When the status quo is no longer good enough

There’s a bit of a war going on for control of the newspaper and magazine supply chain, just in case you hadn’t noticed…

Big publishers and wholesalers have dug in so deeply in defence of exclusive territories that it makes Verdun look like a pushover. Elsewhere on the front, small retailers are pursuing their own guerrilla campaign, indiscriminately peppering any moving target with rather ill-directed machine gun fire. And from over the horizon comes the dull rumble of approaching tanks, as the superstores reportedly mass their forces for a new blitzkrieg.

For those directly involved, the fight is passionate and in deadly earnest. For those on the fringes it can be marginally entertaining, provided of course you are not some small guy caught up in the crossfire. But it leaves me with two uneasy feelings. Firstly, the whole business is desperately inward-looking. Where exactly is the consumer voice in all this? And secondly, so much of what is being argued is largely an attempt to shore up the status quo, when the reality is that we need to see change and new thinking if we are going to address evolving consumer needs.

Yes, I know that the rationale for exclusive wholesale territories is to protect the route to the consumer. Yes, I know that part of the point of ISSA is to improve service standards. But are we really prepared to look again at our practices from the consumer perspective?

Right old mess

Let me give a simple example. I walk into a major retailer on a Thursday morning and find broadsheet appointment sections scattered all over the news display. Why? Because they arrived separate from the newspapers that they belong in, and quite possibly at a different time to them or in different quantities, and they have not been inserted. Cue for a good argument about whose fault this is: the retailer for not inserting, the publisher for not paying enough, or the wholesaler for not counting the inserts properly.

But the argument means nothing to the consumer. He or she has gone into the shop wanting to buy a paper, a complete paper, and has found a right old mess. The reader leaves the shop with the impression of a product that is defective, untidy and poorly managed. We have damaged our own collective brand because we have opted for a "good enough" method of handling supplements that is too liable to failure at one point or another in the chain.

Retail is generally where the point of contact with the consumer occurs, and that is why I am going to focus on it here. Many of the service failures that are visible at retail have their origins higher up the supply chain and (despite my cynicism about the industry processes) we are at least seeing some efforts to tackle lateness, shortages and sloppy supply management. But there are also serious shortcomings in our offering to the consumer and I think we need to give this more attention. Simply propping up the retail status-quo (or trying to get back to the situation of a decade or two ago, which seems to be the ambition in some quarters) is not good enough.

Another example. Soon after I started at the FT my phone rang and an American voice said that he had just arrived in the UK and wished to arrange for his FT to be delivered. I had to tell him that we did not have a delivery service to offer; that he might or might not be able to find a retailer to deliver to him; that I didn’t have a database of which agents delivered in his area; and, no, quite possibly he wouldn’t be able to arrange his delivery over the phone and pay by credit card but might be expected to go into the shop and pay cash. His response? "You’ve got to be kidding". I thought he had a point. Consumer expectations have changed; the industry has not kept pace.

Shop-window

There are three very important roles that I see for the retail sector in selling newspapers and magazines. The first role is as a shop window for our products. There needs to be places where consumers can sample the product in the best possible conditions. A good environment, excellent display, high-quality racking well organised and, above all, range: these are key factors in bringing the consumer and the product together.

The role of shop-window for the industry has traditionally been played by WH Smith, which is why the recent move by WHS to cut back its range has caused such deep concern among smaller magazine publishers in particular. Even before this, the publisher of a newly-launched magazine complained to me that he had paid almost £20,000 for retail display and received a compliance level on issue 1 that he estimated at 10%. The magazine subsequently folded. Publishers need that shop window and, if the market is going to evolve away from providing it, they will have to find – and doubtless fund – new ways of showing their wares.

Micro-markets

The second key role for the retail sector is to provide availability to the thousands of micro-markets that make up the UK. A decent retail environment and display helps, but the key thing here is simply to put the product right where the consumer is going to pass by and see it. Location is everything.

On the face of it, retail availability is one of the great strengths of the British model, with 54,000 outlets for the consumer to choose from. Traditional newsagents may pour scorn on petrol stations selling newspapers, but generally I have no problem with the way that forecourts display our product: it is prominent, sited where the consumer may pass by, and consistent with the consumer reality that most of us now travel by car.

But there are concerns. Not so much the absolute number of retailers as their type and locations. Are they where today’s consumer goes? Are they still at bus-stops and train stations while the consumer is travelling by car? Why are papers not sold in coffee shops and bars where readers gather? Again, the status-quo is not good enough if it does not fit with the lifestyles of today’s readers. It may be that the OFT’s proposal for extending sub-retailing will provide at least a partial answer.

Home news delivery

The third role of the UK retail sector, and in some ways the most interesting, is delivery. In most European markets and many others, subscription delivery systems are either driven by publishers (as in the Netherlands) or independently-owned (including Postal services). Only in the UK is HND the sole preserve of retailers. And this service is declining or disappearing in many parts of the country.

My caller with the American accent was one of the promptings that led me to create our own delivery service for the London/M25 region, operated under the name FTdirect. We now deliver several thousand FTs each morning, before 07.00. And we have reached that level by providing the sort of customer service that I think is essential to today’s consumer: comprehensive coverage, ease of ordering, simple pricing, flexibility of service and a high degree of reliability. For too many consumers, home news delivery is perceived as an old-fashioned concept that their parents or grandparents used to enjoy but which no longer fits their lifestyle. I think we have shown that this perception can be changed.

There are essentially two schools of thought on news delivery. One approach is to prop up the status-quo by seeking to encourage or incentivise the retailers who still provide this service. The other is to go outside that existing channel entirely, which is what we did with FTdirect. I am the first to recognise that that is not necessarily the only, or even the best, way forward. If we can align existing retail delivery capability with the service concept that underlies our subscription model, there could be wins all round.

Homelink initiative

The NFRN "Homelink" initiative is one of the most interesting developments in the market, although in my perception it does not go far enough. From a marketing point of view, Homelink offers a single point of entry for the consumer from which he or she can be referred to a participating retailer. This is a good start, but what next? The order goes "over the wall" to the retailer with no guarantee of consistent response or service and very little opportunity for the publisher to track the subsequent behaviour of the consumer. It is good for the retail status quo where it works, but does little to address the gaps in the current offering.

I also have logistical concerns. One reason why the industry struggles to achieve its delivery time commitments is that we are trying to service so many retailers in such a short timescale. If anyone needs priority copy, it is the HND retailer; but with around 18,000 potentially in the Homelink network, trying to give them all priority is impossible and the efficiency of the operation is questionable. The Post Office delivers to every address in the country from a tenth of that number of local hubs.

We indeed need to support retailer delivery, but we also need to see a transforming change to modernise it. I am not sure that Homelink is capable of delivering this, but the FT will support it and will continue to press for it to go further in adapting retail delivery to modern consumer needs.

We will also continue to develop our own delivery capability, despite the opposition that this has attracted from some in the industry. Call it a "mixed model" if you will. I’d sooner call it "choice for the consumer", and that has to be a good thing.