Category Management

Working closely with retailers to deliver better and more profitable sales from the magazine category offers significant opportunities for both publishers and retailers alike. One of the proven roads to success lies in category management, with evidence of real sales growth for those that employ it. One impressive example is Waitrose; category management has helped engage shoppers with magazines, and through consumer, market and retailer insight has helped increase basket spend and shopper retention. Sales are up 15.7% in annual value – a significant improvement on the market.

At its simplest, category management is a set of activities that focuses on improving the category offer to the shopper. It doesn’t replace the buying / selling relationship between retailer and publisher, nor change the need for strong retail and brand marketing activities. It is however essential to maximising sales at the newsstand as part of a holistic approach to the category.

Whilst it’s entirely possible for retailers to undertake category management on their own, they typically partner with manufacturers. In the case of magazines, publishers or distributors who can bring experience and expertise in the form of consumer insight, magazine knowledge, data analysis and retailing initiatives to help optimise category performance.

For magazine distributors, category management is a key strategy to develop effective, long term retail partnerships, which are essential to success in the increasingly concentrated retail sector. It adds another dimension to the retail relationship and moves the business association a step towards partnership and collaboration.

The magazine category is complex and can be difficult for retailers to manage. Therefore, unless retailers are supported in making the right category decisions, valuable space and sales will inevitably be lost to other less complex high margin categories. This is as much an issue in independent retailers as in larger multiple chains where category management is most apparent.

Category management is very much a cycle of analysis, learning, advice, activity then back to analysis; it’s neither a one off activity, nor one that delivers overnight results. It requires good relations, a willingness to share data and information and openness in respect of plans and ambitions. Category management therefore requires investment in systems, people and time but is an essential service for publishers and distributors who aspire to leadership in magazines.

Distributors and publishers wanting to develop category partnerships must consider the category from the retailer’s perspective, which sometimes means taking tough decisions in order to develop and protect a relationship based on trust. The overriding objective is to drive maximum performance, not to gain space and listings at the expense of competitors.

So what does success look like? Well, here’s a five point plan for any aspiring category partner or retailer.

1. Who are my customers?
Consumer insight is the bedrock of category management – essentially a detailed knowledge of the shopper, and how they shop. Using consumer insight is the basis of segmentation, range and title selection, as well as fixture layout and promotional activity.

It’s customers that define the role of purchasing magazines in their shopping day – do they specifically choose shops because of magazines? Are they complementary purchases to another item? Are they additional purchases – chosen on impulse or intention? Is the magazine for themselves or someone else?

We know from research that magazine purchasers spend more in store. According to the PPA, magazine purchasers spend 20% above average per visit. Those who purchase magazines as a secondary purchase spend the most - 57% above the average. Understanding these consumers, and ensuring the magazine category meets their needs is a vital component.

A word of caution however; cutting through the mountain of consumer insight to arrive at actionable data can be a minefield. Category partners need to ask, "What do I need to know about my customers to make better decisions that lead to more profitable sales?"

Industry surveys can shed light on the reader: NRS, TGI, Mintel studies and bespoke surveys run through the PPA. Tapping into retailer databases, for example Tesco’s Dunhumby, offers a wealth of insight on shopping behaviour. And, of course, publishers should look to share their own data so that better category decisions can be made.

2. What is the best range for my shop?
Range assortment is important; it varies enormously by store and is largely driven by shopper profile, store format and location. Category partners need to work closely to determine what space should be made available and the sales-per-foot performance needed. Range is a key determinant to maximising profit from the category.

Often, smaller retailers carry too broad a range when more depth can deliver better results. Clearly a retailer who has a broad demographic with high footfall and magazines are a destination purchase, like WH Smith High Street, will have a diverse range. Smaller outlets where the demographic is much tighter, say a village store used predominantly by mums where magazines are a secondary purchase, will have a smaller, more targeted range. This offers an opportunity to own a sector, become known for that speciality, and to become a destination shop. However, in the end, range will be determined by the space available and the profit driven from the category. Category partners are able to work with retailers to understand this sensitive trade off.

3. What should be my title selection and layout?
Whilst it goes without saying that best selling titles should feature in each segment in the range, consideration should be given to associated titles. For example, there is a high degree of planned dual purchase between Woman and Woman’s Own, around 60%, and impulse purchase across the Celebrity and Fashion markets. This can drive up the basket size and help to maximise profit per sq ft.

Best sellers should be given a full facing; they act as signposts to the segment and therefore drive sales. For many, multi facing in the early period of on sale is crucial; and consequently retailers need to be more aware of the need for effective merchandising. Too often, brand leaders are lost in a sea of magazines with an over emphasis on breadth and depth of titles, diluting category profitability. The skill is balancing breadth and depth to deliver both profits for the retailer and choice for the consumer.

Layout is a function of customer flow and navigation. For example, it makes sense to site Soaps next to TV Listings and Children’s – Comics and Teenage - next to Women’s Weeklies as there is a strong cross purchase between these sectors.

Understanding how shoppers move from one segment to another is crucial. Publishers and circulation executives can help retailers by advising them on levels of impulse and cross purchase for their titles.

4. How do I deal with launches and promotions?
Launches remain critical to the magazine category and provide a great opportunity for retailers to drive share and revenue. To maximise this, adequate space and positioning should be given, if possible both in and out of category. Often insufficient attention is given to in-store marketing, even with big launches. This is even more crucial for categories or sectors in which customers spend little time browsing. Launches then need to be carefully analysed to establish the impact on the existing range. Readers typically shop within a portfolio of 3-4 titles, so an additional title could either add to this portfolio or replace an existing choice.

Given the high degree of consumer promotion in magazines, free gifts, supplements and special features that are often supported by above the line spend, it is essential to give sufficient space and treatment for these promotions. Careful analysis of consumer promotions and trade marketing is essential to understand how they contribute to sales and customer satisfaction. Distributors and publishers with adequate access to sales data can help retailers understand this, to maximise spend and profitability.

5. What measures are important?
Category management requires careful analysis. The road to greater profitability lies in robust data and insight. The four key hard measures are:

* Sales and revenue growth
* Customer conversion and satisfaction
* Basket size
* Profit per sq foot

At a title level, availability, preferably against a demand model, is key. If titles aren’t available when customers need them, sales are lost. Publishers and circulation executives can help retailers by improving sales forecasting, and better print planning. For retailers with epos, sales based replenishment will deliver better levels of availability with lower unsolds cost. Those retailers exercising SBR have seen an average uplift of 37% in availability and a 19% reduction in unsolds.

Customer metrics that track the number of buyers vs shoppers, how basket sizes are increasing along with shopper satisfaction with the category are vital. The magazine category needs to be engaging, exciting and attractive to shoppers if it is to deliver maximum performance. Essentially, category management aspires to deliver higher levels of customer satisfaction – this translates to increased sales and better profitability.

These five steps should be seen as first steps to better performance. Category management can also embrace a whole variety of elements that affect customer satisfaction and profitability. For example how magazines are managed in store, the role of merchandising, better supply management and creating theatre and engagement at point of sale.

In conclusion, given there are over 2,500 magazines to choose from in the UK, it should be no surprise that retailers, large and small, need help in creating the right range for their customers and to maximise profit from the category. Multiple retailers and distributors are well placed to work together to do this, with the emphasis on more fixed ranges and greater central control on implementation at store level. Independent retailers perhaps require even more support from wholesalers – to determine locally the right range, selection of titles as well as help with fixturing and supply management.

The retail landscape is changing rapidly, space is at a premium and new categories are emerging as serious competitors. Publishers and distributors need to ensure that magazines continue to earn their space - category management is a strategy that recognises this - to ensure a healthy and prosperous future for magazines.