Magazine oversupply

The discount copies of Woman’s Day bagged with NW are competing for space with the regular copies of the magazine. I am getting more of the bagged stock even though sales data does not justify this. I hate this trend.

I’ve been helping out a newsagent recently and have been surprised at the volume of imported crossword titles they receive. Indeed the space taken by the UK titles limits what the business can do to properly display other titles. The imported titles don’t sell that well yet the distributor continues to supply – taking up space and labour – reducing the opportunity for the newsagent to better manage the business.

I’m pretty sure the folks at Lovatts will respond to this as they have in the past been frustrated at the impact imported titles have on the ability of newsagents to professional display their Australian product.

Despite not selling out since March and with an average sell through of under 50%, someone or some broken system or process within Bauer has decided we need more stock of their discounted magazine packs. It makes me wonder if Bauer has an allocations problem.

Click on the image and see the sales history for yourself.

Our supply should have been reduced, not increased. My preference is that I not get these discount packs at all as they send the wrong message. Shoppers have opportunities for discounts through a more whole of business approach. This serves my needs more than the Bauer enforced discount pack over which I have no control and in fact have to find another pocket to display.

But if I have to take this stuff then get the allocation right please!

Some in Bauer will complain that I am complaining unfairly. The data speaks for itself.

We received 23 copies Number Cakes, the latest mini cookbook published under the AWW brand, 16 more copies than we should have been sent based on our sales history.

Escalating the issue through network Services we know the allocation was a mistake by an allocations person at Bauer. While I appreciate that I’m able to return the covers of the excess supply, it’s frustrating it happened. Why a human is involved at all is an issue for me. This should be automated and based on the considerable dataset they have for my business.

Bauer should give newsagents a mechanism by which we can preset our title requirements as I noted recently including this:

Here’s what retail newsagents need from magazine distributors Network Services and Gordon & Gotch to enable us to compete with supermarkets, petrol and convenience:

1. Scale out based on sales data – you don’t ship all copies provided unless the sales data warrants it.
2. Increase or decrease in supply only if we approve.
3. Add a new title only if we approve.
4. Top only returns.

There are other things I could put on the list, as I have done before, but I wanted to keep this simple. This list of four items is easy for you. Technology could make steps 2 and 3 easy for us and you.

Our competitors have these benefits already. That newsagents do not makes us less competitive and less profitable.

We sold out of the December 2012 issue of Puzzler 125 Crosswords was. network responded by increasing us from 7 copies to 8. While they have their reasons, the sales data does not support it as I am happy to sell out of a magazine late in the on-sale – note that publishers please!  However, that is not the reason for this blog post.  No, on the back of no sell outs since the December 2012 issue, Network Services has increased my supply of Puzzler 125 Crosswords to 9 copies.

Okay it is only one copy more you might say, big deal. The sales data indicates that supply should have gone the other way – back to 7 copies. That’s if network Services was providing the professional magazine distribution services it claims to provide.

No wonder more newsagents are cutting magazine space as a way of taking more control over magazine supply.

I was talking to a journalist last week who is contemplating writing about the magazine retail channels in Australia. He was surprised to hear now newsagents are treated differently to our competitors and that we have no control over the titles we receive and the volume of each title we receive and that our competitors do have this control. He asked how can that be? Welcome to the unjust and unfair magazine distribution model that is structured to make newsagents less economically viable that other retail channels. It’s holding us back and will ultimately account for many newsagents exiting magazines.

Bauer owns Network Services. Bauer management participates in discussions with other publishers on the future of our channel. They say they care about the newsagency channel yet our oversupply continues. The best move Bauer can make to support a healthy and profitable newsagency channel would be to get to the heard of the Network Services supply model that sees my supply of of Puzzler 125 Crosswords increase by one copy on the back of no supporting sales data.  Stop this oversupply creep and you will instantly improve the financial health of newsagency businesses and stop some newsagents looking at how to retreat from magazines.

Bauer is in a better position than any other magazine publisher in Australia to address this. For years, under ACP ownership, they ignored the opportunity. If they do not provide newsagents with the same magazine supply controls afforded to our competitors soon more newsagents will leave the category.

This is a serious issue, one for which there is excellent data supporting the need for urgent attention and supporting my position that gross oversupply of magazines occurs harming newsagency businesses, making us less competitive. Every publisher who wants a strong newsagency channel will call for action on this. If you are a publisher – what are you doing about it?

Click on the image to see the supply and return data for yourself.

Here’s what retail newsagents need from magazine distributors Network Services and Gordon & Gotch to enable us to compete with supermarkets, petrol and convenience:

1. Scale out based on sales data – you don’t ship all copies provided unless the sales data warrants it.
2. Increase or decrease in supply only if we approve.
3. Add a new title only if we approve.
4. Top only returns.

There are other things I could put on the list, as I have done before, but I wanted to keep this simple. This list of four items is easy for you. Technology could make steps 2 and 3 easy for us and you.

Our competitors have these benefits already. That newsagents do not makes us less competitive and less profitable.

Newsagents have easy access to magazine sell through data data through the Magazine Sell Through Rates Report with which they can make a case on oversupply by a magazine distributor.

Using industry standard calculations, a Magazine Sell Through Rates Report identifies the titles that are failing to meet minimum performance levels.

Magazines delivering a sell through of lower than 50% are, in my view, under performing. These titles are titles that I would label as over supplied.

The sell through is the percentage of the stock supplied that was sold.

The image shows one page from a magazine sell through rate report from a newsagency. I’ve obscured their identity.

My management tip for newsagents today is to run the Magazine Sell Through Rates Report.  Look at what it shows for the last year. If you have titles consistently below 50% sell through this is evidence you ought to send to the ACCC as proof of poor treatment by your supplier.

Magazine distributors say to the ACCC that newsagents have control. This is not the case, not with certainty and not for the long term.

This report offers further evidence to magazine publishers as to why newsagents sometimes early return a title without apparent justification.

In an interview in yesterday’s Australian Financial Review, Bauer CEO Matt Stanton forecast that there would be more magazine closures as well as some launches as the business responded to title performance. Newsagents with a copy of yesterday’s newspaper should read the article – page 38.

The bigger story in the AFR article is the growth in digital subscriptions with Stanton claiming 20 to 30 percent growth quarter on quarter. He says they have 116,000 tablet subscriptions across their titles.

Stanton I think mistakenly says that tablet subscriptions are pure profit once you have the back end setup costs covered. This presumes that you have a print product to cover all editorial costs.  My reading on the topic indicates we are not seeing people embracing both platforms in large numbers – it is digital or print. So it would be wrong to say that a digital subscription is pure protect. It must wear part of the content creation cost.

The AFR article reports Stanton saying its feasible Bauer could achieve 500,000 digital subscriptions across titles such as AWW and Gourmet Traveller. The road to such an achievement is by way of current print sales.  I expect strategists in all print publishing businesses see the current print products as the bridge to the platform they expect one day to overtake print in sales and value to the business.  This is why publishers will continue to tell newsagents that print is important to them for some time yet.

An area where the company could save is in oversupply. There are several Bauer titles I’m receiving where sell-through is lower than 50%. These titles are loss making for us. The continued excess supply does not make sense.

I was disappointed to see Get Your Business Online on the shelves of one of my newsagencies yesterday. It’s an expensive special interest title and as such should not be sent unless we request. This is the magazine distribution model I want, a pull model for special interest and other magazine titles that fit a range of criteria. In a pull model I am sure I’d be able to increase my magazine sales.

I don’t want Get Your Business Online because we have had titles for the same shopper recently and they have not paid their way. Indeed, the distributor has this data – there is no justification for now sending us this title other than for them to get paid a fee by a willing publisher ken to get stock onto shelves.

Blah blah blah, same old same old. I’ve written posts like this many times before. Magazine distributor behaviour has not changed. the sooner all magazine publishers realise that the distribution model is what causes newsagents to early return stock sometimes irrationally. It is also what is causing some newsagents to seriously think about getting our of magazines altogether.

I worry that publishers will not act on the model until it is too late.

And magazine publishers wonder why newsagents early return. This week we received a 71% increase in supply of Nexus magazine without any justification in our sales data and for no obvious reason in this issue of the magazine.

Our sales data indicates that no increase was warranted yet some person or process within Network Services thinks otherwise.

This is yet another example of gross oversupply over which newsagents have no control, oversupply that disadvantages us and impacts on our ability to effectively compete in the magazine space.

If this behaviour continues consumers will suffer form lack of competition.

Take note magazine publishers – if you want newsagents to keep selling magazines, fix this type of oversupply!

Bauer sent us more than double the usual supply of the OK! and Cosmopolitan discount bundle. I’m not aware of any reason for the increase. We didn’t receive any collateral with which to promote the cheap bundle.

Regulars here will know I am not a fan of these promotions, of educating shoppers to not pay full price and of us having to fund the discount for what is already a slim margin product. My on-going frustration aside, this increase in supply is frustrating as Bauer has the data necessary to make a better decision.

On the back of a sell through of less than 50% for People magazine, the allocations system / allocations people at Bauer have given us a 25% increas in our supply. There is no reason for any increase in our sales data. Indeed, a decrease in supply is warranted. So, I ask the question of other newsagents: has your supply of People magazine been increased without justification?

I’d rather not write a blog post like this.  I’d rather not have the experience of a supply increase without justification in the sales data, sales data I provide to Bauer daily. I’d rather not have these mistakes occur – if they are mistakes. I’d rather not be put in a position where I think that publishers do this because they want newsagent cash to fund their businesses.

It’s not too much to ask to be supplied fairly based on the accurate data I provide.

We are featuring the latest issue of Mollie Makes magazine at the front of our craft section. We are still growing sales, chasing our capacity for this title. I suspect we are barely half way there based on interest expressed after we sell out.

Mollie Makes magazine is the ultimate special interest title. My experience is that it generates new traffic for us as shoppers come in to purchase the title having been recommended by friends.

I am concerned that the damage done by oversupply is causing newsagents to pass on opportunities presented by special interest titles such as Mollie Makes.  If I am right then shame on those who have dilutes and even killed the passion of newsagents for magazines.