Tuesday, April 15, 2008

Time to Make the Case for Magazines and Books

Time to Make the Case for Magazines and Books
By John Harrington

At The Retail Conference, which wrapped up two weeks ago, several of the presentations focused on information that demonstrated the unique values that magazines and books bring to the retail environment. Additionally, another argued that these findings need to be consolidated into an aggressive and coordinated retail marketing approach that will benefit the entire category, and all of the members of the magazine distribution channel. Frankly, such a concept was employed, successfully and cooperatively, nearly two decades ago (see page 2). And for the last 10 years or so, it has been talked about constantly. Now, as the first decade of the 21st century is drawing to a close, and competitive product lines are clearly aiming at publications' space in large chain stores, and the tensions in the channel are reaching a crisis point, all members of the business should be doing whatever they can to see that publishers, national distributors, and wholesalers begin speaking loudly and with "one voice" to retailers.

Some of the good news from The Retail Conference about magazines began with Wendy Liebman's "How America Shops." A few points:

Women who buy magazines are cautious, take charge shoppers, but magazine buyers are also less price sensitive, enjoy browsing more, and are willing to pay to get in and out quickly.

Women who buy magazines shop in more retail channels than those who do not, by 12.5 to 8.6 in a three month period.

Magazines are #1 on the list as an affordable, under $10, treat for women; and,
Magazines are the #1 checkout favorite for women.

In "Improving Store Performance in the Grocery Channel," Tom Griffith of Willard Bishop Consulting, noted that while the so-called "Center Store," essentially general merchandise, is under siege, magazines and books are the most profitable products there. Among the numbers:

Within general merchandise, magazines generate 6.4% of sales, but 16.3% of profits.
Books and news represent 2.6% of sales, but 7.2% of profits.

Magazines profit-per-item sold of $0.58 is higher, by considerable margins, than snacks, gum, candy, and carbonated beverages.

These findings and more were a key part of a third presentation, "A Case for Magazines at Retail: One Voice." Three national distributor executives - Jay Felts, Comag Marketing Group; Drew Wintemberg, Time/Warner Retail Sales and Marketing; and Jay Wysong, Distribution Services, Inc. - laid out the beginnings of a plan to build a true "industry" presentation. The work is being done by a committee of the International Periodical Distributors Association (IPDA). No timetable was announced, but the message was that it has a high priority.

The History: Late in the 1980's, initially under the auspices of the Magazine Publishers of America (MPA), research about magazine and book supermarket profitability was begun, using the direct product profit (DPP) measurement. A major consulting firm substantiated that magazines were the most profitable general merchandise item, and that books were among the leaders as well. The wholesalers' trade organization of that time, the Council for Periodical Distributors Associations (CPDA) soon joined the project. The program's budget, in 1988, was nearly $1 million. Additional hundreds of thousands were budgeted over the next few years to bring the findings to top executives at the largest supermarket chains. Publishers, national distributors, wholesalers, association executives, and the consultant were part of those presentations. Beyond those joint sales calls, DPP materials, monographs and video tapes, developed by MPA and CPDA, were key parts of retailer visits by individual publishers, national distributors, and wholesalers.

The DPP program of the late 1980's and early 1990's was very successful, as supermarket publications' footage increased by double-digit percentages. As a follow-up, MPA and CPDA engaged the consulting firm to study DPP figures for discount stores. The resulting study was presented to a then-emerging discounter located in a remote town in Arkansas named Wal-Mart, which was only beginning to display magazines in its growing chain.

Remember as well, in those years, magazines were strictly a 20%-off cover price item, with display allowances bringing their gross margins up to around 27%. Today, and for the last decade, as a result of increased channel competitiveness, gross margins are estimated, modestly, to be over 30%.

The key to the success of the DPP marketing program of 20 years ago was its cooperative nature. For a new program to succeed, it will also have to be inclusive, and it will have to take place as soon as possible

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