Space Crunch Ahead for Magazines

DAN ALAIMO

While magazines contribute much more profit than many other items, magazine suppliers will have to work hard to persuade retailers not to cut their space.

That's the message that Thomas Griffith, senior consultant with the Willard Bishop consultancy, Barrington, Ill., will deliver at this week's Retail Conference in Tampa of the Magazine Publishers of America and the International Periodical Distributors Association, both based in New York.

The 2007 Grocery SuperStudy from Bishop reports that grocery retailers will shrink Center Store space by 5% over the next five years, and this could have an impact on magazine and book sections. General merchandise generates 6.7% of Center Store sales and 5.1% of true profit, and within GM, magazines deliver 6.4% of sales and 16.3% of true profit, or 58 cents per unit. The study defines “true profit” as gross margin adjusted by all activity-based handling costs directly attributable to the product.

Meanwhile, direct store delivery, or DSD, products like magazines cost 28% less to handle than warehouse-delivered products, the study reported.

While hard numbers will help make the category's case, the strategic importance of magazines also needs to be demonstrated, especially since the numbers are already so strong.

For example, there are consumers who come into the supermarket, browse the magazine section, make purchases from it, and then spend $200 on groceries. “That would be a strategic importance to the retailer, as they differentiate against other formats, if they have a broader selection of magazines which brings in traffic. Certain consumers want that stuff in the store when they go grocery shopping,” Griffith said.

“The Willard Bishop study is going to show that magazines are a very profitable portion of that Center Store which is delivering a high percentage of the stores' overall profits,” said Jerry Lynch, president of the IPDA.