READING UP ON MAGAZINES

Dan Alaimo

Building from a growing body of research, many retailers are renewing their commitment to the magazine category.

Retailers are putting new fixtures up at the front end and employing a growing sophistication in their merchandising of inline magazine sets. While many are trying other products at the front end, almost all retailer executives polled by SN expressed their ongoing support for the category.

"We are firm believers in the magazine category," said Chuck Porter, director, Iggle entertainment and video, Giant Eagle, Pittsburgh. "We think that it is good for the supermarket and good in terms of bringing customers into our stores," he said.

Meanwhile, the magazine category is showing signs of breaking out of a prolonged single-copy sales slump. Statistics from the International Periodical Distributors Association, New York, reported during the recent Retail Conference of the Magazine Publishers of America, New York, showed that total retail dollar sales of magazines grew last year by 3.5%, with annual unit sales increasing by nearly 1%.

"That is the first time since 1996 that unit sales increased," said Nina B. Link, president and chief executive officer of the MPA, in presenting these numbers. "In fact, only twice in all of the 1990s did unit sales grow. For the last five years, the declines have regularly been over 5%. This improvement in newsstand sales may indicate a turnaround in the magazine industry."

Magazine sales at Bashas', Chandler, Ariz., were strong last year with "double-digit growth," said a source at the company. Part of the reason for that success is the targeting of individual stores with tailored product mixes. "You wouldn't find the same magazine mix in any two stores," he said.

Another reason for the growth was re-fixturing the front end with magazine racks that swing out to block closed lanes and, in the process, provide the publications with prime front-end exposure. For example, the Bashas' source said, at times like the early morning when there is just one register open, "it's a solid wall of magazines and candy at the front end."

K-VA-T Food Stores, Abingdon, Va., also is reworking its magazine racks as part of an effort to create a lower profile at the front end, said Jeff Compton, HBC/GM category manager. While the retailer has added other types of products to the front end and cut back on magazine stockkeeping units, it has improved the visibility of the titles it carries. Meanwhile, it is restoring space cut out from the inline racks to ensure that it has adequate variety for customers, he said

Using a similar strategy is Associated Wholesalers, York, Pa. "We are trying to dress up the racks and get them more exposed," said Charles Yahn, vice president, Nonfoods Division. "Instead of putting out 25 copies of 25 different titles in a way that you can't see any one of them, we are putting less on the rack, trying to specialize for the consumer, and get better visibility for what is on the rack," he said.

Magazine sales have "gone down considerably in the last five years, although last year, they didn't go down nearly as much," said Bob Yehling, director of general merchandise, Harp's Food Stores, Springdale, Ark. Changing the checkout fixtures last year helped generate sales and increase "pocket money," the fees suppliers pay to place magazines in the stores.

Facing the challenge of losing valuable in-store real estate as the result of past sales declines, the magazine industry has commissioned several high-profile studies to demonstrate the value of publications to the supermarket channel. Three were presented at the MPA's Retail Conference.

The second edition of the "Market Basket Analysis," conducted by Management Science Associates, Pittsburgh, demonstrated that magazine purchasers bought more items, especially high-margin products, across all departments, said Don Burke, vice president of information management solutions for the research firm.

"Magazine purchasers drive total store sales," Burke said. "When you look at the percentage of households that buy magazines, that 24% drives 58% of total grocery sales dollars and 58% of items purchased."

"The consumers that spend a lot of money in supermarkets clearly also buy magazines, and they look to buy them in multiple locations throughout the store," said Chris DuBois, director, Willard Bishop Consulting, Barrington, Ill. "That is a tremendous opportunity for retailers."

Another aspect of this research project was to show that magazine purchasers are "substantially more likely to use coupons and are far more likely to respond to promotional events than non-magazine purchasers," Burke said. They are also less price sensitive and more brand loyal than consumers who don't buy magazines, he said.

A new and ongoing research project, "Supermarket Checkout Puzzle" by Comag Marketing Group, New York, demonstrated the sales-to-space efficiency of magazines, along with its profitability relative to other core front-end categories.

"In terms of space efficiency, there is no other category that drives sales like magazines, partially because of the high cover prices, but also because of their fast turns," said Tim Humanik, senior director of category management for Comag. "As a result, they are very profitable for retailers."

Among the core front-end categories, magazines generate more sales in the space allotted to them, have higher gross margin dollars and total profit, and trail only soft drinks and water in terms of placement dollars, according to the study.

A third study prepared for the MPA was "Front-End Focus 2002," sponsored by Time Distribution Services, New York; Masterfoods USA, Hackettstown, N.J.; and Wrigley Co., Chicago. This report demonstrated that "the front end is becoming more crowded with new categories," DuBois said.

"As these new categories come in, it can be a challenge to manage the front end as a true total category. But if you think about it strategically, many of these new categories simply aren't as productive as some of the core categories," he said.

"The core categories are really driving the sales," said Bill Romollino, customer development manager, Time Distribution Services. Customers expect to find the new categories in other places in the store, he said.

"We're not suggesting that these products don't have a place at the front end. But we are suggesting that retailers really crunch the numbers, do the analysis, go out and talk to some of their customers, and use all of that information to maximize profitability and customer satisfaction," Romollino said.

At the Checkouts

This chart, from a study done for the Magazine Publishers of America, New York, by Comag Marketing Group, New York, analyzes the contribution of front-end products in terms of sales and space, gross margin, placement money and total profit.

Product: Space; Sales; Gross Margin Dollars; Placement Dollars; Total Profit

Magazines: 26%; 39%; 39%; 33%; 39%

Confections: 29%; 30%; 31%; 26%; 30%

Soft drinks/water: 16%; 20%; 19%; 39%; 20%

General merchandise: 20%; 7%; 8%; 8%; 8%

Snacks: 9%; 4%; 3%; 4%; 3%

Note: This retailer checkout analysis reflects a collection of store-level point-of-sale data, gross margin data and placement monies from over 500 stores over 52 weeks.

Source: "Supermarket Checkout Puzzle" study by Comag Marketing Group