For a long time, supermarkets treated magazines like the day-old-bread bin: a necessary evil, perhaps, but not a product category that required or merited a lot of hands-on attention.
Now, however, a growing number of grocery retailers -- with a boost from some publishers, wholesalers and distributors -- are embracing category management of single-copy magazines and are beginning to tap the profit and merchandising potential of what has become an estimated $1.9 billion segment of the supermarket industry's annual sales.
"Marketing of magazines in supermarkets is getting much more sophisticated and rational," said Christopher Little, president of the Meredith Publishing Group, the Des Moines, Iowa-based publishers of Ladies' Home Journal, Better Homes & Gardens and nearly 100 other titles.
"The handling of it has been so dispersed, with so many wholesalers and so many titles available, that it's been a rather old-fashioned system. We're starting to see evidence of a recognition by retailers that if they approach it in a more sophisticated way, they can sell more magazines and make more money from them."
Many obstacles remain, including the challenge of selecting titles to meet the demands and demographics of consumers in local markets, the inadequacy of current UPC codes as a tracking mechanism, and a high-stakes struggle between retailers and the supply community over who will eat the huge carrying costs of unsold copies.
"We are still way behind other categories in the supermarket" in moving toward category management, said Richard Jacobsen, president and chief executive officer of Time Distribution Services, a New York-based unit of Time Inc. "A lot of other packaged-goods industries are a lot further ahead than we are in understanding the basic needs of consumers."
"The whole issue is something that's still very much evolving," said John Harrington, president of Harrington Associates, a Norwalk, Conn.-based provider of distribution-related services to publishers and retailers. "It will work eventually."
The issue of category management aside, single-copy magazine sales show tremendous sales and profit potential.
The rule of thumb is that magazines account for about 1% of sales industry-wide but 4% of profits, partly because they're prepriced by the publisher and therefore resistant to discounting pressure. They're the largest general-merchandise category in the grocery aisles. And while sales outlets of all types average less than a 40% sell-through of single-copy publications, according to Harrington, supermarkets already sell-through more than 50% of their magazines.
In fact, despite treating magazines as a backwater for so long, supermarkets already provide 44% of single-copy magazine sales in this country, making them publishers' single largest outlet by far. Discounters account for another 18% or so, and bookstores only about 7%.
A still-growing array of about 4,500 magazine titles now are available to supermarket managers, who already face the challenge of accommodating countless categories of merchandise vying for space in the store. Of those titles, between 400 and 500 account for 92% to 95% of all sales in supermarkets, noted Time's Jacobsen.
"So we've had this channel built on pushing product into the system, and as a result you see all this stuff in there that may have no relevance to the consumer shopping there," said Jacobsen. "The supermarket retailer wasn't being given a lot of reasons to get involved or invest in the category."
The overlay of inefficiency in supermarket magazine sales finally began yielding to the discipline of category management only three years ago, when a wave of consolidation reduced the wholesaler ranks by about two-thirds. Many supermarket executives used the shakeout to obtain better terms and more attention in supply agreements with the wholesalers that remained to service them.
Much of what the industry is accomplishing is relatively simple stuff, like changing delivery dates, for example. Time Distribution used to send out People on Mondays, when many other weeklies are delivered. "But then we did a lot of testing and found out that if you align the on-sale date with the greatest shopping dates, sales go up," Jacobsen said. "It wasn't a difficult concept to grasp, but it made a big difference." Once the company began shipping more than half of each week's total national print order of People before the weekend, unit sales of the title increased by 7.5%.
The more publishers make such issue-date changes, the better, retailers say.
"We're very much in favor of getting magazines there when we're the busiest," said Scott Gehrke, director of space management for A&P, Montvale, N.J. "But right now, it's still a problem, because not all publishers have switched production schedules and whatever else they have to do to make that happen. And if you're the wholesaler and you have to make preweekend deliveries and then have to go back on Monday and Tuesday as well, there's no real efficiency for you because your costs of distribution have gone up." Paying attention to the characteristics of individual markets, long a priority of other departments in the store, is beginning to have an effect on the magazine aisle as well. A&P, for example, recently used demographic profiles of its stores, developed by Spectra Information, to pinpoint ethnic enclaves. As a result, in about 200 of its 729 U.S. stores, the chain has developed a specialty-merchandising fixture with titles specifically aimed at Hispanic, African-American and other ethnic audiences. It's still too early, Gehrke said, to tell how effective the gambit has been.
"We handle a lot of very special and niche-oriented products that, unlike soap and tissues, don't cross over [brand] lines," said Frank Herrera, president of Hearst Distribution Group, an arm of New York-based Hearst Magazines. "It's important to know what stores should be carrying certain types of magazines. Should stores in Kansas City, for example, be carrying our Surfing magazine title?"
"A supermarket may reduce the number of crossword-puzzle magazines from 10 to two, but overall the effect hasn't been dramatic, and it hasn't had the effect of preventing national magazines with healthy sales from getting access" to supermarket sales, agreed Don Kummerfeld, president of the Magazine Publishers of America.
Of course, from publishers' point of view, the big drawback to category management is the danger of paring the number of titles back too far. "Retailers realize that, like with every other category of goods, they must offer consumers a choice. [Consumers] don't all want to read the same magazines," Kummerfeld said.
Harrington said maintaining a broad enough mix of titles is especially important for retailers because today's growth mainly is coming from special-interest, highly targeted publications. "Most big magazines have lost sales over the last 10 years," he said.
The scanning of issues is another stumbling block on the way toward category management. For one thing, retailers would like to move toward a "pay-on-scan" system in which they would pay suppliers only for copies that consumers actually buy, and only after they buy them. Right now, supermarkets pay distributors up-front for their magazines and then, weeks later, receive credits for unsold copies. A related issue is who should cover the cost of magazine shrinkage between the delivery and pickup of unsold copies.
UPC codes present another wrinkle. Too many magazines still carry inaccurate and even sloppy UPC codes, publishers concede. Even more significant, publishers generally put what are called "by-pad" numbers indicating the specific issue date at the end of the UPC codes on each issue of a magazine, but few supermarket scanners can recognize the extra numbers. That makes precise, issue-by-issue inventory management very difficult, and supermarket operators want to make sure publishers understand that it's going to be up to them to overhaul the system. "To think that the supermarket industry would completely reprogram everything to enable us to pick up information for this one category is quite a reach when we carry hundreds of thousands of items," said A&P's Gehrke. Instead, he suggests, the solution might involve a "dynamic" UPC code that simply changes with each issue of the magazine. The MPA has established a task force with members from all parts of the magazine distribution market to try to find a solution to UPC-code problems.