A Modest Proposal: How to Grow Magazine Sales at Specialty Retail

In the first week of January 2017 major retailers announced that they would close hundreds of brick-and-mortar stores, eliminating major outlets for magazine distribution. Now, more than ever, it is important to generate new avenues for magazine sales; it is time for magazine wholesalers and national distributors to open and re-launch independent accounts at specialty retailers as big chains continue to shutter their stores. Understanding the economics that the remaining mass-market wholesalers are faced with, it is possible to successfully open new and past retail accounts to grow sales at specialty retail like pet stores, outdoors stores, and electronics shops. In the past, publishers distributed their titles to a variety of retail stores, particularly specialty retail, with great success. While these types of partnerships have dwindled in recent years, there are distribution models that can work for the specialty retail market, and the publishing community has to take advantage of these opportunities. Understanding the History of Distribution at Specialty Retail As a kid growing up in New York City, candy stores and newsstands were the primary outlets where magazines could be purchased. But in the 1940s and 1950s there were major changes in magazine and paperback book retailing. During this time, 800 independent newspaper wholesalers became magazine wholesalers, opening new retail sales avenues for magazine publishers. (I refer to this group as “mass-market wholesalers”). During the ‘70s and ‘80s these wholesalers increased their focus on magazines, moving away from newspapers and paperback distribution. Then, as retailers began to consolidate billing with wholesalers in the 1990s, most of the 800 independent wholesalers closed their doors. A new wholesaling concept was created during this period of consolidation, the direct wholesaler. This group would include Ingram, Media Solutions, Eastern News, and IPD (later known as Source Interlink). They offered one bill and an organized management of a national magazine program that was customized for bookstore chains. These direct wholesalers also attempted to open specialty chain programs outside of the bookstore class of trade and some new businesses succeeded, and some failed. Eventually large wholesale groups began to drop local, independent retailers because the cost for truck delivery to small outlets far from the depot was expensive, or the retailer decided to stop selling magazines. In reaction to this shift, national distributors including CMG, Curtis, Disticor, and Kable News each created specialty, direct-to-retail departments to develop new sales opportunities. GNC, Dick’s Sporting Goods, and The Rag Shop were some of the accounts managed and solicited. Publishers with niche titles began to sell to independent craft, doll, or health food stores. These “specialty” accounts became part of a publisher’s proprietary drop ship magazine programs, and publishers found they could successfully grow this direct-to-independent retail program. Publishers like Cowles Magazines succeeded in having hundreds, even a thousand dealers selling the appropriate title in independent health food stores, horse stables, western wear, and hunting and fishing sports shops. These programs required care and a high degree of maintenance because of churn. Unfortunately, over time many of these programs closed. Why Have Direct Specialty Programs Failed? A 16-title mix of health and fitness titles should sell well at a vitamin and supplement retailer. Unfortunately, many direct specialty programs like this did not work because: Drop shipping to the store often led to poor rack maintenance. Rack maintenance is left up to an employee who may be overwhelmed with a delivery of two to three cartons of magazines a week in addition to the store staples like vitamins and supplements. In direct specialty programs of the past, not only did the employee have to place the new titles on the rack, she had to handle returns and strip covers. The employee often left this chore to the next part-timer or it was not done at all. Most niche magazines are bi-monthly frequency. If a newsstand fixture is not maintained, it becomes an eyesore with old product. Billing can be a major issue. If the direct program is billed corporately, it can be a mammoth task to settle returns, compare sales to store Scan Based Data, and monitor non-compliant stores. These types of programs create lot of work for corporate who are used to simple corporate replenishment when store inventory is low. Adding non-compatible titles (placing automobile titles in health food stores, for example) increases the potential of unsold copies and handling difficulties. For mass-market wholesalers, developing a specialty retail program in a health food, pet, or automotive chain is currently not practical. There is no return on investment to send a truck to stores to deliver no more than 16 pet or health titles every 4 weeks. But There Are Exceptions There were some successes in specialty retail. Milligan News in San Jose, CA, is on such success story. This mass-market wholesaler was the exclusive wholesaler for Fry’s Electronics in California. Milligan offered weekly truck delivery of magazines to each store with in-store service. Because of its in-store service, Milligan was able to offer a full range of titles, including computer magazines, hunting magazines, tabloids, news weeklies, music, food, fashion, and auto. Fancy Publications in Orange, CA, found a niche servicing targeted chains. Fancy created Global Distributing, now operating as Wheelhouse Direct. Magazine copies were shipped to a team of local merchandisers who worked the pet stores in their communities. The in-store service by Globe removed a major hurdle most retailers have against magazines: the frequency and turns that make them a work intensive product. They built retailer loyalty by limiting the title mix and focusing on titles targeted for the class of trade they serviced. You will not find Cosmopolitan or weekly tabloids in PetCo or PetSmart. As a result, Global has maintained very high unit sell through and efficiency. My Modest Proposal: Bring Back Specialty Retail Accounts by Working With Newspaper Wholesalers I believe the remaining independent magazine wholesalers and national distributors have the opportunity to develop partnerships with independent newspaper wholesalers and other wholesalers that have frequent delivery. These frequent delivery wholesalers can act as delivery agents. They can deliver the magazines, invoice, and collect payment to the small retail account. Potential delivery agents and merchandisers would be newspaper, fruit and vegetable, or dairy distributors -- distributors that have frequent delivery schedules like magazines. The discount structure between the publisher, national distributor, and wholesaler will not change because the newspaper distributor will be paid based on deliveries. This requires a more flexible billing relationship, like those many independent newspaper wholesalers have with The New York Times or USA Today. I discovered the lack of flexibility among national magazine distributors the hard way. I developed a distribution program with a local newspaper wholesaler in Las Vegas. By working with the newspaper wholesaler, we were able to sell more magazine copies of a weekly football title, growing sales from 20 to 400 copies a week. Unfortunately, the payment terms to the national distributor were not friendly for the newspaper wholesaler. With the original business based on limited cash flow, the newspaper wholesaler needed at least three months to collect from his base of hotels, airport, and other retailers before the first payment could be made to the national distributor. The national distributor, though, required payment within 30 days. This was very different from the norm and the national distributor was not willing to slowly build the business and extend billing terms. The program ceased. How Distributors Should Move Forward National distributors can make the above partnership work with newspaper wholesalers if they allow for some flexibility in payments, make limited investments in new retailers, and target specific classes of trade. Creating this type of program, magazines can be targeted to local demographics, and copies make it off the floor and onto the racks. I stress that the responsibility for payment should be with the local retailer. The model can also work for distributors who are soliciting chains, if they take advantage of certain “loopholes.” There are “loopholes” in corporate payables that allow local outlets to buy products locally. Avoiding the corporate billing and having a one-to-one relationship with a local store will eliminate corporate back office questions and management of the program because of the unique difference of magazines from other products. Using the “local loophole” should allow convenience stores, for example, to be a viable retail outlet again. Once the largest retailer of men’s magazines, convenience stores can regain this position, but the list of titles sold should be targeted by market and location, not a national list. This modest proposal is not as drastic as Jonathon Swift’s Modest Proposal of 1729, but it probably is as controversial.

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A Modest Proposal: How to Grow Magazine Sales at Specialty Retail

John Morthanos

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