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'AN UPHILL BATTLE'

Magazines have two faces in category management at supermarkets.They haven't lit up their own performance scorecard yet. But they spur impulse sales through outpost displays in health care, cosmetics, meat, produce and other high-profile parts of the store.Despite some solid efforts, category management hasn't powered sales and profit growth in either mainline or checkstand displays. The discipline

Magazines have two faces in category management at supermarkets.

They haven't lit up their own performance scorecard yet. But they spur impulse sales through outpost displays in health care, cosmetics, meat, produce and other high-profile parts of the store.

Despite some solid efforts, category management hasn't powered sales and profit growth in either mainline or checkstand displays. The discipline remains hampered by incomplete issue, title and location data, making a close analysis of performance virtually impossible.

The problem: add-on Universal Product Codes do exist that would let retailers determine specific issues that are selling, the in-store locations they're selling from, and the period of their life cycle at which they're selling, but no chain appears ready to invest mammoth dollars in technology to read that data, for a triple whammy of reasons:

Magazines account for less than 1% of supermarket sales, so it's hard to justify the expense.

Reading the extra code would slow down the scanning process, diminish throughput at the front-end and upset consumers.

The industry anticipates having an extra digit on all UPCs by the year 2005, which could solve this issue, so why spend on an interim solution?

The magazine trade has been pushing hard to resolve this issue, but cooperation from chains ground to a halt this year when information-technology departments became overloaded with Y2K problems. "There isn't even any discussion as to when we'll be back on their front burner," said Michael Pashby, executive vice president for consumer marketing at Magazine Publishers of America, New York. "And there's no way the trade can practice full category management without resolution of the scan-code problem."

Sources point to at least one major magazine that's begun to flip-flop five digits of its code in every other issue, so the publisher and retailers can interpolate which issue is being sold. However, they add, the Uniform Code Council, Dayton, Ohio, doesn't want to endorse more than one code per product, and retailers haven't gotten excited about the prospect of dealing with extra codes.

Despite those frustrations, magazines are taking on a life as sales catalysts in many areas of supermarkets, turning some chains into huge fans and pressing distributors and publishers into new realms of creativity.

Since supermarkets have worked category management through much of their store assortments already, they're now turning their attention to general merchandise. It's an area notorious for its lack of syndicated data, yet magazines are at the top of today's priority list, said Pashby. "It's certainly getting more attention than in the past. Progressive retailers understand the future growth of their stores will be in general merchandise, including magazines, because of the bottom-line lift it brings.

"Of course it's an uphill battle because supermarkets' fundamental purpose is to sell food," he added. Yet figures showing magazines as contributing less than 1% of store sales are a bit misleading; the category matters more than that, he said.

"They're no less important to consumers than they ever were. But stores have grown larger in recent years. Stores used to have eight checklanes within 10,000 to 30,000 square feet. All they needed was 10 copies at each lane. Now stores have 40 checklanes, but only eight or 10 open at a time. You can't sell magazines when people aren't passing through the lane. The in-line sell-through rate hasn't changed much over the years. What's changed is at checkout," said Pashby.

Still, there's no denying that category management hasn't spurred growth in magazine sales -- at supermarkets or any other trade class.

Figures for the full year 1998 show a 5.8% decline in total industry sales, following a 4% slide in 1997. Dollar volume edged up by nearly 1% to $4.53 billion, reflecting "the chaos of the magazine distribution system," said John Harrington, principal at Harrington Associates, a Norwalk, Conn.-based consultancy. Unlike 1996 and 1997, when new titles offset massive single-copy declines by TV Guide, National Enquirer and Star, in 1998 "all levels of the business were down, including the Top 25, the leading 100 and the rest of the line." He attributed some of the decline to large wholesalers abandoning smaller retailers.

The good news for supermarkets: on a 4% sales climb in the trade class, they increased their share slightly to 45% of dollar volume, or a bit more than $2 billion. In explaining his own figures, Harrington said that wholesaler sources may have classified stores such as Wal-Mart Supercenters as supermarkets, discounters or a different entity, so they may be off slightly. "The supermarket share of the business has been constant for the past four years. The gain shown is insignificant," he noted.

What the figures reflect then is an industry crying out for savvy category management: the variety of titles has soared this decade from 2,600 to 4,500; the biggest titles are declining in unit sales, causing a flatness overall; and total dollars are up because of cover price hikes.

Indeed, "progressive retailers are driving the shift from a publisher-push system to a consumer-pull system. They very much want to look at the whole category, sub-segments, assortments, titles and quantities to create an order regulation system that gives them better sell-through and higher returns," said Ellen Gussin, president of Allen Levis Organization, the Northfield, Ill.-based consulting firm acting as facilitator for the Magazine Retail Advisory Council, which is jointly funded by publishers, national distributors and magazine wholesalers.

"Sophisticated chains want to assort by store clusters, and most wholesalers already have powerful models that dictate assortment based on demographics of a marketplace," added Gussin. "They work pretty well, and publishers are getting more involved to help their own specific titles."

Yet Wal-Mart can activate a technology edge whenever it wants that would enhance its inventory capabilities. Sources acknowledge that the mega-discounter has scanners in place that are able to read issue code. "If they begin using them, it would help them cluster and assort titles better," noted Gussin. "It would be one more example of how Wal-Mart would raise the bar, and everyone would have to comply in order to compete."

To help unearth inefficiencies in magazine distribution, the UCC and MRAC are creating a flow chart of how titles move from creation through to the reader. It will document transportation, who authorizes decisions at each step, how distributors interact with printers and break-up agents, and more. "There's merit to the argument that the distribution model needs to be streamlined. So many people touch the product, it's amazing," said Gussin. "This will give all members of the supply chain a clear understanding of areas they're not involved in, and create a common platform for discussion."

TAGS: Walmart