By Steven Etter, President/CEO, Harrisburg News Agency
The Newsstand Industry Council (NIC) had an ambitious agenda for its third meeting, held on August 13th. The scope of the discussions and progress made say much about the determination of the participating publishers, wholesalers and national distributors to use this new forum to effect real, timely change. Here’s a summary, including comments from various NIC participants.
On the retailer outreach front, now that two “One Voice” slide presentations summarizing the magazine category’s supermarket metrics are ready for use in meetings with retailers, the group agreed to work together to coordinate wholesaler and national distributor outreach efforts as much as possible.
The focus will very much be on retail top management, as well as buyers. This formal initiative will run parallel to more “grassroots” efforts encouraging all who have contact with retailers to employ these presentations.
Talking points to complement the graphic presentations are now being developed, including work by a subgroup to identify emerging newsstand industry issues to be included within these talking points.
DSI president/CEO and NIC participant Mike Porche stresses that the industry will also need to frequently update magazine/book performance benchmarks, along with benchmarks for competitive categories, in order to realize a long-term benefit from this initiative.
Another key initiative underway is development of a voluntary retail best practices white paper for scan-based trading that will reflect the input of all members of the distribution chain.
Gil Brechtel, president/CEO of Magazine Information Network/MagNet and a member of the NIC’s SBT subcommittee, points out that it’s estimated that retailers representing 27% of total U.S. magazine dollar sales are already in SBT relationships with wholesalers.
“It’s time for the industry to work together to develop SBT best practices,” Brechtel says. “In my opinion, the first step is to provide retailers and wholesalers with recommended systems requirements that retailers should demonstrate that they can meet. From previous experience, the majority of shrink appears to be caused by lack of systems integrity on the retailers’ part. In addition, we should recommend that retailers who are in SBT relationships with wholesalers support our category, as they certainly benefit the most in SBT relationships, from both financial and operational perspectives.
“The NIC SBT subcommittee, which includes wholesalers, national distributors and publishers, will discuss and recommend voluntary best practices for the many issues involved, including shrink, cashflow issues, and returns handling, among others,” Brechtel continues. “These issues are intertwined in wholesaler-supplier relationships, and these discussions will be time-consuming. However, if we don’t start now, more retailers will be in SBT relationships with their wholesalers, and wholesalers’ financial situations will be further compromised.”
"If SBT is conducted in accord with established standards and best practices relating to data quality, data synchronization across all channel partners, access to POS data, the ability to audit, and systems integrity, it could present a strategic opportunity for the magazine industry to enhance its competitive positioning at retail,” comments Michael Sullivan, president/CEO, Comag Marketing Group. “In exchange for the retailer benefits under SBT, it is likely that the magazine industry will experience improvements in the quality and quantity of merchandising space that the retailer devotes to the category, thus acting as a catalyst to grow sales, in conjunction with realizing the operating efficiency improvements afforded by SBT."
“Obviously, SBT is complex, involving considerations for all involved—and most of all for publishers,” says DSI's Porche. “Publishers have the most potential risk on a number of fronts, including possible added costs; auditing requirements; tax nexus and insurance issues; and the possibility that, for accounting purposes, they might need to delay declaring revenue until off-sale, instead of the current dominant practice of declaring it at on-sale. In return, publishers have relatively little to gain, in our view.”
However, Porche adds that he believes that NIC will produce “a solid document" with well-considered recommendations.
Seasonality issues were also high on the agenda. Since NIC’s first meeting, Curtis Circulation Company president/COO Robert Castardi has been emphasizing that significant opportunities for increasing sales are not being realized because many retailers continue to make category decisions based on using sales data from an immediate previous reporting period rather than from the previous, comparable season—resulting either in over- or under-allocations.
For example, for mass merchandisers, magazine allocations should be higher during the holiday season when their traffic is heaviest, so using summer magazine category data results in under-allocations—just as using data from holiday or stronger months for slower-traffic season planning results in over-allocations. The same principle applies for convenience stores, where allocations should be higher in their heaviest traffic, summer months, and adjusted downward for lighter-traffic seasons. Using the appropriate, comparable-season data enables having the right number of copies on hand at the right time to satisfy predictable consumer demand.
At Harrisburg News, we began working with retailers to implement use of season-comparable data soon after the first NIC meeting in March, and the results have been very encouraging.
NIC participants agreed to develop an industry white paper for dissemination to retailers that will detail seasonal category trends and the benefits of using season-comparable data. Individual ND’s will help wholesalers and others spearheading this project by supplying in-depth seasonal trend analyses of key magazine editorial categories.
A forth area addressed was merchandising. Taking costs out of our industry is critical to enhancing profitability for all, and I’ve been among those within NIC strongly advocating that we analyze how we can reduce redundancies while maintaining or even improving in-store servicing levels.
The group, noting that in-store functions break into three basic areas—getting publications from the back room to the store floor, merchandising on the floor, and collecting data—focused on how timing might be coordinated among wholesalers, national distributors and publishers.
NIC members also discussed the possibility of exploring joint efforts to handle common, noncompetitive operational functions or areas, such as overnight copy shipping.
Finally, the group discussed the need to address a misperception on the part of some retailers that publishers are lessening their commitment to single-copy circulation. There was agreement that the magazine category needs to convey more effectively to retailers that newsstand sales are critical and highly valued within publisher business models, and that subscription efforts have always coexisted with newsstand marketing within those models.
NIC will be developing plans to incorporate information about publisher models and the newsstand’s key role within these as part of the retailer outreach efforts described above, as well as through separate communications.
At the same time, all agreed that continued focus on improving efficiencies and intensified efforts to develop effective promotions (including those aimed at driving multiple title sales), permanent displays, regional initiatives and other sales-enhancing programs are the keys to demonstrating the industry’s commitment to retail in concrete fashion.
All in all, a very solid day’s work...to be continued at NIC’s next meeting in mid fourth quarter.
Reporting assistance: Karlene Lukovitz
