MRAC OFFERS GUIDE TO TESTING SCAN-BASED TRADING

MARK HAMSTRA

NEW YORK -- The Magazine Retail Advisory Council here was expected by early this week to release a document that will provide some guidelines for the testing of scan-based trading of magazines at retail.

The document, called "Recommendations for Pilot-Testing the Application of Scan-Based Trading to Magazines: Phase 1 of the MRAC Scan-Based Trading White Paper," was developed during the past eight months by representatives from the retailing, wholesaling, distributing and publishing industries. It evolved from a 1999 study called The Mercer Report, which outlined the potential for up to $420 million in savings through universal implementation of scan-based trading of magazines.

The goal of scan-based trading is to have invoices generated by data scanned in at the register, so that a perpetual inventory system is created in which there is a paperless flow of goods and financial documents.

"We recognize that this is something the supermarket retailers are really looking to do, and as an industry we are showing that we really want to work with the retail community to find a way that everyone can work with this," said Anne Finn, vice president, consumer marketing, Magazine Publishers of America, New York.

Although scan-based trading has been tested by grocers in other product categories, magazines -- with their thousands of stockkeeping units, high rates of return and burdensome handling procedures -- promise to be among the most difficult products to apply this technology to.

Finn was joined on the MRAC committee that produced the paper by several supermarket retailers, including Chuck Porter of Giant Eagle, Pittsburgh; Jim Ryan of A&P, Montvale, N.J.; and David Sefcik of Giant Food, Landover, Md. Representatives from those companies either declined to comment or were unavailable for comment.

Several supermarket chains have expressed interest in implementing scan-based trading of magazines, and industry sources said that H.E. Butt Grocery Co., San Antonio, and Giant Food, a division of Ahold USA, Chantilly, Va., were both eyeing the possibility of implementing tests of scan-based trading of magazines. A spokesman for Giant declined to comment, and a representative from H.E. Butt was unavailable for comment.

Wal-Mart, Bentonville, Ark., which also had a member on the MRAC White Paper Committee, has previously stated its commitment to implementing scan-based trading across a variety of product categories and is one of only two major retailers who have implemented the costly technology that allows retailers to scan add-on bar codes on magazines. Barnes & Noble, New York, is the other.

That technology, which allows retailers to electronically capture the issue date of each magazine sold, is considered important but not essential to scan-based trading of magazines. In fact, one of the key features of the white paper is its description of alternative solutions for testing that do not include the ability to read add-on codes.

The paper also outlines the responsibilities of retailers, wholesalers and publishers for conducting SBT testing. Retailers would have to agree to share their sales data with their wholesaler, distributor or a third party for evaluation, and would also have to establish a magazine department key at the register that would identify the sale as a magazine rather than simply general merchandise. The retailer would also have to accept advance shipping notices at store level and agree to have the test audited by a third party, among other requirements.

Not all parties involved are as enthusiastic about SBT as retailers are, however.

"The publishers are concerned about the usual things that people are concerned about with scan-based trading," said Bill Bishop, president, Willard Bishop Consulting, Barrington, Ill. "Their first and biggest concern is: 'Is there is going to be a shrink charge and is it going to be shifted to me when I didn't have it before?' And the second question is likely to be, 'What's the impact of this going to be on my balance sheet?"'