REFINING PROCESS

AL HELLER

Here's a real page turner for food retailers.

The magazine industry's two largest single-copy wholesalers -- Anderson News Co. and The News Group, LP -- are advancing programs that streamline the number of titles they distribute to each store in the name of dramatic efficiencies and greater cover presence at the retail shelf.

Their efforts reflect a major shift in thinking by wholesalers, retailers and some publishers to turn magazine distribution into a pull system rather than its historic push approach.

Some big players feel the initiative is long overdue.

"Many practices and policies that have evolved don't work in today's marketplace. In many respects, they're counterproductive to sales and they inflate distribution costs," declared Joel Anderson, chairman of the Knoxville, Tenn.-based wholesaler, which operates in 40 states. "The industry has a huge supply imbalance. Publishers publish more titles than our physical displays can handle, they're pushing more titles into the system, and the overcrowding inhibits sales.

"To eliminate redundancies, we feel that rather than give each title the maximum distribution it can have, we should stock titles for each store's location and demographics. After we compute the title mix and quantities based on our analysis of individual stores, we should drive that information back up to the printing press to determine the number of copies to print," he explained.

Calling this "a reversal of the printing process," Anderson claims this "can remove hundreds of millions of dollars of excess manufacturing and distribution costs over a period of two years. Everyone recognizes the anemic sales out there, and costs that are too great. Doing this will benefit consumers through tailored product selections, stores will sell more magazines while carrying less inventory, wholesalers reduce handling costs, and publishers save considerable manufacturing and transportation expenses."

He bases his comments on a year-long test in thousands of major supermarket and mass-merchant stores. Anderson plans to post an update on its company Web site in March.

Gil Brechtel, president of Charlotte, N.C.-based The News Group, the second-largest magazine and book distributor in North America, a subsidiary of The Jim Pattison Group, Vancouver, British Columbia, concurs in principle. He's keenly aware that 1,400 of the 3,000 regular-frequency magazine titles he distributes account for 94% of his sales; the other 1,600 sell through inefficiently and post 6% of his volume.

"We believe that if we can eliminate or reduce the exposure of 'me-too' titles, which are non-core, we'll not only improve efficiencies but we'll increase overall sales," Brechtel said. "Because so many titles vie for limited space at retail, we're forced to remove good titles prematurely in order to display inferior titles."

The News Group has spent six months testing a program at four complete chains -- not just small clusters of test stores -- including two supermarkets, one convenience chain and one drug retailer. The key finding: a 50% reduction in titles going to the stores raised sell-through rates by at least 7%. "Moreover, we'll reduce retailer labor expenses of checking in and out product that doesn't sell, improve turns and cut overall inventory carrying costs. We're attempting to improve overall efficiency, focus on titles that sell and move more towards category management," he added.

Count Bill Mansfield, vice president for general merchandise of the 92-store, Indianapolis-based Marsh Supermarkets operation, among those who are convinced. "We can assort anywhere from 400 to 1,200 titles in our base linear footage. If we pick the right 400, we can outproduce the potential sales of the 1,200 because we make it easier for customers to make a purchasing decision," he said.

"If you overlap 1,200 titles and make shopping difficult, you may make a great variety statement, but people may pass by the category because the selection is overwhelming. We seek tighter assortments, logical classifications and better organization at the shelf."

Not everyone agrees, however.

Jeff Manning, vice president of general merchandise at Omaha, Neb.-based Baker's Supermarkets, said he believes that "inventory downsizing is hurting the business. Consumers want more variety, and we need the array of special-interest titles. Our population is growing more diverse, and what publishers are offering is less diverse. The way magazine wholesalers have pursued category management, it has cost us sales because they go by traditional definitions of performance. But I know if we have a title in the store, we need to keep it even if it appears to be a slow seller because it satisfies certain customers, including frequent shoppers."

Mansfield concedes some of that point to Manning. "The last thing you want to do is kill that obscure title," said Mansfield. "Know what your customer is buying and make sure you've got it. Marry scan movement and frequent-shopper card data. Maintain the highest possible scan integrity for the category. And organize and classify the department. That will download into a better use of category management tools.

"The difficulty of mining data," he added, "is that it's really in the past before you have a true understanding of what a title created or didn't create. By that time, you can't do much about it. The next issue of that same title based on news of the day may be fantastic. There's no way to predict in advance the success or lack of success of a particular title." Every source that SN interviewed was frustrated by the slow creep of category management into the magazine/book category at supermarkets. "It's applied much more broadly elsewhere in the store," observed John Styron, senior vice president and director of merchandising at Anderson News. "One of our big initiatives is understanding how to put the right titles in the right store at the right time to meet ultimate shopper needs. To that end, we're investing in data warehouses and the demographic profiling of stores.

"We've had good luck," he noted, "when chains share statistics on ethnic hair care sales by store. Stores that sell a lot of that need magazine titles appealing to African-Americans." Likewise, he cited specific assortments that work for Hispanics, or parents of new babies or senior citizens ("They love crossword publications. We'll look at sales of arthritis remedies to find them.") and other market segments.

He feels that technology advances and the leadership of major chains are bringing category management to the fore, "making it easier to manage the multiplicity of stockkeeping units and understand the titles more like packaged goods."

For now, however, "lack of data is a hindrance. We're just getting to the point of scanning individual magazines," noted Charles Yahn, vice president at York, Pa.-based Associated Wholesalers, which services 1,200 stores and is involved with about 300 of them on magazines. "We've had to live by what distributors told us, and they were being pressured by publishers. We're now asking them to be more accountable."

The stores Yahn services stretch from New England to Virginia, so he works with four different distributors. He's seen magazine sales growth slip to a single-digit pace, down from double-digits in the mid-1990s. What will help reverse this trend, he suggests, is recognition that "browsing time is limited. Titles must be accessible, the physical area must be appealing, and promotions could induce trial. I don't believe publishers are afraid of undermining their cover prices -- which continue to rise -- but they don't see their value in driving sales much. Still, I think people would respond to them."

Manning has a few ideas: "How about 'this month McCall's is $1' or 'Get $35 in coupon savings at this store when you buy this issue of Good Housekeeping,"' he offered. "Publishers have to breathe new life into the category. It used to mean nothing to plunk down $2 for a title, but people balk at $4.95. And how about promotions for kids' or health magazines?"

To build impulse further and harness magazines' power to drive sales in other categories, Mansfield would like to see more titles cross-merchandised. Marsh regularly posts Cigar Afficionado in its smoke shops and Wine Spectator in its wine-and-spirits department. He noted that as the Indianapolis Colts proceed through the current National Football League playoffs, Marsh will create ancillary displays of titles about the sport and the team and place them around Colts T-shirts, hats and other merchandise.

On the eve of the MPA/IPDA Conference (Magazine Publishers of America and International Periodical Distributors Association), Feb. 27 to 29 in Atlanta, the industry is weighing many issues.

Tilly Young, director of retail consumer marketing at New York City-based Magazine Publishers of America, said that the MPA's Magazine Retail Advisory Council is busy gathering data to arm nonfood executives with compelling performance figures that can win them display space in supermarkets.

The council is due to report at this conference on the flow of magazines from publishers to consumers, so all parties can understand how best to work together to slash pipeline costs, and assort and merchandise more powerfully in stores.