Push-me-pull-you

Recent surveys suggest that overall retail sales growth is around the +1.3% mark, with growth coming especially from the non food category (+2.2% - which includes magazines), with food being flat at best (-0.1%). The current position caps a 30 month upward trend in sales growth indicating that there are not too many issues on the UK retail front at least. Figures over a much longer term show spend on food and non-alcoholic drink declining as a proportion of total expenditure by UK households, with spending on alcohol and tobacco buoyant and bucking that proportional trend. Since 2001, whilst having to spend more of our hard earned income on necessities such as clothing and utilities / energy, we have decided to spend heavily in areas such as personal care and recreation. So far, the picture painted bodes well for the magazine category, doesn’t it?

Considering the second quarter of the last set of magazine ABCs, the value of the market has grown very slightly though below the rate of inflation, but with sales volumes down nearly 2% year-on-year. The consumer’s appetite for regular, fresh and up-to-date content has bolstered the weekly market and, without this, both volume and value would be significantly negative. During the first eight months of 2007, magazine closures have outpaced launches and, just comparing launches alone, they are down over 10% year-on-year.

So, when general consumer market trends are conducive to selling more magazines, why aren’t we doing just that? Commentators emanating from the publishing fraternity will always look to accentuate the positive in their marketplace. It’s true, but one can’t help but ask questions on the general patterns of sales and, subsequently, may want to know more about what is going on at retail level, especially considering we are at an all time high for newspaper and magazine stockists in the UK?

Consumer volatility

Consumer purchasing patterns are fickle. They will shop instore in a variety of moods and shopping missions and have their own repertoire to look for as well as whatever may take their fancy at that moment in time. It seems that more and more buying decisions are being made whilst stood in front of the display. Magazine buyers are different in that they tend to be younger and more upmarket and spend around 60% more instore than non-magazine buyers. Their visit frequency will vary and they have an array of shops to choose from across which the role of the magazine category instore will be quite different. I think we are all agreed it is complex, and we may also generally agree that magazines are engaging, and browsing and buying is a pleasurable experience, undertaken by a knowledgeable consumer. You may judge these dynamics to be volatile enough, but to what extent does the ‘push’ model of copy allocation detrimentally drive volatility?

Retailer share of RSV has changed over time and this movement has been accelerated by acquisitions and organic growth from the multiple supermarkets especially during the last five years. WHSmith High Street, Martin McColl and Spar have all taken a hit, but the major decline in sales volume has been experienced in independent newsagents. Today, fewer magazines are being sold across more newsagents and this trend in itself poses a significant challenge to getting the right product in the right place.

Who has the knowledge?

But who knows best? Editors and their publishers will tell you that they know their targeted consumer best and they know exactly how to pitch the content and front cover to maximise circulation revenue. Distributors profess to have the knowledge of the UK marketplace and therefore are best placed to help decide on print quantities, allocation strategy and analysis coupled with logistical expertise. Wholesalers, who have a direct relationship with those interim consumers – the retailers – will always review what they have been asked to achieve and reserve the right to make minor adjustments – based on a detailed understanding of their geography as determined by their contracts - along the way.

And then there’s the independent retailer, who meets the consumer face to face and looks to respond to requests supported by the rest of the supply chain. And he of course knows when Mr Evans is on holiday and will temporarily not want his copy of Racing Pigeon News, that his shop refit over a period of four weeks will hit sales and increase unsolds if something isn’t done about it and, when the dust settles, he will have two more wall metres of magazines, in a vastly improved shop, that provides the possibility of selling more copy, but only if he is supported effectively.

Quite clearly, there is no one level of the supply chain that can claim to know it all. The knowledge is dispersed but, nevertheless, it is all there, but only if we truly want to mesh it together through a different service offer, a greater balance in the decision process and improved two way communication. It’s true to say there is very little sign of any significant momentum behind this approach, although there are one or two tests taking place that will aim to prove that a different service provision for independents can deliver rewards for all.

For years, the top down approach has driven harder to achieve results, but waste levels are at an all time high and those sales volumes just aren’t coming through. It’s time to work smarter, collaboratively.

Enough already!

Today’s independent retailer is in near exhaustion after struggling with those allocation systems. Wholesaler online adjustment provision was dressed up to be the future, but publishers will not allow the wholesaler to honour the changes made and therefore those marketing systems simply get overlaid when determining what is distributed. Feedback reveals that, if offered a choice, independents would rather have less of the titles they don’t want, but more of what actually sells. The industry is agreed on communicating launches and promotions 48 hours in advance of distribution (ISSA), but the lion’s share of copy allocation adjustments are invisible and, consequently, Christmas comes every morning for the newsagent – only then will he know whether he can serve his customer or not. And then there is packing accuracy, damaged copies, out of stocks, due book management, additions and deletions to range, supply restrictions, supplementary distributions, order amendments and seasonal adjustments all of which conspire to place sales and supply patterns in the blender, thus generating even more volatility. The ability of wholesalers today to consistently manage long term single copy orders into independents is in serious doubt and future plans to increase home news delivered magazines – a huge and untapped route to market – could be jeopardised.

Tailored approach needed

Over the years, multiple retailers have tended to clone their shops based on magazine fixture space with a grading structure aimed at providing a close fit of magazine range to space. More recently, dynamic ranges to match local profiles have been attempted, an approach that more closely suits independent retailers. Today, there are over 1,000 multiple grades offering an array of service offers to multiples. For independent newsagents, there is no such provision – it has been a one size fits all landscape since the beginning of time. Yet independent newsagents trade in the most complex and niche situations that require a tailored approach to supply. Indies want a service that provides the backbone of national bestselling titles coupled with a provision of specialist and niche titles in order to serve their unique locality.

The wholesaler needs to know the magazine space deployed, display method, range capacity, home news delivered copy and have an understanding of the consumer types that shop instore. This information then needs to be matched with a copy allocation system that can deal with these dynamics so that a tailored service offer can be provided. Range and sales development strategies can then ensue, in conjunction with an improved analysis of sales patterns which can go towards the ultimate segmentation of independent retailers. This will also allow for the monitoring of shelf space changes across the industry which could allow wholesalers and publishers to devise support strategies on how to maintain and grow magazine space instore. Seasonality could be managed simultaneously on both a micro and macro scale much more effectively than it’s ever been done before. And the EPOS investment, totalling several thousand pounds, could then be put to full use, which in turn will support data communication in the exploitation of sales based replenishment.

Training support for independents can then be devised with a view to developing a consumer facing website that visually promotes the huge range of magazines available in the UK which can be used by newsagents live instore to promote and sell the category. The product lends itself perfectly to this medium and can provide a multitude of solutions in today’s marketplace. Next comes incentivisation… but let’s stop dreaming for a moment and get right back down to reality.

Financially, the determination of magazine supply has a significant impact on the invoice level and profitability of newsagents. Getting it right, more of the time, is something the newsagent strives for and he is also realistic about sharing control - fully understanding that the publisher ultimately picks up the cost for unsolds. Leaders in the supply chain really must grasp the nettle and move initiatives forward at a far greater pace. It is a race against time, for the longer we leave it as it is, the faster more and more magazine space will go to other competing product categories instore.