A buddy and I were marveling at the changes here in the Chicago marketplace over the past year or two. Like me, my friend spent many years working in the Midwest and recalls calling on many of the former wholesalers discussed in a post last month.
The changes out here in the central Midwest are significant. Source and News Group had reached what felt like holding pattern in the last decade. The acquisition of all Kroger banners by News Group last year did not significantly impact this market. TheNews Group already serviced the Michigan, Cincinnati and Columbus banners. When Source took over CVS and Rite Aid Drugs last fall, that too was not a big change. These had been Source accounts since the fall of UniMag in the late 1990’s. The only big changes we had seen in metro Chicago was the transition of the airports and Meijer’s Discount to News Group. But in 2014, this is old news.
But now in the first and second quarter of this year we will really see the impact of the closing of the Dominick’s Supermarket chain on newsstand sales. The venerable Jewel/Osco supermarket chain has moved suppliers from the Source McCook, IL facility to the Jackson, MI News Group DC. In late Spring, the Roundy’s chain of supermarkets, which includes the fast growing upscale upscale Mariano’s stores in Chicago, will move to News Group service. The rest of the Roundy’s banners in Wisconsin and Minnesota also move to News Group.
Let’s be clear: No one can fault either of these wholesale distributors for trying to make a profit, expand their business horizons, or increase their market share by taking on national or regional chains. The issue, as some magazine publishers have expressed to me is that no matter how hard they work (and they do work hard), how hard they try (and they do try hard), there no longer appears to be any marginal benefit for a publisher when a retailer shifts from one wholesale supplier to another. In fact, the disruption to the distribution can significantly hurt sales.
With a promise to remain anonymous and only a little light editing, I wanted to share with you what my friend had to say. I could feel the frustration coming from the monitor in waves:
“I have a client who has lost significant sales in CVS and Rite Aid out on the east coast due to the CVS and Rite Aid transitions. This benefited the publisher how? They get to explain this to their advertisers (especially the ones based in Manhattan) how? Will TNG tie product in Central Michigan for delivery to the Chicago and Wisconsin market. I have a local publisher in Chicago. How does this improve things for them?
You know who newsstand consolidation really benefited? Right from start of this big mess right up until the beginning of 2008? It’s got to be the accountants and the Wall Street guys. All of this must have made their books look better. Maybe it added some cash to their bottom line. SBT has to make the bottom line look real pretty too. The inventory gets stuck with the wholesaler.
So we “modernize” and “fix an ancient and creaky distribution system” (Remember those awful UniMag Power Points?) we’ve blown up something that worked kind of OK and replaced it with something that does not work all that well for any of the suppliers in the chain, the wholesalers and national distributors, or the producers – the publishers. But it has to have worked out OK for the retailers.
That buyer from Wal-Mart Canada who was in Harrington’s a few months ago that BoSacks blasted all over the place? She is right to want to see publishers step up. She is right to want to see publishers take some ownership for the newsstand and the sub offers and the high newsstand prices.
But I want to see these retailers take some ownership for the changes and challenges they put on us. I hear a lot of complaints but we didn’t make the system this way. They did. (Emphasis mine)”
It went on this vein for some more but you get the gist. And it’s an interesting point. In all the writing you see about the “broken” newsstand system, you see call out after call out after call out for the publishers, the national distributor, the wholesalers, someone, anyone, to do something. But this started with something the retailers wanted.
Personally, I wonder if the supply side of the distribution chain has the will or ability to “fix” what is broken. There are too many disparate needs and viewpoints. The true leaders of the industry, the larger publishers, are focusing their talents, money and attention elsewhere. The small and medium sized publishers don’t have the cash, the experience or the clout to make changes.
The real advances that we will see in marketing, display and call outs to readers to come into bricks and mortar stores to buy magazines will take place on an ad hoc, piece by piece basis. We’ve seen much of this in the past few years from advances in electronic covers to social media campaigns like the Miley Cyrus cover from last year. The question is: Will we reach a critical mass in time to save the system?
In light of all these things, I still find it endlessly fascinating that once again, in the dawn of what looks to be another down year, I am working with publishers who are willing to launch new product into this “ancient and creaky” system. Heck, beyond my personal experience in the launch venue, in the past two months, Mr. Magazine ™ has ID’d another 32 regular frequency launches and 103 specials. Does that mean the world is crazy? Or hopeful?
I’m always “cautiously hopeful.” After all, I’m on the Titanic. But I’m also on the foredeck. If you recall, it’s easier to get off the ship from here.