|
at the newsstand
Meredith's Murray on biz of retail magazine sales
By Jeff Bercovici
Of all the magazine industry’s ills—a slumping ad economy, declining direct mail response rates, escalating postage costs—perhaps none is as daunting as the situation publishers face on newsstands, where double-digit percentage drops in sales have become distressingly common. This week, publishers, wholesalers, retailers and others have gathered in Dallas for the 2002 Retail Conference & Expo, where they will discuss ways of reviving flagging book and magazine sales. Ron Murray, director of retail sales for Meredith Corp., is chairman of the conference, which is sponsored by the Magazine Publishers of America and the International Periodical Distributors Association. Murray spoke recently with Media Life about the origins of the newsstand crisis, the solutions publishers are pursuing, and how magazines are like soup and diapers.
Whenever publishers are asked to explain declining newsstand sales, one of the factors they always blame is wholesaler consolidation. Can you explain what they mean by this, and why consolidation in the wholesaling business translates into lower single-copy sales numbers?
Basically, our industry is dealing with consolidation like many other retail categories.
If you look at what's going on in the packaged-goods industries right now, there's a lot of consolidation.
A lot of what's happened is sort of an upstream from the retailer consolidation that has been happening since 1995.
As retailers have gotten larger, they have demanded to deal with larger supply-channel partners.
So as a result, the wholesalers have over the years consolidated their businesses.
Whereas at one time there were about 400 independent locations out there, spread throughout the country delivering magazines, now the number’s down to about 180.
At one time, as you counted up a list of companies that you dealt with on the wholesale side, you'd have to go deep into the ranks to get a significant market share, but today the top-four wholesale companies represent about 90 percent of single copy sales.
Now, sales of magazines at retail have been declining to a certain degree, but it's still a very dynamic industry when you consider that it’s well over a $4 billion category at retail.
It's very similar in size to, if not even greater than, say, the diaper category. It's very close in volume to the soup category. So it's a very significant category.
Part of what you're seeing is the logistical transition of these wholesalers picking up new business as far as who they're delivering copies to.
We're very bullish as an industry that this is going to turn around in the not too distant future, especially when you look at events after 9/11 and how the industry responded to getting product out in a big way, and how people relied on newsweeklies for information.
The industry is still very responsive.
Now it's a matter of improving category sales by having larger publishers, franchise publishers, working with larger wholesalers who are working with larger retailers.
Besides wholesaler consolidation, what other factors have been adversely affecting newsstand sales in the last few years?
Once again, aside from the wholesalers, it's also the retailers.
The retailers are starting to employ category-management practices on our category. And when you have a very fragmented business like magazines at wholesale where, depending on who's count you rely on, there's over 4,000 consumer magazines, retailers are saying, Look, I only have so much space out there, I can’t handle every one of these titles.
So, as you try to apply category management techniques to make sure you have the right assortment, and the right quantities, the right types of display – as that happens, there are always going to be some growing pains.
But we're very bullish because those practices are starting to be applied, and if you look at certain retailers who are doing it the right way, you’re starting to see growth there.
Is the newsstand situation improving for publishers, or is the worst still to come?
I think you've got a lot of partners working on ways to improve the business. As I said earlier, our industry is following models of other industries, and typically in this model, consolidation moves right through the whole channel where you get retailers consolidating, the companies themselves then getting consolidated, and typically the manufacturers consolidating, and you’ll probably see more consolidation in the publishers ranks as time goes on.
But outside of that, I think there's some silver linings out there of programs being tested, things like scan-based trading, a program that is, in essence, really a cost-to-serve program.
To help bring some financial stability to the wholesalers is something that will improve the economic picture for the wholesaler community.
Besides scan-based trading, what other kinds of solutions will you be discussing at the conference, especially solutions for magazine publishers?
Well, a lot of what we publishers do is called the "push factor."
You can push some copies out into the marketplace, you can try a new magazine and try to get it out there as best you can.
But one of the key things we're trying to work on is, How do you create consumer pull?
We've created a new program called "Get Caught Reading."
At this year’s conference, we’ll be announcing the details of a new consumer-driven program where we’ve got celebrities in different walks of life where we’ve "caught them reading." We’ve got great signage and posters that will be put up in stores throughout America.
We’ll be doing a very grass-roots promotion where retailers, by participating in the program, will have an ability to give away computers to local schools based on purchase patterns of both books and magazines.
We want to build a larger audience for reading in general.
We think that’s something we've got to continue to work on to help assure a long-term audience out there that continues to grow.
One of the ideas that has surfaced repeatedly over the last few years, as many publishers have struggled with declining single copy sales, is a suggestion that magazines that sell a very small percentage of their copies at retail would do better to abandon the newsstand altogether and stick to selling subscriptions. What's your take on this?
Every company's going to have its own perspective on circulation management.
But I would highly doubt that a lot of companies would start taking copies out of the newsstand channel.
Typically, the newsstand channel is a very productive, profitable source of circulation for publishers, number one.
But number two, it’s a great way to get visibility for your property. Let's just say it's "only" 5 percent of a few million circulation. That’s a few hundred thousand copies, that’s a good source of circulation for you, and it’s good visibility.
And it’s a great touch point to readers on a daily basis that gives you some feedback of how they’re receiving your property: how they’re responding to covers, how they’re responding to editorial features—it’s a very quick way to get that.
So I would doubt that you'll see a lot of large franchise publishers saying, Let’s just get out of newsstand.
March 18, 2002 © 2002 Media Life
-Jeff Bercovici is a staff writer for Media Life.
Send to a
Friend| Printer-Friendly Version
Cover Page | Contact
Us
