The Most Effective Use of Checkout Space. Saving the Newsstands with Mr. Magazine’s™ MagNet Exclusive Series of Interviews with Luke Magerko.July 7, 2014
This week we focus on the most effective use of checkout space for the publishing industry, analyzing the value of multiple titles sharing checkout space, and how this can benefit small publishers and large publishers equally.
YOU WANTED TO ADDRESS ANOTHER READER’S COMMENTS THIS WEEK?
A newsstand consultant told me that “none of your analytics matter until you can solve merchandiser challenge.” One quick note: a merchandiser is responsible for placing magazines on the racks in-store.
I am frustrated by the defeatism of this comment. While publishers have no control over merchandisers, all is not lost. Publishers should influence what titles are shipped, and should work closely with wholesalers on store-level product mix.
This is why MagNet recommends a profitability approach to distribution, especially for titles which are part of a checkout rotation.
WHAT IS A CHECKOUT ROTATION?
Publishers like Meredith and Time Inc. rotate multiple special interest publications (“SIP”) through checkout space. Publishers use this rotation to ensure the product remains fresh. Publishers give the consumer an opportunity to choose from a wide variety of product which changes on weekly basis.
DOES THIS TECHNIQUE WORK?
Yes. Meredith SIPs and Time Inc. Home Entertainment SIPs rank in the top 15 of all publications based on profitability.
IS IT FAIR TO COMPARE AN SIP ROTATION OF MULTIPLE TITLES TO AN INDIVIDUAL TITLE?
Not necessarily, but title rotations are quite beneficial to the retailer, and these rotations are rewarded with checkout space.
HOW DOES THE RETAILER BENEFIT?
As I mentioned in our last session, checkout space is not optimized when a title can remain in a location for extended periods. The consumer shops multiple times a week. If they do not take action in the first or second visit, it is fair to assume they will probably not purchase the product in the third or fourth visit. Retailers benefit from the fresh product and enhanced sales title rotations bring.
IS THE CONSULTANT RIGHT? WHAT IF A MERCHANDISER MAKES THE WRONG DECISION AND REMOVES A GOOD PRODUCT AND INSERTS A POOR PERFORMING PRODUCT?
It happens all the time, but that is something a publisher cannot control. A publisher, however, can control what is sent to the merchandiser. This has been a debate in larger publishing houses, and needs to be explained to smaller publishers interested in checkouts.
WHAT IS THE DEBATE?
Publishers attempt to influence the merchandiser’s choice of product through communication. Two examples: (1) color coding and (2) rotation schedules.
For example, a red dot on the spine of a magazine might imply this title should be replaced in favor of green-dotted titles. Publishers also send rotation schedules, a title-specific guide for the merchandisers to follow when a new product arrives.
THAT SOUNDS CONFUSING!
It is both confusing and wrong. Publishers who try to influence merchandisers this way make the tactical error of leaving the decision in the merchandiser’s hands. Our approach determines which titles are successful in a store, and removes those titles which are not, completely removing the merchandiser choice.
HOW DO YOU KNOW IF A TITLE IS SUCCESSFUL?
Profitability by store. A publisher who tries to influence the merchandiser assumes the strongest national-selling title should have a higher position than a lower-selling national title. Every title has successful stores and unsuccessful stores, even the best title in the rotation should not be in every store.
IS THERE AN EXAMPLE OF THIS?
This is a top-20 publisher with greater than 25,000 checkout pockets, rotating six titles through these pockets. The publisher’s strategy is to rotate most, if not all titles, through each checkout pocket. Let’s look at the profitability results of some individual stores in Walmart Canada:
All titles are profitable in stores 1122, 3075, and 3076. This is wonderful news and needs no further analysis. However, Title 5 is highly unprofitable in store 1094. There is no benefit to shipping Title 5 into this store.
Publishers can eliminate merchandiser choice by not shipping Title 5 to the store. It is impossible for the merchandiser to make a bad decision if the poor performing product is not available.
In the case of stores 1145 and 1149, most titles are unprofitable. What would happen if this store only received two or three titles as opposed to all six? One can assume there would be some slight sales increase for the remaining titles but the publisher (and wholesaler, by the way) would gain overall profitability.
THAT IS A VERY INTERESTING USE OF SPACE FOR LARGE PUBLISHERS. HOW WOULD THAT WORK FOR SMALLER PUBLISHERS?
In the last newsletter, I stated some mid-sized publishers could benefit from following the SIP model. Today, I implore small publishers to work together combining their magazines into one category-specific checkout offering. Many smaller titles, when combined with other smaller titles are in fact quite powerful and are worthy of checkout space.
THIS SOUNDS VERY COMPLEX TO ME!
It is a bit complex, but MagNet looks forward to offering advice to smaller publishers about how they can play at checkout. The most important note is that these publishers have to think about their competition a bit differently, and retailers have to think about their checkout space a bit differently.
WILL THERE BE PUSHBACK?
One senior level publishing executive bemoaned that the problem with this industry is poor checkout productivity. Another account representative pointed out checkouts are locked down because some large publishers agree to pay for space only if their product is represented at checkout in every store. This is not helpful in making the industry more productive at retail.
MagNet provides an objective look at each title’s profitability at checkout, and provides alternative titles not currently being considered but are valuable to the retailer.
The era of a mass checkout planogram with 15-20 titles in every store needs to end sooner rather than later. The checkout needs to become a bazaar worthy of the audience these publishers target. We look forward to leading that conversation.
THANK YOU LUKE.
The Mr. Magazine™ Blog is taking the first break since its inception in March of 2007. We will be back at the end of July. Enjoy your summer.