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Small And Mid-Sized Publisher Opportunity In A Contracting Market. A Mr. Magazine™ Exclusive from MagNet..

May 13, 2014

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An ongoing series of Mr. Magazine™ exclusive interviews with MagNet’s Luke Magerko.

Luke Magerko was a consistent contributor to my blog in 2013. Luke has partnered with MagNet to provide retail analytics for the publishing industry. Today, we pick up our conversation from two two weeks ago and, going forward, MagNet will provide me with an interview with Luke every other week highlighting retail analytics.

This week, we focus on increasing sales by changing the checkout status quo, especially for smaller and mid-sized publishers. First, we report on the overall magazine share of market and sales trends based upon price point. This analysis is based on all titles off sale in the previous 12 months ending February 2014.

HOW DID YOU ANALYZE PRICE POINTS?
We segmented our analysis into four price groups and observed four national sales results. The four price groups are:

•$0.00 – $3.49: examples include Women’s World, First for Women, All You
•$3.50 – $5.49: examples include People Magazine, HGTV Magazine, Shape Magazine
•$5.50 – $7.49: examples National Geographic, New Yorker, Country Sampler
•Greater than $7.49: examples include Cuisine at Home SIP, Fine Cooking and Taste of Home Bookazines

We analyzed weighted cover price. Weighted cover price is revenue generated in the United States and Canada divided by total unit sales. For example, Muscle and Fitness magazine has a U.S. retail price of $6.99, however its weighted cover price is greater than $7.00 due to Canadian sales.

The four sales comparisons are:

•Dealer Count = How many stores received a magazine. A monthly title ships to 10,000 dealers an issue. This equates to 120,000 dealers annually.
•Copies Shipped = Share of total copies shipped (“draw”) by price point.
•Unit Sale = Share of total unit sale by price point.
•Retail Sales = Share of total retail sales by price point.

Screen shot 2014-05-11 at 8.20.20 PM

I AM SURPRISED THE $3.50 – $5.49 CATEGORY REPRESENTS NEARLY HALF COPIES SHIPPED AND UNIT SOLD. WHAT ELSE CAN WE LEARN FROM THIS CHART?
$0.00 – $3.49 price points – These titles represent 14% of the dealer count, but 21% of copies shipped and 25% of units sold. These titles have a high penetration at checkout and have a higher sell-through efficiency than national averages. However, these titles generate just 12% of all retail sales.

$3.50 – $5.49 price points – This group represents nearly half of all dealers and units sold; just under half of all units sold, but only 44% percent of all retail sales. Again, these titles are highly represented at checkout, but have a below-average retail sales share.

Combination of both higher price points – These titles represent 38% of the dealer count, but 28% of copies shipped and 25% of units sold. These titles are either part of a checkout pocket rotation (such as BH&G Special Interest Publications) or are relegated to the mainline. These magazines generate 45% of all retail sales revenue and are easily the most profitable group of all price categories.

BUT THE HIGHER PRICE POINT PRODUCT HAS LOWER SELL THROUGH EFFICIENCIES.
Yes, but wholesalers wisely pushed higher price product in spite of the lower sell through because it generates more revenue/profit for the retailer.

WHAT ARE THE SALES TRENDS BY PRICE POINT?
Let’s look at monthly retail sales by the price point grouping in this chart.

Screen shot 2014-05-11 at 8.21.19 PM

The lower priced titles weigh heavily upon the entire category. The $5.50 – $7.49 group, however is declining less dramatically while the greater than $7.50 group sales is increasing.

THE UNDER $5.49 TITLES REPRESENT MOST OF THE CHECKOUT SPACE!
Yes, they do. Retailers are shrinking the magazine footprint in store because retail buyers focus on checkout results and punish categories where sales fall rapidly.

HOW DO WE CHANGE THE STORY AT RETAIL?
I mentioned this in a past interview, but it bears repeating: there has been little change at the checkout in the past 10 years. There is similarity of product at checkout, and the publishing industry needs a new mix of titles to generate life into this industry.

WHICH PUBLISHERS SHOULD PURSUE CHECKOUT SPACE?
We analyzed one publisher which produces high-priced, high-quality special interest publications this week. We determined that this publisher could improve both sales and profit by purchasing checkout space.

HOW DO YOU DETERMINE PROFITABILITY?
For this exercise, we estimate revenue and expense. Our estimates are fairly accurate, but we always prefer to work closely with a publisher to produce exact results.

WHAT DID YOU FIND?
This publisher creates more than 50 releases a year. Although the overall sell-through efficiency of 27% underperforms national averages, this publisher makes over $1.40 per copy sold. This is an excellent profitability number that lends itself well to investing in checkout space.

WHAT STOPS THIS PUBLISHER FROM EXPANDING INTO CHECKOUT?
In my experience, smaller to mid-level publishers believe checkout pockets are too expensive, both in pocket fees and in waste. More than one publisher representative said they would not want to increase the print order to cover the checkout space.

BUT THE TITLE WOULD SELL MORE PRODUCT!
Yes, but what we cannot do is predict the exact increased sale. One senior-level wholesale representative told me a title moving from the mainline to the checkout sees a 5:1 increase in sale. I believe that is too high, but it is reasonable that any title moving from an aisle in the middle of the store to checkout will see increased sale. We need to make publishers more comfortable in this arena so they can test product at checkout and determine if it is right for them.

WHAT ABOUT EXISTING TITLES AT CHECKOUT?
Some of those top-30 titles need to reduce space or be sent to the mainline based on lack of productivity. The publisher we analyzed could credibly walk into many retailers and point out its line of mainline titles already outsell many checkout titles right now.

WHAT WOULD HAPPEN AT CHECKOUT?
It has been well reported that wholesalers are in financial trouble and retailers compound that trouble by reducing the magazine retail footprint. A more diverse checkout with higher priced product will bring back some consumers and spur sales. Higher-priced product at checkout will help the retailer’s bottom line which is a win for the publishing industry as a whole.

INTERESTING, LUKE. YOU CAN CONTACT LUKE AT LMAGERKO@MARKET-ANALYTICS.COM OR JOSH GARY AT JGARY@MAGNETDATA.NET IF YOU WOULD LIKE AN ANALYSIS OF YOUR OWN TITLES.

©Samir “Mr. Magazine™” Husni, 2014. All Rights Reserved.

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