The Latest Initiative in Scan Based Magazine Trading

Collaborative Pay and Report on Scan project underway.

BY LINDA RUTH

http://www.audiencedevelopment.com 

How can magazine wholesalers become profitable once again? How can publishers support wholealers in their quest for profitability? How can we better adapt to Pay On Scan (POS) at the retailer level? How should we include the widespread and growing reality of Scan Based Trading (SBT) in our distribution management?

All these topics are now being addressed in one collaborative initiative called Pay and Report on Scan (PROS). According to some recent conversations I've had, this initiative is currently under consideration by the national distributors and IPDA. Its goal is to reduce distributor and retailer costs. As such, it represents a new method of newsstand sales accounting intended to reduce costs associated with unsold magazines, as well as improve the speed and accuracy of data reporting throughout the newsstand supply channel.

While wholesalers currently use their standard inventory-depletion systems of sales tracking even in SBT retailers, subtracting returns, as they come in, from the bulk copies that each retailer receives, PROS will allow wholesalers to calculate sales and post returns based on POS data. In other words, and quite simply, if a retailer receives ten copies of a publication and scans five of them through the register, sales are recorded at five copies for that store, regardless of how many of those copies are physically returned.

In fact, under the proposed terms of PROS, returns will no longer required for all SBT stores. On a chain-wide basis, however, there is expected to be a representative sampling of stores that will send in returns for auditing and to track shrink. Shrink, most of us know by now, are those copies that just go missing somehow-whether because of theft, or because of damage, or because the UPC did not scan properly through the register. And the under this iteration of the PROS initiative, stores are still expected to be responsible for their own shrink.

 The percentage of shrink found in the audit sampling is to be extrapolated across the chain and applied to the non-audit stores as well as the audit stores. (This strikes me as sensible, since assigning responsibility for shrink is the surest way of reducing it, and shrink reduction remains an important goal for publishers, national distributors, and wholesalers).

One reason for this initiative, according to one of the distributors with whom I spoke, stems from the fact that, even though wholesalers are getting paid by retailers based on POS, publishers do not currently accept the POS relationship. This leads to duplication of effort and increased costs across the supply chain. If we as an industry, through PROS, accept the Scan Based Trading relationship, then it will be possible for sales scanned through the register to populate the wholesalers' reporting and for the wholesaler to use that information in the accounting to the national distributors and publishers.

One snag is likely to be publisher auditing. Since most retailers don't scan by issue, scan sales are applied to each issue based on a publication's on-sale period. That means that every sale that falls within an issue's on-sale dates will have to be applied to that issue-necessarily inaccurate, as publishers that watch their post-week-four sales from Barnes and Noble, the chain that does scan by issue, will know. Also lost from the equation is the sales or returns flow that some publishers use to project future sales or returns. With PROS you get one sales and return keyed in.

[Ed.-In the meantime, AAM has given its final approval to initiate a shrink-allowance scalebased on average print single-copy sales.]

So there are a few complications that need to be figured out but there are also benefits. The first benefit is cutting wholesalers' costs by saving them returns handling, which will help keep them in business. This is of course to the benefit of newsstand publishers everywhere. Plus a side benefit is expected to be POS data supplied the distributor and publisher-although this has been promised under other industry initiatives and, let's be honest, the format that the information comes in, the number of requests needed to get it, and the frequency (or lack thereof) of getting that information has never made it all completely seamless.

But while all the questions haven't been answered-and maybe some of them haven't even been posed-a committee has been established, consensus has been sought, white papers have been (or are being) written, and collaborative efforts are happening all up and down the line. And I have been told that all of this is expected to be addressed in an upcoming PBAA meeting, scheduled for August 9th, entitled "POS Data in an Expanding SBT Environment: New Uses, Best Practices, and Implications for the Single Copy Supply Chain."

Linda Ruth is Principal of Publisher Single Copy Sales Services. Her book of case studies, "How to Market Your Magazine on the Newsstand," is available at BookDojo.com and atAmazon.