magazines

“Only Women’s Day and People’s Friend today, my daughter gets her fix online now.”

The mother spoke with a tinge of sadness in her voice. They shop regularly together and visiting the newsagency was a treat because they all found what they wanted. Mother, daughter and mother’s mother. The daughter is more satisfied now with Girlfriend and other sites online than a magazine.

As the three women left the shop I mused that it would be handy to track traffic to websites like that for Girlfriend and to plot these compared to retail sales. There must be an intersection which publishers watch for. Based on this brief comment at the counter I felt out of date.

Young girls and boys are smart and if they can satisfy their interest in up to date news and information online then why buy a magazine. This where plotting the intersection would be valuable. It doesn’t take long for habits to change. For the short term we need to work harder at building the magazine buying habit among people 25 and younger. We need to help mothers pass on traditions to their daughters.

Most magazines are not affected at the moment. But at the fringes there is enough activity to measure.

The online press gazette, in Heseltine proposes magazine distribution levy, reports that the former deputy prime minister believes the industry should raise an “administrative levy” to help smaller shops sell more magazines. It claims he is backed the Periodical Publishers’ Association. Hesletine is quoted: “I was appalled by how bad the relationship was between publishers and newsagents. It didn’t make any sense for the producers not to see eye-to-eye with the front end. Nobody benefits from inefficient distribution, least of all publishers.”

With 65% of titles carried by Australian newsagents cash flow negative for newsagents, it would not be surprising to find that newsagents here start to organise themselves for similar financial support from publishers. Sales of popular titles suffer from the financial and operational drain on newsagents by the specialist less popular titles. That is, the very point of difference which publishers and newsagents crave about newsagencies is starving the channel of resources to compete with supermarkets, petrol outlets and convenience stores which sell only the top performing titles.

The founder of Rolling Stone is quoted in this Wall Street Journal article which contemplates the future of magazines and, in particular, online published content. Wenner is positive about the medium term future of print magazines. The article is worth reading.

Eric Sink likes to predict the end of businesses. This entry at his blog predicts the end of software developer magazines. His criteria are sound as are his conclusions. Computer magazine sales are in free fall and software developer magazines are leading the pack. Given the timely information about software development available online compared to in print, it makes sense to kill these titles before they cause all involved to loose too much money. Newsagents could use the space saved to better display titles in growing categories such as crosswords, crafts, women’s weeklies and fashion.

How many hair magazines in a newsagency is too many? Six? Eight? Eleven? I’ve been in several newsagencies this week and each has eight or more different hair titles on their shelves and one with eleven. Only two of the titles come close to paying their own way. Newsagents are losing money on the rest. I’d suggest that average consumer interest in hair would be satisfied by a maximum of six titles and probably four. Newsagent could cut their range in half and start to make money out of the hair segment. This is where the problems with the magazine supply model kick in – getting supply of a title cut is difficult for newsagents even if they are losing money every month. If a distributor decides to cut a title and not carry it at all, another distributor is likely to pick up the title and push it out to newsagents – continuing the cash-flow problem.

Newsagents are overloaded with underperforming titles. The segments where this is most evident are: hair, cars, weddings, computers, computer games, science, crafts and music. It is in these segments that the return on investment is the lowest and newsagents are almost powerless to correct the situation.

The problem is so serious that the ACCC ought to look at the supply model. Newsagents are the only businesses not being compensated for their time and resources in the event of a title not selling.

I have talked here before about Cosmos magazine. That title is a good example of the problems with the magazine supply model. Here it is ten months into the life of the title and most newsagents are still losing money. Many have hundreds of dollars invested in the future of the title. These are small business operators unable to pay themselves an adequate wage yet the magazine ‘system’ forces them to invest capital in a magazine launch like Cosmos.

The system is sick and newsagents are running out of cash.

The Guardian carries a story reporting that former UK Deputy Prime Minister and owner of Haymarket Publishing Group, Lord Heseltine, is urging the magazine industry to provide financial support for local newsagents. The story says, in part:

The former deputy prime minister believes that the industry should raise an “administrative levy” to help independent retailers sell more of their magazines.

Although the details of such a fund are still to be worked out, Ian Locks, chief executive of the Periodical Publishers’ Association, said Lord Heseltine’s suggestion had “a lot of support”.

Newsagents in Australia are challenged in carrying magazines which their competitors choose not to carry. We know from recent cash-flow research that around 65% of titles are cash-flow negative. Any support from publishers to underpin the viability of such range in retail would encourage newsagents who might otherwise be looking to reduce range. It will be interesting to see if Lord Heseltine’s proposal gains traction in the UK.

about

There is no magazine category more attuned to fashion than crafts. For ages it was quilting and then scrapbooking took over as the popular segment in the category. Now it is beads magazines. Sales are very strong thanks to new titles and the phenomenal growth of beads at retail – Kleins, Diva and others. Smart newsagents will use the bead magazines to anchor the craft area to make it more appealing as well as co-locating the titles at the counter. We’ve been doing this in my newsagency in recent weeks with excellent success.

This is where newsagents can excel – driving what other retailers would consider ‘fringe’ titles to underscore newsagents as having the depth of range to satisfy interests in areas such as beading.

Craft magazine customers are more likely to buy more than one title compared to most other category customers.

Scrapbook titles did well for two years and is still reasonably strong. Let’s hope beading stays popular just as long.

Talk to any newsagent and they will tell you that teenage boys are those most likely to steal products. The data suggests otherwise. Women’s magazines are stolen more often and I’d bet that these are being stolen by women and not teenage boys. Sure there are adult magazine plastic covers left on the floor, but Woman’s Day and New Idea have no plastic cover so the only evidence is in the data and few newsagents look at theft data to understand the nature of the problem. Women and tidy thieves too, they leaf little in the ay of tracks. Boys rifle through adult, sports and computer magazines and make it look life a theft scene but the reality is these categories generate less theft for newsagents.

This story from Mediweek claims that US celebrity magazines are about to significantly ramp up their online presence. As better mobile devices become available and a viable advertising offering emerges for publishers and advertisers over the counter will suffer at the hands of online. While publishers will disagree, logic dictates that moves like those forecast in the Mediweek story have to be considered in the context of the best revenue model for publishers. This means online, ultimately.

Footnote: This story from the New York Times is also on the same topic and talks about Conde Nast beefing up online presence for some of its titles.

Good to see the Famous masthead change today – this should boost sales. The pink is replaced by a colour closer to red.

The National Federation of Retail Newsagents has now published its guidelines for handling magazines with covers which may be offensive. Given the negative feedback some newsagents have received from customers on Explode, Picture, People, FHM and Ralph, it would be appropriate for Australian industry associations to consider similar guidelines or to at least discuss the situation with publishers. I’m not sure what I would do. I have had customers complain to me but then if I hide the titles I know sales will tank. It’s a challenge but cannot be ignored.

Mike Burgess, the wireless editor of London-based Emap Interactive, is quoted in this MediaWeek story (subscription required) as saying that an online strategy is crucial for magazine publishers. He outlined three key areas of a successful multimedia strategy: community, customization and user-generated content. This is exactly what we are seeing in Australia with successful online strategies from magazine publishers of titles such as Vogue, Explode, Better Homes and Gardens, ZOO Weekly and FHM.

I know of some newsagents who would rather magazine publishers ignore any online activity. My view is that it’s important for the brand and in most cases will not, in the medium term, take sales from retail. In fact, watching online activity is providing my shop with opportunities for in-store tie-ins since we have an internet terminal and can use this to connect the online with offline.

Helen Kingsmill, Executive Director of the Magazine Publishers of Australia, has written a good piece for The Australian today about new magazine management guidelines for newsagents. The MPA project is important in that it provides newsagents structure for magazines in their shops. Given the vast range of titles in newsagents (compared to any other retail outlet carrying magazines) structure is crucial. The project also breathes life into the range which retailers competing with newsagents choose not to carry. The challenge now is to get newsagents to embrace the strategy and reinvent their magazine story. I was the first to implement this strategy when it was a trial in my store in 2004 and am certain is part of the reason for our above average success with magazines.

The UK Home Office and the National Federation of Retail Newsagents have reached agreement that Zoo, FHM and Loaded should be placed on according to this report at M&C News. It will be interesting to see if self regulation works for these titles.

Here in Australia, Zoo, People, Picture, FHM and Ralph are regularly browsed by boys under sixteen and it’s a challenge for newsagents to police. While it’s not our job to be censor, that boys can so openly browse the material is offensive to other customers. Explode is another title posing challenges for newsagents. I hear of complaints each week from customers offended about it and while from a publisher perspective any controversy is considered good for sales, the reality is that sales are not good. Any title upsetting customers have to be profitable to remain in public view.

As I have documented here recently, newsagents are being hurt by a magazine supply model which is inappropriate for the more competitive environment of today. The cash-flow data shows that 65% of all magazines are cash-flow negative. This drain impacts on the ability of newsagents to properly service top performing titles. So, it is in the interests of publishers of popular titles to address the issue and over the coming days I will discuss here several recommendations. The first relates to how newsagents manage magazines themselves. Rather than trying to be all things to all titles, newsagents need to pursue low hanging fruit, that is, top selling titles.

Here is a list of things I’d have retail newsagents do to better leverage magazines for profit:

1. Focus more on your top 50 titles and less on the rest. More growth will come from top selling magazines.

2. At your high traffic magazine area promote, left to right, with a full column each: Woman’s day, New Idea, NW, Famous, TV Week, Aust Woman’s Weekly. (Change two columns to Take 5 and That’s Life on Wednesday)

3. Use the lottery counter, create a second display for women’s weeklies. Display a full covers.

4. On the wall above newspapers install a acrylic pocket to promote weekly titles for the first two days of their on sale period only.

5. Create a magazine of the week area at the lotteries counter. Separate to anything any other marketing program drives. On days 1 and 2 of the on sale for weeklies promote them and on day 1 of major monthlies promote them (AWW, Better Homes, Family Circle).

6. Create a feature magazine display space near newspapers – use this to promote your range, craft one week, dogs another week and so on.

7. If a title is to be in more than one pocket only ever do this vertically. Do not display horizontally. If you are short of room only double up titles (displaying part of the masthead) in the middle section of a tier.

8. Anchor categories with well known titles. i.e. put Wheels and Motor in the top0 3 or 4 pockets of two columns in the cars section; Your Garden, Burkes Backyard and Gardening Australia in the top 3 positions (at least) of three columns in gardening. I call this signposting. Choose titles with common words. For example, four Golf magazines will look better in a waterfall display than spread through sport. The mastheads must scream the signpost word.

10. Once your magazines are out on a Monday, Wednesday and Friday, step outside the shop and look at the message, make sure it is consistent. Then walk in and make sure that it is consistent at each key place in the shop.

Many newsagents do this work already. Their only compensation is 25% of cover price. Newsagents receive no retail display allowance or any other compensation for providing additional coverage to a masthead. I’d like to see newsagents paid bonuses for sales growth. This would treat them an business people rather than process workers.

I have been contacted by several magazine executives who claim I am unfairly attacking their businesses in this series on cash-flow. The reality is that I am reporting what the data shows and nothing can colour that. Magazine distributors created and manage an unfair model. Publishers support the model.

Below is a graph showing the sales decay for the major women’s weekly magazines in Australia as recorded over a common month in 10 newsagencies.

Consumers shop early in newsagencies compared to other retail outlets (petrol, convenience, supermarket) based on comparative data I have seen.

The newsagent decay data demonstrates the importance to newsagents of having weekly titles on display on day one of the on sale period. There is no value to newsagents in promoting any of the weekly titles beyond day three of the on sale period.

Comparing this data with data from the same stores from a year ago underscores the importance of day one with 75% of sales growth in 2005 compared to 2004 was achieved on day one.

In my own shops we manage to leverage the decay to our advantage. We actively promote weekly titles in three key traffic positions on days one and two and roll back for the rest of the week to a single position. Whereas we used to actively promote weeklies all week, we have freed up real-estate for other uses later in the week. The sales results speak for themselves.

Early in the week is when we can reach the low hanging fruit and this is what newsagents should focus on.

The following table ranks the cash-flow impact of nine titles for each of six newsagents in my research into the cash-flow impact of magazines. Positions 1 through 5 are the worst performing titles by the cash-flow measure. I have included positions 20, 30, 40 and 50 to illustrate the distance between these and the worst titles.

This cash-flow research has uncovered the bottom performing titles as the problem. While newsagents complain about the impact of competition t the popular title end of the marketplace, these titles are strongly cash-flow positive. It is at the end of the marketplace which newsagent competitors do not touch where the cash-flow problems occur.

In the six case study newsagencies, the annual cash-flow of the bottom 50 titles ranges from $-3,739.00 for the rural newsagency to $-16,655.00 for one of the suburban newsagencies.

The bottom 50 titles account for between 18% and 20% of all negative cash flow. Put another way, eliminating the bottom 50 titles in the case study newsagencies would cut negative cash-flow by between 18% and 20%.
Given the way newsagencies are valued, a cash-flow savings of $4,000 conservatively equates to a $12,000 increase in the sale price sought for a newsagency by between $12,000 and $60,000.

There are some titles which the data suggests ought to be eliminated altogether and others which will need to be considered on a store by store basis. Network wide title elimination cold be undertaken by analysing consumer satisfaction within categories. Newsagents carry too many magazines in the Wedding, Hair, Computer and Car categories. Titles cold be eliminated without consumers noticing. Newsagents would save millions in cash-flow terms over a year.

These numbers are an indictment against the magazine supply model and the companies in control of that supply model. Newsagents cannot sustain such losses from a small number of titles.

Newsagents need to consider cutting the bottom 50 titles from their product mix. Doing this would not impact their range point of difference. Magazine distributors have an obligation to work with newsagents on this. I would be interested to hear what the ACCC would say if a magazine distributor continued to supply product in a situation where a newsagent has proven that continued supply creates a loss situation for them.

Magazines are important to newsagents, especially the range they carry which no other retail outlet carries. However, equity has to return to magazine supply arrangements and I content this begins with elimination of the bottom 50 titles from each shop or at least supply on terms which are equitable than those imposed by distributors today.

Considering a full year of data from six representative case study newsagencies I have been researching, on average, 31% of all titles supplied over the year analysed were found to be cash-flow positive, 1% are cash-flow neutral and 68% cash are flow negative.

The following table breaks down this data by each of the case study newsagencies and indicates the associated cash-flow (operational profit and/or loss). The difference between most of the stores, in percentage terms, is not as great as one might have expected.

An immediate question is why would newsagents tolerate such a situation? The data suggests that concentrating only on the top performing titles would be the most logical course of action. Of course, this is common practice in supermarkets, petrol outlets, convenience stores and other retail outlets selling newspapers. They do not take anything more than 10% of the range of magazines in a newsagency and focus only on the cash-flow positive titles.

These non-newsagency magazine outlets usurp profits from top performing titles without sharing the burden of the bottom performing titles, thereby reducing a newsagent’s ability to offset the cost of loss-making titles. This leaves successful departments of newsagencies to cover the losses incurred in the magazine department.

I doubt that any newsagent has calculated the full cash-flow impact of magazines, certainly not to the extent of this study. For the first time, my research includes the cost of real-estate and the cost of magazine-specific labour to reach an accurate cash-flow impact position for each title.

So, the answer to the question why would newsagents tolerate such a situation is: because they never knew the extent of the cash-flow problem for their magazine department as it has always been hidden by other successful departments and by the complexity of the magazine supply model.

Newsagents cannot sustain the current magazine supply arrangements for titles outside the top performers.

Based on my research into the cash-flow performance of magazines in newsagencies, the top five categories in order are: Women’s Weeklies, Partworks, Women’s Interests, Crosswords & Puzzles, and Teenager. While sales are stronger in other categories, longer shelf life and a lower sell through rate lead to a significant (detrimental) cash-flow impact.

The Special Interest, Sport & Leisure, Children’s, Motoring and Adult categories are all cash-flow negative. Special Interest is the worst performer and within that, the Travel & Tourism and Other segments are in trouble. Other is a catch-all segment that includes such seriously cash-flow negative titles as: New Dawn, Irish Echo, and Adbusters. These titles are not alone in causing the cash-flow problem: 90% of titles in the Other segment of Special Interest are cash-flow negative.

FHM has launched video content in the UK for Sony PSP devices and mobile phone content in the US. (Source: MocoNews.)

It’s not a surprise that brands such as FHM and Playboy are connecting with consumers this way. This is just the beginning. Freeing content from the page makes the stories the product and this offers a revenue model considerably beyond the traditional magazine model. This makes celebrities more valuable than ever. We have a customer who visits our shop weekly to use an internet computer to download and print (in colour) every story about the star she obsesses about. Her weekly spend is usually in excess of $50.00. If she had a place she could go and pay this amount for every story about her star I’m sure she would.

Zoo Weekly sales information for several newsagencies suggests that while it has some fans it is not setting the world on fire. The best way to compare a new title like this is to compare sales to other titles in the segment: People and Picture are the closest comparisons. Sales for Zoo are running at between 20% and 30% of Picture. The data sample set is too small to consider this indicative of anything. In my view Zoo needs to identify a specific niche. In its present form I reckon it’s soft in terms of content of interest to prospective readers. This approach may be fine for the supermarkets. In newsagencies the title in in a segment where it is the soft (weak) product.

With Bazzar, OK! Australia and Australian Women’s Weekly all featuring a free lipstik with magazine purchase this month, we’re running a lipstick promotion this weekend featuring all three titles.

Weekly women’s magazine Star has had a make-over and is looking like a contender. This week’s edition is a dramatic improvement on the mediocre product we’ve seen until now. The next step has to the a considerable marketing campaign to win new readers and try and woo back people who have the title a go and didn’t like what they saw. Publishers of Star cold use their on-sale day (Wednesday) to their advantage in newsagencies given that by then sales of other women’s weeklies are soft having peaked Monday, Tuesday.

We’re using flash lights to draw attention to Famous in the window of one of our shops. This 5MB movie file shows the impact. The challenge with Famous is its covers. Anecdotal consumer feedback suggests the covers are soft.

The latest covers of Ralph and FHM feature Eva Longoria, or so they claim. Which one is the real Eva? Or, has Eva undergone an extreme make over? The Ralph cover looks somewhat ‘touched up’. I wonder what Eva and her people think of this – but then maybe it’s what comes with being a celebrity because of your body.