
Added consumer value
Faced with these challenges and the increasingly intense competition that magazines face from other forms of media, publishers are constantly investing in their titles to provide added consumer value. Magazines are carrying a greater variety of different types of promotional support than ever before in the form of gifts, extra pages through supplements, price promotions, cover price discounts and targeted promotional voucher campaigns. An analysis of the various consumer promotional support vehicles used by magazine publishers in recent years, demonstrates that the number of magazine issues that are supported by some form of promotional vehicle has increased dramatically over the past few years.
| Year | Average promotions per title |
| 2002 | 5.84 |
| 2003 | 7.41 |
| 2004 | 8.57 |
| 2005 | 8.76 |
| 2006 | 10.42 |
| Source: Menzies Distribution Consumer insight | |
We certainly shouldn’t underestimate the importance of researching consumers’ views and opinions on the in-store shopping experience – the assumption being that the more in tune we are with what consumers want at the point of purchase, the greater likelihood that they will buy more magazines. Hardly rocket science, but nevertheless it is an area which historically has been under-researched and neglected by the industry.
Some interesting suggestions made by consumers as to how publishers might promote their magazines more effectively came out of last year’s ‘Magazine Town’, the pioneering initiative undertaken as part of Magazine Week 2007 which created a ‘sales laboratory’ in Guildford. Through a mix of research and promotional mechanics, the initiative assessed the buying behaviour of a panel of magazine readers.
Three suggestions came through most strongly. First, increasing awareness of individual titles through advertising and promotions – anything from cross-merchandising in-store, links to supermarket loyalty cards and even placing copies in public places such as libraries and doctors’ and dentists’ waiting rooms. Price-driven promotions were also popular, particularly money-off vouchers. The third suggestion that the panel had for publishers was to make free gifts worth having; in their view, most are not! Polybagging was not popular with the panel as it meant they couldn’t browse before buying.
In terms of consumers’ views on what they want from a magazine retailer, there were two things that stood out most noticeably from the research in Guildford. Firstly, the space and ‘permission’ to browse and secondly, more logical and tidy magazine racks with clear category signage. The latter has been backed up by recent results from a Smiths News scheme which has seen magazine sales increase for those independent retailers using Perspex category flags.
A further challenge highlighted by Magazine Town is trying to encourage consumers to move outside of their established magazine buying repertoires. The research showed that with the right sort of encouragement, consumers will be more adventurous but also indicated that most were simply not aware of the sheer range of magazines available. This suggests that if the magazine industry focused on initiatives to encourage sampling of the wide range of magazine titles, there would be potential for an impressive sales uplift.
Supply chain perspective
So, given that the people buying our expertly crafted magazines can be tricky customers in more ways than one, what does all this mean from a supply chain perspective? Naturally, the consumer variables outlined above have a direct influence on the dynamics of the magazine supply chain. As we’ve seen, with increasingly fragmented and diverse shopping patterns across the retail universe, accurate projection of consumer demand becomes extremely difficult. This necessitates an efficient supply chain to ensure a wide availability of product to enable maximum consumer choice and, while some of the trade press headlines might suggest otherwise, the UK does have one of the most efficient supply chains in the world. Like most things though, there is always room for improvement.
One area where a lot of work has been done in recent years is around Sales Based Replenishment (SBR). SBR is now available from all wholesalers and a variety of retailers have taken this up. A fulfilment or ‘top-up’ service is available to smaller retailers utilising stock made available as part of the replenishment process. The SBR universe currently includes up to 350 monthly titles, around 40 weeklies and just under 3,500 retail outlets. The benefits of SBR are clear: results from retailers involved in SBR activity show increases in net sales of 2-3% and it has also delivered reduced waste levels, improved availability and reduced stock-holding at retail. However, we’re not there yet and current areas of focus include increasing the number of titles on SBR, notably weeklies, and increasing the number of retailers that receive the service.
The spectre of the OFT
Now it would be strange for an article focusing on the challenges on the newsstand not to mention those three letters that have cast a shadow over the industry in recent years: OFT. It is now four years since the OFT began its investigation of the newspaper and magazine retail supply chain – a lifetime in publishing! The OFT perhaps deserves some sympathy as it is having to balance three separate but overlapping inquiries: (i) the industry’s own request for an opinion on the legality of the current arrangements following a decision by the government to withdraw the arcane Vertical Agreements Exclusion Order; (ii) a long overdue review of the Newspaper Code brought in following the 1992 Monopolies and Mergers Commission review; and (iii) a request for a referral of the arrangements to MMC-successor the Competition Commission by the NFRN.
The first two draft opinions offered by OFT have been roundly rejected by the industry on a number of grounds and we are now expecting the third – sometime ‘in the spring’.
If the OFT stands by earlier opinions and the newly named DTI (BERR) elects to stand by and watch, then the outlook is not good and the projection is for many smaller retailers to exit the market. While some publishers might pick up larger market share based on exclusivity deals with supermarkets, the reality is that magazine range at retail would be restricted and the diversity of Press in the UK would suffer.
So that is why publishers, together with independent retailers and wholesalers, are keen to see a robust self-regulatory code-based system supported by BERR and the OFT to ensure that the current system’s guarantee of distribution to all qualifying retailers throughout the country remains intact. The alternative is an open ‘free-for-all’ market with unpredictable results.
Collaboration is the key
While the supply chain does a pretty good job, all things considered, of getting the right product in the right place at the right time, there is always room for greater efficiencies, and collaboration between all parts of the supply chain is a critical factor for success. The Joint Industry Group (JIG), which represents all parts of the news industry, has recently embarked on its most ambitious project to date, an initiative which aims to reduce the volumes of unsolds without impacting adversely on availability and sales.
And what better template for collaboration can there be than Magazine Week, the cross-industry initiative spearheaded by PPA and launched last year. Designed to raise the profile of the magazine medium and reinforce its key benefits to consumers, plans are already underway for 2008 and success will be wholly dependent on engagement from all sectors of the industry.
So, undoubtedly the industry faces a number of challenges. Historically as an industry we have tended to focus on supply chain issues which give rise to the inevitable and well-rehearsed adversarial positions of the different parties. However, there is now an increasing recognition that the real gains are to be made by focusing on the consumer. That means working collaboratively to deliver what they demand – and that is the challenge of the future.
