Friday, February 8, 2008

Wholesalers and Retailers Draw the Line, and an Industry Lurches Toward Efficiency

Wholesalers and Retailers Draw the Line, and an Industry Lurches Toward Efficiency
Circulation expert says big magazines are the problem.
by Tony Silber
Wholesalers and retailers that attempt to increase efficiency by reducing the numbers of titles they carry, especially the smaller ones, are fighting the wrong battle, a leading newsstand expert said this week.

What's more, says Dennis Porti, executive vice president of the national distribution company Curtis Circulation, any attempt to bring the newsstand sell-through to 50 percent overnight would result in "a catastrophic loss of sales."

Porti was reacting to a flurry of news in recent weeks detailing moves by Wal-Mart [0] and other retailers to delist large numbers of magazines, and by several of the leading wholesalers to reduce by tens of millions of units the numbers of copies they distribute.

According to Mediaweek [1], Source Interlink is cutting distribution by 40 million copies over the next few months, while Anderson News Corp. and the News Group are making cuts of undisclosed numbers. Source is aiming for an overall efficiency-that is, number of copies distributed compared to number of copies sold-of 50 percent by the summer, up from the current efficiency of 38 percent. Last spring, Source cut 57 million copies.
The wholesalers said they thought the reductions could be made without any loss of sales, and some publishers and industry observers have agreed.

But Porti argues that the newsstand isn't inefficient because of the numbers of titles on the racks, he says it's because of the big magazines. "Here's the problem: 50 magazines generate nearly 70 percent of the industry's returns," he says. "The big magazines have the best positions and they have a very, very high draw per outlet. Hypothetically, if they go into a store with 100 copies, they sell 40. That's 60 returns per magazine."

Porti says the magazines themselves are in a tough spot, as are wholesalers, because many retailers may have upwards of 30 checkout racks. "If you go in with too few copies, all in the channel, including retailers, become concerned about empty wire," says Porti. "But when you fill the wire, you become inefficient."

Ultimately, he says, the industry improves efficiency if the larger-circulation magazines manage their draw better. Thankfully, Porti says, the industry has become much more sophisticated about managing draw.

And that's why the industry has picked up four to five points of efficiency in the last few years, he says. "There isn't a publisher in this business that doesn't want to operate more efficiently, and the aforementioned gains are an excellent start."

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