Gil Brechtel and Josh Gary from MagNet coordinated the “Reimagining the Newsstand” segment at the ACT 6 Experience. Gil moderated the first panel on “Reimagining the Newsstand.”
The focus was on the newsstand business, its relevancy to publishers, how to stabilize it, as well as the current and future roles of each of the channel members… wholesaler, national distributor, retailer, and publisher, and how we as an industry engage the retailer to promote and increase sales.
Wholesaler participants included David Parry, President & CEO of TNG and Shawn Everson, Chief Commercial Officer of Ingram Content Group. Three CEOs of magazine media companies also joined this segment of the ACT 6 Experience. They are Hubert Boehle, CEO of Bauer Magazine L.P., Andy Clurman, CEO of AIM (Active Interest Media) and Eric Hoffman, CEO of Hoffman Media.
Videos of all the presentations will be posted on this site in addition to Linda Ruth’s reports. Linda, thankfully, accepted the role of the scribe of the ACT 6 Experience. All the videos are at the bottom of this blog.
And now for part 2 from Chapter 3 as reported by Linda Ruth.
Hubert Boehle, CEO of Bauer Media, came to ACT 6 to talk about the German newsstand magazine market, and lessons the US might draw from it.
An American publisher might wonder why we in the US magazine market might want to look to Germany as a model to emulate? As an answer, the example of Bauer Media itself might provide sufficient reason.
Bauer Media, a German publishing company, represents the largest seller, in terms of units, of magazines in the United States. On a dollar basis, Bauer is the second-largest media company in the US. Further, in a newsstand-challenged age, newsstand accounts for 90% of the Bauer publications’ sales.
A second reason to look to Germany for inspiration might be found in the nature of the German magazine market itself. Germany has a quarter of the population of the US, but its magazine revenue is equivalent—roughly $2.5 billion in each market. The average consumer in Germany spends about four times as much on magazines as the US consumer. Also, while sales and revenue have declined in both the US and Germany, the declines are not equivalent; Germany’s has been considerably smaller.
Boehle identified several reasons for the differences in the magazine market, focusing on each player in the magazine publishing supply channel; and he suggested initiatives based on these differences. First, looking at the wholesale network, he finds it much more concentrated In Germany , with a much higher level of service. In an area the size of California, he pointed out, there are 54 wholesalers, who, owing to their density, know their customers well and visit them daily. Partly in consequence of this service level, Germany’s average overall magazine sales efficiency stands at 60%. By comparison, the average sell-through in the US is 26%. How, Boehle asks, can we create a better service level in the U.S? How can we support our wholesale partners to enable them to provide this level of service to their retailers?
Part of the answer to that tracks back to the magazine publishers. Because publishing is profitable in Germany, publishers support their newsstand circulation. With higher efficiencies, and the lower costs resulting from fewer unsolds, there is more profit to all supply chain partners. This frees up a higher remit per copy sold to be paid to the publishers. Germany, in fact, remits about 60% of every retail dollar to the publisher, with 100% of sold copies paid a week after off sale. This allows for cover prices that are considerably lower, which in turn leads to multiple purchases by consumers at retail.
The overall health of the newsstand channel is supported by the fact that German subscription prices are not deeply discounted, as they are in the US. The price of each issue of a magazine subscription is roughly the same as the same issue purchased on the newsstand. What similar incentives, Boehle asks, could be created that would encourage US publishers to invest in newsstand?
While the US market is finding its incremental revenue through up-priced one-shots, specials, and bookazines, Boehle suggests that this approach is, at best, a band-aid to the problem. It takes a regular frequency to addict a customer to a magazine, a frequency that is supported by cover prices that make multiple purchases affordable. Germany’s market provides its readers hundreds of weeklies and bi-weeklies, as compared to the US market which provides only a handful of comparable frequency products.
And with the larger publishers now using their checkout space to rotate their bookazines into, checkout space, which relies on the addictive and frequently-turned weeklies for its vitality, begins to lose its effectiveness. Profitability drops as the checkout titles are unable to provide the needed turns as frequently as needed.
Another way to develop excitement and addiction at checkout is to provide frequent new releases to browse and buy. In the US, all publications go on sale the same day of the week. In Germany, they go on sale every day, incentivizing customers to look for fresh magazines more frequently.
How can the US magazine market learn and benefit from these lessons? Perhaps, Boehle suggests, wholesalers might consider penalizing publishers with low subscription prices. Perhaps checkouts space should be reserved for higher-frequency titles. Publishers might consider reversing the push to higher-cost product and implementing lower cover prices.
In fact, we in the US might re-think the entire checkout system. In Germany, magazines aren’t sold at checkouts—the mainlines are placed so you see them right away, coming into a store. The impulse at the checkout is becoming obsolete, as today people spend their time in the checkout lane looking at their phones. From a publisher’s point of view, each checkout lane has to be treated as a separate retailer, with its own allotment and order regulation, its own placement fee; and from a wholesaler’s point of view, the excess product in the checkout lanes exacerbates the return situation. Might it be possible, Boehle suggest, to rethink the dichotomy between checkout and mainline and, again emulating Germany, work on getting highly-visible mainline displays established in the vicinity of the checkouts,near the front of the stores?
David Parry, the CEO of TNG, North America’s biggest magazine wholesaler, responded by speaking of TNG’s experience as a wholesaler with enormous fixed costs and declining net profits, in a market very different from Germany’s. Parry cautioned that, in getting publications to retailers throughout the country, in reimagining the newsstand, it is essential that the pressures are alleviated for all channel partners, and that continued viability is ensured all along the supply chain. With weekly delivery to over 70,000 retail locations in the US and Canada, and service provided at more-than-weekly frequency at retail level by over 10,000 TNG merchandisers who provide real-time reporting, a first order of business needs to be to ensure stabilization and survival of this channel, before looking to increase store visits or publisher remits.
With 23 million units delivered weekly, and 1.2 billion annually, across an enormous geographic area, the challenges here are very different from the ones faced in the compact German market. TNG, however, is working to develop new and innovative services far beyond the delivery of magazines.
Parry acknowledged that all channel partners need to constantly innovate. But far from letting go of front end placement, he said, it is critical that we defend that space, as a priority among all channel partners. With beverages and snacks competing in droves for that placement, we are fighting for all the checkout space we can get. It is understood that people are making the lion’s share of their purchases within 100 feet of the front door, and that space is not simply up for grabs. Major consumer goods companies are looking at that same 100 feet, and they are tough competitors.
TNG has experience with retailers that back up this perspective. Parry mentioned Chief Auto Parts, which tried four times with magazines, in four different places in their stores, and nothing worked until they put magazines at the front end. Other retailers, including, as an example, Loblaws, cut back on the placement of magazines at the front end and their customers protested. The chains were forced, by customer demand, to reinstate magazines at the checkout.
Yet, Parry acknowledged, checkout merchandising does drive up costs, and TNG’s merchandisers do need to be in many stores up to three times a week. With the physical wire checkout pockets getting thinner, they need to be restocked more often, and that requires merchandising presence in the stores.
What, from the viewpoint of a major wholesaler group, can be done then, to strengthen the supply channel and build profitability for channel partners?
Parry suggests working collaboratively to re-invent checkout space; focusing on promotions and events calendars to generate excitement at retail, finding new places to display product in stores through outposts, and capitalizing on trends and opportunities. Local interest is big: Texas Monthly can outsell People in some markets. Adult coloring books came out of nowhere to sell over $15 million at retail. Publishers and wholesalers need to get a seat at the table with the retailers to find ways of supporting magazine sales together. Try using beacon technology and instant coupons; participate in mixed displays and cross-merchandising opportunities.
And constantly innovate.
Click below to watch Hubert Boehle’s presentation at the ACT 6 Experience:
Click below to watch Shawn Everson’s presentation at the ACT 6 Experience:
Click below to watch David Parry’s presentation at the ACT 6 Experience:
And click below to enjoy the debate moderated by MagNet’s Gil Brechtel: