American Society of Magazine Editors

Retail Marketplace Workshop: Leveraging Retail POS Data

By Karlene Lukovitz, IPDA Daily Publishing & Retail News

How are magazine supply-chain partners employing point-of-sale (POS) data garnered from retailers on scan-based trading (SBT)? What new capabilities might this data enable for the category?

Publisher and wholesaler executives shared their perspectives during a workshop panel discussion at Retail Marketplace 2013.

Moderator Gil Brechtel, president/CEO of Magazine Information Network (MagNet), said that deeper analyses of magazine retail performance, by day and by week, are possible through POS data. He shared examples of some magazine category performance insights derived from this data to date. [See "Data-Driven Insights" section below.]

"I believe that If we can systematically drill down and sort through all of this data and do the proper analyses in a timely manner to get to the important information," over time, the insights could enable the magazine category to "change the way we go to market," Brechtel said. For example, the insights might enable adjusting on-sale periods for some titles, planning cost-effective wholesaler replenishments for high-priced bookazines and other titles; and honing seasonality distributions for specific subject categories, he said.  

Publishers' Current Uses for Data

The Taunton Press looks at POS data weekly, using it to get a first indication of each current issue's sales performance against its average sales performance for the same week in the on-sale cycle over the past six issues, reported Jay Annis, VP, trade sales, magazines and books for Taunton and president of PBAA.

Annis shares that information with editors, to help them hone upcoming covers and content, as well as using the data to adjust print orders on a timely basis for the 70-plus issues published per year across various Taunton titles. He also uses it to monitor current promotions: If the expected sales lifts in retailers participating in the promotion aren't showing in the data, Annis checks with distribution partners on the status of copy deliveries to these stores, he said.

Conde Nast Publications has been using POS data for those same purposes for more than a decade, reported Joe Bertolino, the company's VP, retail sales. Having immediate results on how a specific cover or promotion is performing, rather than having to wait two or three months for reads from O&R data as in the past, enables Conde Nast's editors to fine-tune upcoming issues' covers and content "on the fly," he noted.

Conde Nast also tracks each title's sales trends against those of its competitive set, which is particularly useful in making timely, well-informed decisions about future print orders, Bertolino said.

Chris Butler, VP, retail sales and marketing for Source Interlink Media, said that in addition to ongoing editorial and print-order uses, he finds that the specificity of POS data (by retail class of trade/COT and by chain), as well as its timeliness, is valuable for launches, in particular. For example, in launching Recoil magazine last year, SIM's strategy was to do a small print order for the first issue of this  expensive-to-produce product, seeding the copies across retail classes of trade. When first-issue results showed that the title was selling well not just in the expected retail formats, but also in COTs like drug stores, SIM was able to double the new title's second-issue print order, with strong sales/sell-through results, he said.

Wholesalers' Current Uses for Data

David Parry, president and CEO of TNG U.S. and The News Group LP, said that integrating POS data into TNG's budgeting has become "critical," as it enables a true, current read on P&L.

It also enables TNG to track results of current major promotions for timely replenishment purposes, Parry said. Further, by-store POS data is used to refine the in-store merchandising force's judgments on copy replenishments needed by store, which has increased reorder activity, he said.

Source Interlink Distribution (SID) also uses POS data for financial forecasting and various ongoing and timely analyses, reported president Michael Porche. SID's field force performs merchandising and replenishment in its high-volume retail accounts two to five times per week. He added, however, that in general, SID performs careful analyses as to the cost-justification of multiple weekly deliveries within specific retail locations. "Replenishment is not what it once was," Porche said.

SID's main objective is to use data to "do the right thing for the retailer," monitoring sales so that it can make well-informed decisions--including leaving "better-quality" products that are selling on-sale for their full on-sale periods, while removing "lower-quality" products that aren't selling from stores after a period of time.

Hudson News Distributors does not use POS for budgeting/financial forecasting, but does use it for replenishment programs--"although candidly, I'm not sure how much replenishment we need, when we're selling 30% or 32%," said president/COO Ron Clark.

Potential for Further Leveraging Data

Brechtel acknowledged that deeper dives into daily and weekly data would "exponentially increase the amount of information we'll have to analyze."

Bertolino said that using segments of the data over the past 13 to 15 years has yielded valuable broader insights for Conde Nast, such as the value of an extra week on sale (its monthlies realize 7% to 10% incremental per-issue sales when they're left on sale for a fifth week).

However, both Bertolino and Annis pointed out that current levels of data analysis require significant amounts of time, and even large publishers lack the resources "bandwidth" to perform analyses of by-day sales and the other more granular data.

Further, "I don't know that more data" is a solution, said Bertolino. "Speaking for our company, we have a pretty good handle on what we sell and how we're selling it." Rather than more data, the need may be for data to be more readily accessible for operational insights to publishing companies that may lack the resources to develop dashboards and process the most important data segments, he said.

Bertolino added, however, that he believes the category could benefit from  using insights and lessons learned about the growing bookazine segment to further develop that segment and to try to apply learnings from premium-content products to regular-frequency titles.

"We're already starting to hit a point of information overload," said Annis. Nevertheless, the ideal, in his view, would be for industry channel partners to harness data and insights more extensively in ways that can move the needle for sales and efficiency levels. "We should be focusing on sales, and how we can use POS data to bring sell-throughs up so that publishers can maintain their cover prices, or maybe even lower them or offer some discounts," he said. He pointed out that a 1% lift in category sales would translate to an additional $3.5 billion in annual sales, with significant benefits for financially challenged wholesalers, as well as other channel partners.

SBT and Wholesalers' Financials

At various points in the discussion, wholesaler panelists stressed the financial toll that SBT terms, combined with category trends, are taking on their businesses.

SID's Porche noted that the industry benefits from timely POS data available through wholesalers' SBT relationships with retailers, and that the financial benefits realized by retailers in SBT relationships are increasingly critical to retailers' continuing support of the magazine category in their stores.

However, SBT's shifting of inventory ownership from retailers to wholesalers, in the context of sales and efficiency declines and a growing number of bookazines and other products with extended on-sale periods, has created business dynamics for SID that are not sustainable, he said.

About 80% of SID's business is on SBT terms. "We're buying 100% of the product for what we ship in the prior month," but being paid only what's sold for that 80% of business--"and with products staying on sale longer and longer, that creates a big burden on our working capital," Porche said.

"We're not happy about the general liability with the inventory, but we got past it," said Hudson's Clark. "But now when we have products on newsstand for this length of time and not being paid for it until it goes through the register, it's become a real financial liability for us." About 35% of Hudson's business is on SBT, and while Hudson would prefer not to expand that to more retailers, expansion appears inevitable due to marketplace pressures, he said.

"Working capital is a problem for us, too, but without POS we'd be lost--it's critical information for us," added TNG's Parry.

Brechtel said MagNet's analyses show that 20% of all sales for bookazines and high-priced specials come after 60 days on sale, "but because of wholesalers' inventory dilemma, we're seeing a lot of prematures on bookazines." If trading partners were able to resolve this within their own relationships, sales opportunities would likely be enhanced, he observed, adding "that's not my decision."

SIM's Butler pointed out that finding solutions to this challenge is critical, given that bookazines and other high-priced products are "the fastest-growing newsstand concept out there now." He added that such solutions should be possible, given the ability to use data to accurately forecast sales patterns for mainline and checkout titles over the course of on-sale periods.

Bertolino agreed, noting that the bookazine/SIP segment now represents about 10% of total magazine sales, or roughly $340 million annually.

On another front, wholesaler executives raised the proposal, as formalized in  TNG's "PROS" program, to enable wholesalers to gain channel-partner approval for eliminating physical processing of returns from most SBT-based retailers by employing POS data and a statistically valid group of stores (which would remain on a traditional order-regulation/physical returns processing basis) to calculate by-title, by-issue shrink levels and extrapolate those across specific chains. TNG estimates that shifting to this system would reduce wholesalers' collective operational costs by $10 million annually. [For more detail, see IPDA Daily's coverage of PBAA's April 2013 session on POS and SBT issues.]

Porche said that while he's glad that the International Periodical Distributors Association (IPDA) is spearheading an initiative among all channel partners to develop best practices guidelines with the goal of enabling such a shift, "there is urgency--we need to get this finalized and done this year." Having employed such a system for several years now with two of its largest retailer partners, SID is "confident about our system." He also stressed that SID continues to focus on its own internal initiatives to streamline systems and reduce costs while maintaining sales.

Parry said that, from TNG's perspective, the industry needs to focus both on driving sales and improving efficiencies and reducing wholesaler operational costs. "Improving efficiency by even 1% would put a lot of margin back in wholesalers' pockets, but at the same time, ignoring opportunities to reduce our overall costs would be fatal for us," he said. TNG is "very focused" on driving sales, as well as streamlining its operations, he said.

Clark said that Hudson has to focus every day on controlling its costs. "If we don't, our doors would be closed already, absolutely flat-out closed," he said, adding that if current dynamics continue for another year, "there will be one less of us."

Data-Driven Magazine Category Insights

A sample of category insights gleaned from POS data:

*Bookazines and other SIPS on sale for two months or longer sell nearly 20% of their copies after they've been on the shelves more than six weeks.

*Celebrity magazines sell more copies than the total sales of titles in the food, games, health, automotive, home, lifestyle and teen categories combined.

*About 50% of all magazine copies are sold on Friday, Saturday and Sunday. The lowest-selling day of the week is Wednesday, with about 11.5% of the total sold on an average week. Although Saturday is generally the best magazine sales day of the week, in July, Sunday sales outpace Saturday sales by nearly 8%.

*Friday, followed by Sunday, are the  two best days for magazine sales in airport terminals.

*On average, the category's biggest week-to-week sales gain during the year comes during week 13 (around the last week of March). Sales are consistently 8% to 10% higher in week 13 versus week 12.

*Average monthly sales in June, July and August are 7% higher than the rest of the year, helped by a spike in sales of teen and children magazines' titles. (December is also a strong month for those categories.)

*Supercenters show strong seasonal magazine sales increases in the summer, experiencing up to a 50% average surge in sales during the first three weeks of July.

*Bookazine sales typically spike during the first few weeks of July. As a result, the average cover price of all magazines sold during that period has increased by about 12% in recent years.

*The day before Thanksgiving is among the best days of the year for magazine sales. However, November as a whole is generally the category's weakest sales month. In the fall, celebrity title sales usually dip, while titles in the food, health and automotive categories spike during the fourth quarter.

*The computer category has the highest overall cover price (its average cover price peaked at about $10.70 in December 2012).  

*Based on MagNet's sample of non-bookstore retailers, 20% of all books sold in 2012 were sold on Saturdays. Friday is the second highest sales day.