PBAA: MANAGE MAGAZINES AS TWO CATEGORIES

JOEL ELSON

ATLANTIC CITY, N.J. -- Magazines are one of the top profit producers for supermarkets, but mainline and checkout racks have reached the point where they need to be managed as separate categories, said Mike Kessler, chief executive officer at Central Sales & Marketing, publishing sales and marketing consultants, Fair Lawn, N.J.

Kessler spoke here last month during the New York-based Periodical & Book Association of America's annual convention, where he presented findings from a PBAA study of the magazine category. The study was conducted at five grocery chains with more than 1,700 stores in five regions of the country.

With supermarkets now accounting for 45% of all single-copy magazine sales, Kessler said, the time is ripe for managing magazines as two distinct categories. "Each department should be measured for its contribution to sales and profits," he stated.

"After housewares, magazines at supermarkets represent the lion's share of nonfood sales, with 15.9% of all general-merchandise sales."

Like greeting cards, another high-gross department, magazines are one of the few categories in the store not warehoused. In-store services are provided in most cases, and all sales are on a guaranteed basis, the speaker pointed out.

The PBAA data illustrates the difference in sales velocity at the two locations within the store where magazines are sold.

The combined sales of single-copy magazines at the five chains, which remained unidentified, totaled $121 million a year. Magazines as a percentage of total store sales was 0.65%.

The chains averaged 10.1 checkouts per store, and reading centers ran 15.3 linear feet. In-line sets were 4 to 24 feet.

The average checkout in the study pulled in $6,320 in annual sales. This also included other products displayed on the fixture. Annual sales per lineal foot in the reading centers averaged $2,433, reaching over $3,000 at one chain.

The survey also revealed that the average checkout produced 58% of total business, compared with 42% from the mainline reading centers. Magazines sold at checkouts averaged 17.2 annual turns, compared with 10.9 turns at the mainline reading centers. The average retail ring for magazines at checkout was $1.82, vs. $3.29 at the mainline.

The total gross margin on magazines sales at the five retailers, which included retail development allowances, was well above the store average and ran 31% at checkouts and 34% at reading centers.

Kessler said RDAs play an integral part in the magazine category's profitability for supermarkets. "RDAs derived from checkouts represent an average of 6.5% of category profit. At the mainline rack, RDAs jump to 9.7%."

Supermarkets also can tap into additional profit pools publishers provide, ranging from initial placement offerings to allowances for position at checkout and fixturing incentives, Kessler noted.

He called on the publishing community to "do a better job of making the retailer understand the changing nature of the reading consumer."

This is especially crucial for supermarket retailers trying to satisfy "the more eclectic tastes of today's readers. That is why there are more than 4,000 titles, a variety that consumers ask for," he said.

Kessler advised retailers and publishers to change their thinking in developing reading centers for repeat sales. "Supermarkets like Wegmans Food Markets [in Rochester, N.Y.] have encompassed the concept of destination shopping [for magazines], offering the depth and product necessary to keep the consumer coming back time and again," he said.

He told the PBAA gathering to "take a look at the book-store chains and their most comprehensive selection of periodicals, which has made them a destination shopping experience."

Even though sales at checkouts represent the largest share of magazine sales at supermarkets, the "rising cover prices have kept many magazines sold at checkout flat," Kessler explained. However, this is being countered by larger front-end fixtures with expanded display space that are contributing to a growth in sales and profits, he added.