Actually Fixing the Newsstand

- Part 1

"The first task, and it is one that falls unequally on publishers, is to stop the decline.  Answer the question that is being asked by everyone, "Where is the bottom?"  Find it and find it quickly.  Then begin to rebuild sales.  All of the losses are unlikely to be recovered.  It is a different media and retail universe.  However a stable sales market will mean a stronger, more reliable newsstand environment for magazine publishers."

John Harrington, New Single Copy reposted by Bo Sacks Thursday, September 26

I could not agree more with Mr. Harrington's analysis of both the retail challenge and who is responsible to solve it.  Before the publishing industry can solve their challenge of declining sale, it must determine why their sales are declining.  I will share many reasons for the decline and solutions in the upcoming weeks.  Let's start by analyzing a title that recently reduced its print order. I offer two charts known as histograms.

CHART ONE - DISTRIBUTION OF STORES BY ANNUAL SELL-THROUGH

This chart displays a count of stores (frequency) by their annual sell through (YrPct).  Remember sell through is a simple formula of unit sales/copies shipped.  The title has a mean (average) sell-through percentage of 30.0%.  The analysis makes intuitive sense:  some stores perform better than 30.0%, some stores underperform 30.0% but the majority perform at or near 30%. 

If a publisher wanted to reduce inventory, where should it cut copies?  It is reasonable to cut stores that sell 0%, 2% and so on until the publisher reaches the reduced print order.  But let's take a look at what really happened:

CHART TWO - DISTRIBUTION OF STORES THAT WERE CUT BY ANNUAL SELL-THROUGH

Here are stores with a current draw = 0 (that means they are not on distribution) and their historical sell through percentages. 

You can see this bar chart shift to the left meaning this publisher did in fact reduce copies in some historically poor performing stores.  However, one has to ask:  why would the publisher cut 66 stores which had an annual sell through of 68% or 320 stores that sold 50%.  In total, this publisher cut over 2,000 stores that had an annual sell through greater than 40%.  Further the average sell through percentage of the cut stores was 25.37% (not much different than the overall sell through in chart one).

How does this happen?  The simple answer is that there is something amiss in the methodologies used by the wholesaler or the publisher.  The possibilities are fairly numerous so for this article, let's just stipulate there is a challenge and quality stores are being cut.

The more complex answer begins with people who have been responsible for inventory management have been using the same methodology for decades and seemingly do not consider the output of the formula file before implementing it.  If they did look at the output, saw the cuts of successful stores and continued anyway, the publishing industry has even bigger problems!

I will post results atwww.market-analytics.com starting Monday, October 7, 2013.  I also make this offer to the first five publishers who respond to me at lmagerko@market-analytics.com:  call your national distributor, ask for your MAGNET store level data file and send it to me.  I will tell you how many productive stores were cut and how many unproductive stores remain.  The results will shock you.

Mr. Harrington pointed out that initiatives, some more aggressive than others, of publishers, national distributors, and wholesalers to slow, stop, and/or reverse the trend.  Not only have none of them worked in any substantial fashion, but the decline has picked up intensity in the past five years.  

My response to that is yes, many things have been tried but I submit to the audience that each new "innovation" is nothing more than a subtle change on the old model.  Publishers, the time for subtlety is gone.  Bo, there needs to be a new model and I look forward to sharing that with you in the upcoming weeks and months!