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HIGHLIGHTS FROM THE 2009 RETAIL CONFERENCE
Reporting by Karlene Lukovitz, KL MediaLinkPhotos by Cristina Dinozo
*IPDA Newsstand Forum will be providing in-depth coverage of the 2009 Retail Conference later this week. To register for the newsletter, click here.
TABLE OF CONTENTS
MONDAY: General Sessions
TUESDAY: Breakout Session
MONDAY, MARCH 23General Sessions
Conference Chair Welcome
Conference Chairman and host Tom Masterson, SVP Consumer Marketing and Manufacturing at Hachette Filipacchi Media US, welcomed attendees and outlined the day's agenda.
MPA Chairman: Turning Recent Turmoil into a Positive
This year’s Retail Conference, co-sponsored by MPA and the International Periodical Distributors Association (IPDA), kicked off Monday morning with an address by John Q. Griffin, President of National Geographic’s Magazine Group and Chairman of MPA.
In a “brutal” economic environment, it’s particularly important to remember what a “great and important” business magazine publishing is, Griffin emphasized. Magazines “educate, inform and inspire 85% of the U.S. population each month,” and their audience is growing faster than that of any medium except the Internet, he reminded.
The retail channel continues to be vitally important to publishers because “each sale represents a person connecting to the magazine’s content,” Griffin said.
And while the distribution channel has recently gone through a “wrenching” time, publishers, national distributors, wholesalers and retailers can now turn this turmoil into a positive, he said.
As a publisher and “believer in magazines,” Griffin expressed hope that each party in the channel will now focus on four goals:
* Concentrating on the consumer and providing a great in-store experience in order to increase sales and improve profits for all. “Let’s stop fighting over a shrinking pie and grow the pie,” he urged.
* Striving for outstanding execution. “Let’s get the right magazines into the right stores in the right quantities so each person has the chance to buy the magazine that most appeals to her,” Griffin said.
* Ensuring that magazines are well displayed and merchandised.
* Improving efficiencies. This will come about if the first three steps are properly executed, he noted.
“Let’s show that we can work together for the common goal of increasing magazine sales,” Griffin concluded. “We all need to feel that we are putting our effort and resources into a system that is functioning effectively, spending carefully and moving toward the same goal of growth.”
What Consumers Secretly Want (…But Are Afraid to Tell You!)
Kate White, author and Editor of Cosmopolitan, offered four ideas for better connecting with the customer in print:
1. Drain the bathtub (but don’t throw out the baby). Editorial reinvention is even more critical during a time of radical change like the present, but publishers must also retain the core mission and benefits that readers are passionate about, White said. Cosmopolitan, for instance, has preserved its mission of being “the relationship Bible,” but adopted a more straightforward, edgy and irreverent tone that appeals to today’s young woman.
2. Make sure you’ve got your mantra down. Simply put, people want to know what a magazine stands for and what they’re going to get from it, White said. A “mantra” or guiding statement defines your message and keeps you from going off track. Cosmopolitan’s focuses on defining its audience: the “fun, fearless female.”
3. Figure out the “freak” or “passion” factor. Understand what about your magazine is so important to readers that they’ll “freak” if they can’t get hold of this month’s issue—what passion makes them choose to buy it over other magazines and other options for spending their discretionary dollars, advised White. This requires listening carefully to readers, including ongoing research.
4. Go big or go home. Making readers wonder “What are they going to do the next time?” is part of creating a passionate bond with a magazine, White said. Cosmo strives to surprise and delight. For example, the magazine has used card-stock inserts to provide handy, tear-out guides to summer fun and excerpts from the summer’s hottest books. Instead of a predictable perfume sample, Cosmo inserted a pumpkin/lavender fragrance, based on research that this unusual combo increases men’s arousal. White also encouraged publishers to fully leverage the magazine medium’s “physicality” and ability to deliver lush visuals.
Category Success Story: ELLE—Downloads That Drive Sales
Offering music downloads increased retail sales significantly in a test conducted on ELLE’s September fashion issue, reported Will Michalopoulos, Vice President, Retail Sales & Marketing, Hachette Filipacchi Media U.S.
About 8% of total draw copies for the issue included the promotion. Those copies bore a yellow sticker on their covers and a code inside that newsstand purchasers could use to download music selections from Disney’s High School Musical 1 and 2, Rehanna, Fergie and 3 Doors Down.
About 4,300 or 13% of promotion-copy purchasers, downloaded a music selection—a very impressive response by direct marketing standards, noted Michalopoulos.
Unit sales of the September copies including the download offer were 44% higher than the magazine’s average for the previous eight months, 36% higher than sales for the September copies not bearing the promotion, and 62% higher than sales for the same month’s issue in the prior year.
Hachette is now trying a similar promotion with a book download offer on Woman’s Day, Michalopolous said.
The Changing Retail Landscape
(l-r) Lee Nichols, Dechert-Hampe & Company, and Al McClain, RetailWire.com
Lee Nichols, President and CEO of Dechert-Hampe & Company and Al McClain, CEO and Founder of RetailWire.com, reported on two recent surveys that found similarities and differences between retailers and magazine category executives when it comes to views about retail and category trends.
One survey, fielded by Dechert-Hampe in Nov./Dec. 2008, focused on the retail community’s views. Of the 228 respondents, 32% were manufacturers/vendors, 24% retailers/wholesalers, 31% services suppliers/researchers/consultants and 13% agency/other. The second survey, conducted in Jan./Feb. 2009, was among MPA/IPDA members. Of the 107 respondents, 43% were publishers, 22% national distributors, 12% retailers, 10% wholesalers, 8% consultants and 5% other.
The two groups agreed that quality of space allocated to magazines is the most important market factor determining magazine category growth, followed by overall consumer demand for magazines.
Looking at the most promising opportunity for the magazine category, improved location within the store was cited by 35% of retailers and 28% in the magazine channel. More effective merchandising was cited by 34% in the magazine channel versus just 22% in the retail community.
Looking at category promotion opportunities, 55% of the retail industry and 37% of the magazine channel emphasized cross-merchandising. Retailers ranked in-store advertising second but put little emphasis on pricing promotions, whereas the publishing channel put about equal stress on these two activities (each was cited by about one-quarter).
Magazine channel respondents view club stores, mass stores and supermarkets as the three biggest opportunities for the category, while retailer executives cite supermarkets, bookstores and club/mass/terminals.
Succeeding in a New Economy
According to retail consultant Michael Sansolo, step #1 in succeeding in the months and years ahead is realizing that everything changed after September 15, 2008—the day that Lehman Brothers failed. If your business model hasn’t changed since then, you’re probably headed for trouble, he said.
On the other hand, for businesses that are actively embracing change, there is “a world of opportunity,” Sansolo stressed. Examples of companies seeing increased sales include Hyundai, as a result of offering consumers a financial protection guarantee in the event that they lose their jobs after buying a new car, and Wal-Mart, as a result of offering value and conveying that in simple, direct messages.
Sansolo said that companies have become too dependent on demographics, when “behavior drivers” are what really matter. He cited a recent Coca-Cola study that found the core behavior drivers to be time, money, family and “me,” in that order.
“Magazines are not a need, so you must create the need” by offering magazines that make people’s lives better somehow—providing a break from worry, or guidance in this difficulty economy, for example. “Find out what drives all segments of your customers,” he advised.
New Realities for Magazines: Where the Opportunities Lie
(l-r) Michael Sansolo, Retail Consultant; Richard Alleger, Rodale, Inc.; Kathy Meier, Harrisburg News Company; Mike Duloc, Kable Media Services; Lee Nichols, Dechert-Hampe & Company; and Al McClain, RetailWire.com
Yes, there are real opportunities for the magazine category in this economy, according to a panel moderated by retail consultant Michael Sansolo.
Richard Alleger, Senior Vice President, Retail, Rodale, advised publishers to identify the stores in which their titles are number one, or at least in the top rung, and analyze every aspect of those stores and their customers. “Then take what you’ve learned and roll it out to the rest of the stores,” he said.
Michael Duloc, President and CEO, Kable Media Services, Inc., called for greater sharing of customer demographic data at the store level. “The opportunities are there, but I don’t know if we’re taking advantage of them as much as we could,” he said.
Kathleen Meier, Vice President, Marketing & Sales, Harrisburg News Company reported that grocery shopping trips are declining further as families now stock up, and that impulse buys are also less prevalent. However, cooking magazines are doing “tremendous” business because of the eat-at-home trend, and crosswords are selling very well because they take people’s minds off their troubles, she said. It’s very important that the magazine category work with retailers to drive customers through the magazine aisle to foster impulse buys, she stressed.
Lee Nichols, President and CEO, Dechert-Hampe & Company, advised publishers to help retailers tailor their magazine assortments by store. He also suggested that the magazine category needs to become as creative in its merchandising as it is in ensuring that its products are constantly fresh and changing. And he urged the partners within the distribution chain to learn more about each others’ challenges by engaging in more direct communication.
Al McClain, CEO and Founder of RetailWire.com, said that the magazine category should realize that all classes of trade are testing smaller-format stores. As format and traffic patterns change, “You’ve got to be there—you’ve got to be in front of consumers when they’re in the store and in the mood,” or they’ll turn to the Internet and other sources of information and entertainment, he said.
Category Success Story: Family Circle’s 75th Anniversary
David Algire, Vice President Retail Sales, Meredith Corp., shared results of a multi-platform promotion, featuring $75,000 in sweepstakes prizes, which was implemented for Family Circle’s 75th anniversary.
Family Circle’s Feb. 2007 issue featured a letter from the editor about the special event, as well as a cover line that included the page number for a full-page ad inside. That ad carried contest information and the advertiser-partner’s logo and Web link. Retail displays for the issue also promoted the event.
Consumers were driven to familycircle.com, bhg.com and parents.com (10 million page views per month combined) to enter online. An online “decoder” was provided so consumers could instantly determine if they’d won. Meredith’s television stations (10% of all viewing audiences) also promoted the event.
Benefits for retailers included participation in a $40,000+ gift card give-away, with their store brands featured on Web sites and visibility in the ad in Family Circle. To participate, retailers needed to authorize a floor display or feature pocket.
Results: The FC issue was featured in 7,000 floor displays, and sold more than 1.3 million copies. That was the highest sale in the past five years and 47% over the average issue sale. Further, sales efficiency was at 52%.
For retailers, the issue generated incremental sales lifts ranging from 7% to more than 300%, depending on their degree of participation.
Category Success Story: Esquire’s 75th Anniversary
Esquire, which also had a 75th anniversary last year, took a very different but equally successful approach.
The magazine decided to focus the anniversary theme on the next 75 years. High-profile events—one featured George Clooney, LeBron James and Marc Jacobs doing live demonstrations of their visions of the future—and updated versions of four iconic Esquire covers generated lots of free press coverage, reported Chris Butler, Vice President, Consumer Marketing Director, Hearst Magazines.
The official Oct. 2008 anniversary issue, themed “The 21st Century Begins,” carried the first truly digital magazine cover. Out of a 250,000 draw, 100,000 copies bore the very costly cover, which was underwritten by Ford Flex. Nearly all of the digital-cover copies were concentrated in about 2,000 Borders, Barnes & Noble and transportation terminal stores, Butler reported. PR outreach focused on tech blogs and traditional press, and the retailers were mentioned in every promotion.
Anniversary issue copies with traditional covers were priced at $4.99, while those with the digital cover were priced at $5.99.
At Borders, where the issue was featured in “The Short List” e-newsletter (17 million emails) and displayed on the best-seller book table, as well as in end-caps and window displays, results included a 500% sales increase for the digital-cover copies, with a 50% price increase.
Overall, unit sales jumped 250% in retailers carrying the digital issues, and sell-through was 75%, according to Butler. Units for traditional-cover copies were flat, but with a $1 price increase. Newsstand revenue for the issue doubled. The Esquire brand realized extensive press exposure, and the sponsoring automotive advertiser was very pleased with the results.
Evolution and Revolution in Publishing
(l-r) Tom Masterson, Hachette Filipacchi Media US; John Griffin, National Geographic Magazine Group; Michela O'Connor Abrams, Dwell; Andy Sareyan, Better Homes and Gardens; Robert Sauerberg, Conde Nast Publications
Magazine executives shared their thoughts on the Internet, the retail channel and other key issues and opportunities during a panel moderated by Tom Masterson, Senior Vice President, Consumer Marketing & Manufacturing, Hachette Filipacchi Media U.S., Inc. and chairman of this year’s Retail Conference.
The panelists agreed that publishers are becoming increasingly sophisticated at leveraging the strengths of print and the Internet to create brand synergy.
Robert Sauerberg, Group President, Consumer Marketing, Condé Nast Publications, noted that increases in magazine readership numbers reflect the medium’s uniquely powerful image and graphics capabilities and ability to “answer questions that people didn’t even know they had.” The Internet is best for research or reading opinions that support the opinions that an individual already has, he said. Large traffic gains and increasing success with online ad sales show that publishers are learning how to manage content between print and the Net and drive consumers to Web sites, he added.
Michela O’Connor Abrams, President and Publisher of Dwell, pointed out that nearly 500 magazines were launched last year, and teens and tweens continue to buy magazines in large numbers. Her company launched a new travel magazine last fall, demonstrating how much it believes in the medium, she said. Developing the brand connection with consumers through the Web site and events creates new readers for the magazine, just as the magazine helps create new site users and attendees, Abrams noted.
Andy Sareyan, President, Better Homes and Gardens and Executive Vice President, Meredith Publishing Group, said that publishers would benefit from trying to figure out how to have new or current-issue content reflected on the Net in more timely fashion. One advantage might be having current newsstand issues with relevant content generated during online searches, along with Web site links.
John Q. Griffin, President of National Geographic’s Magazine Group and Chairman of the MPA, said publishers should work harder at making the Net a tool for encouraging sampling of magazines. “Since people are spending their time on the Net, let’s use it,” he said.
In the retail arena, the industry needs to focus on finding innovative ways and working with retailers to connect with the consumer, said Abrams.
Sareyan said the recent retail channel crisis offers the positive of exposing weaknesses that were allowed to exist during better times, but must now be fixed immediately. A system that forces wholesalers to pick up and count returns from retailers with whom they have scan-based trading agreements is “crazy,” and the industry must find a solution, he maintained.
Sauerberg urged the industry to use its resources, including customer databases and Web sites, in the retail channel. “The buyers are out there—we just need to stimulate them,” he said.
Addressing sustainability, the panelists agreed that the key challenge is subscriber copies, since most newsstand copies are already recycled. While the industry has made real progress in encouraging recycling of subscription copies and adopting sustainable operational practices, the work is ongoing. Abrams stressed that to be successful, sustainability initiatives must support business profitability objectives.
Category Success Story: Real Simple—Easy Everyday Solutions for Spring
Rob Gursha, Executive Vice President and CMO, Time/Warner Retail Sales & Marketing, detailed a 360-degree, integrated promotion that was extremely successful for Real Simple, and has since been adapted by other magazine brands for their own retail initiatives.
The goals of Real Simple‘s “Easy Everday Solutions for Spring” promotion were to grow retail sales in a key retail partner (Walgreens); drive new customers into the retailer’s stores; increase overall product purchases/market basket amounts through cross-merchandising; and add value and ROI for participating advertisers. Participating advertisers included several leading cosmetics brands and a leading confections brand.
Consumers buying two of the participating products were eligible to receive a subscription to Real Simple and a branded gifts, such as an RS tote bag and notepad/journal. Time/Warner worked with a fulfillment partner to collect consumers’ data and have the gifts sent to them.
The multiple targeted vehicles used to drive store traffic included an in-magazine advertorial spread created by editorial that featured the advertiser brands, in-store radio, POS signage, special in-store displays, in-store demonstrations, and mobile marketing.
Displays, which featured a spring solutions tips promotion piece, included in-aisle stands in beauty sections and “side-kicks” featuring a tips sheet and the participating products.
A digital booklet with tips content and a $1-off coupon for Real Simple’s was used to motivate consumers to text and enter their email addresses while in the store. In 50 markets, in-store “ambassadors” gave product demonstrations and walked around handing out samples and tips sheets.
The overall results: The magazine’s single-copy sales increased 28%, and nearly 67,000 incremental products were sold for participating advertisers. One advertiser saw a triple-digit lift, according to Gursha.
Gursha stressed that two keys to success in such integrated promotions are keeping the message simple and working closely with advertisers and retailers to ensure high in-store compliance with the program.
What Lies Ahead: Wholesaler Perspectives
David Parry, The News Group
Executives from two major wholesalers shared their perspectives on the channel’s current status and the challenges and opportunities now facing the magazine category.
David Parry, President of The News Group, U.S., described TNG’s scramble during the past 45 days, after Anderson News suspended business, to acquire certain Anderson News assets and get distribution going again in key areas.
Parry stressed that three elements will create stability for News Group and its customers and channel partners. News Group LP is made up of five separate ownership groups, which together serve approximately 90% of the continental U.S. plus Alaska, he explained. In total, the partnership has 27 distribution centers, 120 depots, 8,600 employees and 2,500 trucks.
In terms of processes, TNG has spent millions of dollars on refining category management systems, and will continue to invest “to make sure we do have the right product in the right stores” and improve efficiencies. Third, TNG will continue to invest in continual training at all levels, from merchandisers to senior management, to ensure efficiency, professionalism and focus on customer service, he said. TNG’s core principles are honesty, integrity and that single-minded focus on the customer, Parry said.
Now, Parry emphasized, it is critically important that channel partners get magazine product shipped to “the right distribution centers in the quantities that we need, as soon as possible.” Retailer partners have “suffered heavily” since Feb. 7 because of not having the product their customers were asking for, he said.
The channel must also move fast to “protect our retail space,” Parry stressed. “We’ve got to get out there with a single voice and get this business standing tall again with our retail customers, or we will lose space to other products in the store,” he said.
Ron Clark, President and COO of Hudson News, also stressed that the magazine category is now facing serious credibility issues with retailers. Like Parry, he said that some retailers are rethinking their approach to the category, including space allotments, and that competitive categories are seeking to take advantage of this scenario.
Clark urged small groups of key publisher executives and wholesaler executives to get out and meet with top executives at key retailers to address and correct a perception of category instability.
Mythbusters: The Truth About Magazines at Retail
Three national distribution executives addressed misconceptions about the magazine category at retail.
Moderator Jay Felts, Senior Vice President, North American Sales for CMG, was joined by panelists Steve Burbridge, Senior Vice President of Sales and Logistics, West, Time/Warner Retail Sales & Marketing, and Todd Garland, Vice President, Marketing Distribution Services, Inc.
A summary of five key myths and realities:
1. Myth: The magazine category is too small to impact retailers’ bottom lines. Reality: Selling magazines can boost total store profits.
Magazines rank in the top 10% of retail category revenue, generating over $4.5 billion annually. Magazine buyers spend $67 per weekly market basket—71% more than customers who are not magazine buyers. Magazines generate 17.4 inventory turns, more than double the turns generated by the total store.
2. Myth: People don’t read magazines anymore—especially the youth market. Reality: Magazine readership is growing among all target audiences.
More than 85% of Americans read magazines, and magazine readership grew during the last five years. In fact, magazine audience growth increased more than all other media except the Internet. The average number of issues read by adults has increased by 4% since 2004. Among 25 to 34 year olds, the growth rate was 11.5%.
3. Myth: Candy and gum are the main drivers of checkout profits. Reality: Magazines generate more sales and profits than any other category at checkout.
Magazine profits per unit are higher than any other front-end category, including snacks, gum, candy and carbonated beverages. Magazines deliver 35.7% of total checkout profits. Moreover, 58% of consumers say they would miss magazines if they were not at the checkout. Magazines are the #1 checkout favorite for women, ahead of candy, gum and mints.
4. Myth: Magazines make no difference in stores. Reality: Consumers say that magazines enhance their shopping experience, helping to differentiate a store and encouraging the sale of other products.
One-third of consumers who don’t find the magazine they want will go to another store to buy it. Consumers perceive checkout times to be shorter when magazines are available at checkout. Magazine recipes, beauty tips, product reviews and advertisements have been proven to drive traffic and product purchases.
5. Myth: Magazines are more hassle than they’re worth. Reality: Other products require much more labor.
In-store magazine service, including delivery and merchandising, is provided by magazine wholesalers rather than retail store employees. Dollar for dollar, magazines’ true profit margin is double the total-store true profit margin.
Conference Close
Jerry Lynch, President, IPDA: Magazines are “an incredible product, put out by passionate people... We can be successful if we focus on bringing this great product to the customer.”
TUESDAY, MARCH 24Breakout Session
Newsstand 2008: Trend or Anomaly?
John Harrington, Harrington Associates LLC, and Baird Davis, Baird Davis & Associates
Magazine single-copy unit sales dropped 11.7% last year and dollar sales declined 3.2%, according to an analysis of MagNet data by John Harrington, Partner, Harrington Associates LLC and Publisher of The New Single Copy.
Harrington and circulation consultant Baird Davis discussed the reasons behind the 2008 retail trends and their views on where retail is headed going forward during a session on Tuesday morning.
Economy-driven store traffic declines and cutbacks in impulse purchases were primarily responsible for the sales losses, Harrington and Davis agreed.
However, Davis added that while the impact is difficult to quantify, he believes that substantial price increases by a number of major newsstand titles were also a contributing factor. The increases, he noted, were implemented in 2007, just as the recession was setting in. The average cover price for audited titles remained at about $3.40 between 2004 and 2006, but jumped to $3.48 in 2007, and to $3.81 last year, he reported.
Harrington said that his retail tracking shows that, whereas the marketplace has for many years been accepting of cover price increases, the number of titles able to raise price without experiencing unit fall-offs showed a notable downtrend last year.
The two consultants also agreed that the economy will add impetus to resolving problems and leveraging opportunities. For instance, working together to use the retail data that is now available to the industry represents a significant opportunity, and improving efficiencies will also see even greater focus going forward, they said.
Davis, citing the example of Newsweek, suggested that publishers may begin moving toward new models that are somewhat less advertising and rate base-dependent and enable greater emphasis on profitable circulation.
Harrington pointed out that the magazine category declines, while significant, should be viewed in context, as part of the overall economic recession that will begin to turn around at some juncture. Nearly every product category is seeing losses, and some industries are suffering declines far larger than low double digits, he noted.
Magazines are an exciting and still much in demand product—and the only category at checkouts that changes and provides consumers something new every week, Harrington reminded. He also pointed to the successes despite the economy, including People, which sells $300 million annually at retail; The Economist’s sustained period of growth; Cosmopolitan’s November issue, one of its best-ever retail performances; Vanity Fair’s record of winning issues; and the phenomenal demand for magazines of all types that featured Barack Obama on their covers.
