Wholesalers’ view

Positioned midway between publishers, distributors and retailers in the supply chain, wholesalers are in an excellent position to observe the mechanics of the market. WH Smith News (WHSN) distributes 36% of the UK’s magazine, and 33% of the newspaper market, so is in a good position to comment.

As a wholesaler, WHSN markets and distributes product on behalf of its publisher and distributor clients to ensure maximum sales and availability, and minimal waste. The company also undertakes promotional activity, and provides its publisher and distributor clients with market information and support to help grow sales.

Magazine trends

Taken as a whole, magazines could be viewed as a mature market showing steady, if not spectacular, growth of 5% (NB. this includes partworks).

Even weekly magazine sales are hovering around the 4% mark, which might seem surprising given the frenetic activity in certain sectors, the most obvious being the men’s weekly market. At the start of the year the market didn’t exist, yet now Nuts and Zoo are selling nearly half a million copies each week. Just recently Bauer launched Cut, and there is talk of a new men’s weekly title from Richard Desmond’s Express group.

The celebrity sector continues to grow (remember it wasn’t such a long time ago that we just had Hello!), although Cashmore voiced concerns at signs of increasing price competition within this sector, starting at just sixty pence. "This is a very competitive sector and cover price growth is being pegged by some of the lower cover priced titles. We recognise the need for publishers to be innovative, but we would like to see price reflecting the value for money that magazines offer."

The monthly market is flatter, although the performance of individual sectors varies considerably. Comics and women’s monthlies, for example, are both showing year-on-year growth but the computing sector is down. However, given that the computing sector responds quickly to the launch of new software, it’s a fair bet that the launch of, say, a new consol format would quickly re-energise this part of the market.

Unquestionably, the star of the show over the last eighteen months has been partworks, showing a remarkable 40% year on year growth. Cashmore puts the performance down to a number of factors: high levels of launch activity; more aggressive cover pricing (current average price £5.26, up from £4.06 last year); increasing use of DVD and video in the product offering; and lastly changes to the reader offer. So called "build ups" are still a significant area of the market, allowing readers to make a replica aeroplane/boat/doll’s house etc. However, if an issue is missed then clearly the build may not be completed. More recently, there has been the emergence of a new type of partwork - the "dip in, dip out" purchase that allows potential buyers to maintain their interest beyond the hiccough of a missed issue.

Supporting retailers

All well and good. But what do magazine retailers want from the supply chain?

From publishers they want products that sell. From wholesalers they want top quality service – delivering the right product, at the right time and in good condition. A large amount of WHSN’s time and energy therefore is spent considering ways to improve the service it provides to retailers, in order to help maximise the profitability of the category. "We need to ensure retailers receive a healthy return in order to secure retail space for the category," says Cashmore. "This will assure the long-term future of the category. Supermarket growth is in non-foods but if net profits are not increased, we will continue to lose space to other non-food categories."

Just how committed the company is to improving service can be judged by its decision to make its performance public knowledge. According to Cashmore, WHSN has been running a twice-yearly customer satisfaction survey for the last ten years to take feedback from its retail customers. The survey asks customers to respond to questions around twenty-three different service areas from "Deliveries are made on time" and "Deliveries are accurate" to "Vouchers are redeemed quickly and efficiently".

Two years ago, it took the decision to publish these results to the whole industry. The company will shortly be publishing the results from its latest survey, conducted in July 2004, however, results from January 2004 show the house average across all categories was 6.8 (down slightly from 6.91 in July 2003, but up from the 6.42 in Jan 2003), and, says Cashmore, the trend over the last five years has definitely been upwards.

Is this a wake-up call for the industry? "Through a more transparent approach to performance we have been able to drive better, more consistent service across our whole distribution network," says Cashmore. "We have invested a huge amount of money in retailer service, and we are measuring all aspects of our performance, from the timing of customers’ deliveries to pack accuracy, and returns scanning."

Cashmore goes on to say: "We would support any moves to introduce increased transparency across the supply chain using three-way KPIs to measure performance and reconcile objectives, between publishers, wholesalers, and retailers."

Sales Based Replenishment

One example of where WHSN is working to improve the service offering to retailers is in the area of "sales based replenishment" (SBR). Current practice is that 100% of copy is supplied on day one of on-sale. "But shelves are not elastic," says Cashmore, "and there simply isn’t the room available to display the current volume or breadth of titles."

This can mean that some copy goes straight into the stockroom where there is a chance that it will disappear without trace. For an industry looking to increase sales and reduce waste levels, this is not good news.

Other non-news sectors currently use SBR to manage on-shelf availability and WHSN is now trialling SBR with Tesco. The system operates around the principle of only providing the right number of copies for immediate display on day one. EPOS information then allows further supplies to be delivered when the shelves need to be restocked.

Cashmore believes this innovation will greatly benefit the retailer by helping them to manage their titles, while the improved information flow should help publishers make better informed decisions about print orders - perhaps cutting down on unsolds. However, there are concerns around demonstrating a cost-benefit between publishers, retailers and wholesalers which need to be better understood.

The publisher offer

In addition to the retailer questionnaire, WHSN has also started surveying publisher opinion (as represented by the distributors) to benchmark customer service.

Feedback from these suggests that publishers want to see continued improvement in the following areas: logistics and basic service levels, copy management, information provision, and creativity in developing sales opportunities.

While basic service levels are being addressed at retailer level, major investments have already been made in copy management. Three years ago WHSN instituted a major reorganisation with the aim of improving its performance in copy management and sales development. "We’ve put sales at the heart of our organisation," says Cashmore.

The company moved responsibility for copy management, which previously rested within twenty four houses, into two specialist centres at Worcester and Stockport. The purpose was to create centres of excellence through consolidated resourcing and tighter management control. Hand-in-hand with this development was the roll-out of a new £20 million enterprise wide computer system using SAP software. The concentration of smarter people working with smarter software has led to service improvements in a number of areas.

For a start, the new system has allowed WHSN to offer a more tailored service offer to its retail customers by categorising them according to type; the 16,000 independent retailers served by WHSN were previously recorded under a single classification. The SAP software enabled them to flag the largest 2,500 independents and to customise its service offering accordingly for this important grouping. Different grades of store within the multiples sector can now be identified and properly supported, dependent on consumer profile, sales trends and other demographics.

As well as working on the day-to-day processes of copy management, these two new centres have implemented bespoke teams each one working with individual publishers and focusing on devising innovative sales development initiatives.

Market information

One of WHSN’s declared goals is to improve the transparency of the sales process through the provision of timely and relevant data to publishers and distributors, allowing them to make informed publishing decisions.

The vehicle for this is In-fuse, their online information system. This is an optional, paid-for service, subscribed to by the major distributors and a number of larger and smaller publishers.

The product, which is refreshed daily by the SAP system, gives marketing information on a title, down to store level and includes the use of EPoS data to drive forecasting as well as applications such as SBR.

In summary

Finally – in an ideal world, what would Cashmore like from publishers?

* first and foremost - innovation: for publishers to continue to produce top quality product that sells in high volumes
* continued involvement and strong working relationships with wholesalers
* a responsible attitude to the level of unsolds
* a greater sensitivity to the business imperatives of the retailer

Cashmore is very upbeat. Having previously worked at Seymour he knows both sides of the business. "Everyone talks about the inefficiencies of the supply chain and undoubtedly there are opportunities to improve the efficiency and service, but the industry does a lot of things very well, from product management and data flows through to the logistical feat of getting huge volumes of product to 50,000 retailers each night within a two to three hour time window. If issues arise, we can deal with it – the flexibility in the system is phenomenal."