The circulation of confidence is better than the circulation of money.

James Madison

The Long Tail of Borders Books

From the Foredeck of the Titanic

http://newsstandpros.wordpress.com/

The past two months have been a long hard slog of budgeting, reporting, meeting, writing, re-writing, making calls, taking calls and yes, believe it or not, here we are well into the 21st century, making copies.

What's it all been about? Publishers still want to be on the newsstand. I've been working with several publishers who want expand their physical visibility and they want it to happen in the coming new year.

Publishers continue to participate in check out pockets. They will pay for retail and wholesale based promotions. Magazine publishers will participate in airport programs. It's important to be "out there."

But that doesn't mean that we don't have problems above and beyond the competition for people's time and "eyeballs". Within our own industry we need to address and solve the question of Scan Based Trading. Who owns this product? How do we square the circle when we try to market an impulse item, but manage it within the store the same way as peach rings, troll dolls or note pads because, "That's the way the retailer wants it!"

We still have difficulty managing our distributions. Our remote, centralized way of managing order regulation takes a lot of local knowledge and instinct out of the equation. No matter how savvy the data is, now matter how good you are, no matter how well meaning, if you've never been to Cuyahoga Falls, Ohio and all you know about the stores there are the demographic keys and the rack size, well, you don't know anything about Cuyahoga Falls, Ohio or the people who may buy magazines there.

So who buys magazines in this town?

But one interesting item made itself very apparent while working through all of the data I've been snowed under for the past sixty some odd days: The loss of Borders was not only very big, it is still being felt. Even now, as we compare issues where there was no Borders distribution in the prior year, and in some cases, where we tried to find alternative sources of distribution to replace that lost retailer, you can see and "feel" where the volume is not the same. Where the presence of the other bookstore chains and related retail expansion simply did not pick up the slack.

On a related front, I am still surprised that our industry never made an overture to the independent bookstore market and tried to expand our presence there. While it's a small market, would it hurt to try and pick up a few points of unit sales?

There's been a long and worthwhile discussion about finding alternate retail markets for magazines: Beauty supply stores, craft stores, auto parts stores, dollar stores, outdoor gear and office supply stores. All of our major wholesalers have divisions dedicated to these markets and they all do a good job of locating, pitching and servicing these accounts.

But from what I can see in the numbers, for many magazines, five copies in a beauty supply store simply does not take the place of more than 50 running feet of mainline space in a large format bookstore.

There's just no way around that. And it's just one more thing on the long list of things our industry needs to address.

Source Interlink Payment Deferral

In other words, if the deferment is granted, you get your full on sale. If it isn't, the wholesaler won't hold on to the inventory for you.

BY LINDA RUTH

http://www.audiencedevelopment.com

If you are an American magazine publisher, there is a very good possibility that you recently received a letter from Michael Proche, president of Source Interlink Distribution, asking for some help in easing the strain on our multiply challenged supply channel.

Challenges to our magazine supply channel are not new, and everyone is looking for solutions. Publishers hear proposals for increased discount from wholesalers; requests for promotional dollars from retailers; wholesalers struggle to manage more product at lower efficiencies while fixed costs increase; retailers find themselves serving as storefronts for online businesses that don't share the profit.

Adding to the wholesalers' woes these days is the very trend that has represented a bright spot for publishers: the bookazine. While bookazines sell a good number of copies at a high cover price-good news for all supply chain partners-their one-shot, annual, or semi-annual frequencies create a set of problems of their own for wholesalers.

Wholesalers are expected to pay up front for inventory. In years gone by, retailers would themselves pay up front for inventory so wholesalers had some cash to forward to the national distributors, who in turn forwarded advances to the publishers based on estimates of what final sales of a given publication were likely to be. In recent years, wholesalers don't always get that early payment. The "pay on scan" retailers refuse to accept the burden of inventory and, instead, pay only for product that has already been purchased by the end customer and scanned through at the register.

This has increased the inventory burden on wholesalers, who have not at this time passed that liability back up the supply chain to the publishers. Low-frequency publications-ones that are out on the shelves 90 days or more-create a longer timeframe in which wholesalers must wait for the credits from returned copies to compensate for inventory costs. The high cover prices typical of these long-on-sale products further increase the wholesaler burden.

The problem itself is not a new one. I work with publishers who have grappled with these issues for decades, and the ways in which their agency partners cope with it are various. One way is through early returns. If it isn't worth the inventory cost to the wholesaler to hang on to those copies, back they will come regardless of on sale period.

A second approach we see is the so-called "paper" return-a cooperative wholesaler will hang on to the inventory for redistribution but put the inventory in a return account for re-billing at re-distribution time. This is a creative approach but absolutely fraught with the peril of error. Actually, if we change the word "peril" to "certainty" we're closer to the mark on this one-with the best will on all sides, the manual overrides cause inevitable situations in which returns are applied against inventory that hasn't been credited back to the publisher.

A third approach has been through split distributions-hardly worth the bother to either publisher or wholesaler unless the distribution is quite robust indeed.

Source Interlink is asking publishers to grant them a 30-day payment deferral for any title with a frequency of less than bi-monthly. According to Source this "will better align the timing of the allocation that provides ample copies for a full 90-day on-sale period." Source will work with publishers in several ways in return for such a deferral. First, they will "support a mutually agreed upon allocation" to a level appropriate for the extended on sale period. Second, they will feature the publication in a "weekly broadcast to our merchandisers to maintain full-display for the entire window of on-sale period."

To a publisher who has experienced the difficulty of keeping a special issue on the newsstand for an extended time period, these concessions probably sound pretty good. On the flip side, if the 30-day deferral is not granted, Source will "take the necessary steps to align" the quantities ordered "with an adjusted 30-day on-sale period."

In other words, if the deferment is granted, you get your full on sale. If it isn't, the wholesaler won't hold on to the inventory for you.

The difficulty for publishers here is this: Their contracts are with the national distributors, and their payment schedule is based on those contracts. The deferral, if agreed upon by the publisher, will affect their agreement with the national distributors, who in turn will have to create their own set of overrides.

In other words, if we as an industry are to make this adjustment, there is some re-programming of accounting systems that will need to be done.

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.