Logo
BodyBGTop
Magazine Middlemen Bounce Back
For wholesale magazine distributor Anderson News, the problem was providing a central point to diagnose and repair distribution problems for field reps all over the country. A custom-built mobile system provides a solution that gives field representatives from national distributors and publishers the same access to decision-critical information that Anderson's own agents get.
Posted Apr 17, 2000
Page 1



It must have been easier back in Al Capone's time. Then the issue of what magazines and newspapers would be offered for sale in what locations was settled by bribes and threats, by gangs of thugs looting competitor's delivery vans in the reddish-orange glow of a burning newsstand.

It's much harder these days, despite the fact that the magazine industry is booming. The number of "titles" (as they're called in the trade) vying for space on magazine racks at supermarkets, convenience stores, bookstores, newsstands and discount chains has increased from less than 2,500 to well over 4,000 in the past decade.

That, along with record single-copy magazine sales of $4.4 billion in 1998, is the good news. The bad news is tangled up with trends going back five years or more: The loss of thousands of magazine sales outlets; the severe cutback on the amount of floor space allotted to magazines at thousands of other locations; and changes in consumer buying patterns. All these challenges make it increasingly difficult and costly for publishers to maintain a significant newsstand presence for their titles.

Perhaps the most crucial new element effecting what magazines are displayed at what locations has been the rapid consolidation in the wholesale distribution industry- -from 450 agencies in 1989 to under 100 in 1999 and, according to some analysts, less than 30 by 2001.

Survival of the Fittest
Anderson News, a mid-sized Knoxville, Tenn.-based wholesaler, faced the pressures earlier than most of its competitors. New titles, which were being launched at the rate of almost 100 per month in 1997, were clogging its distribution pipelines and dramatically increasing handling costs. Seeking a technology solution to help get the right magazines to the right dealers in the right quantities, Anderson CEO Charles C. Anderson, Jr. and his technical advisers made a decision to forego commercial applications and develop their own software.

The successful implementation positioned Anderson to take advantage of other agencies unable or unwilling to adapt. Unchallenged by the national distributors, which were deterred by antitrust considerations from buying up struggling agencies, the better-managed companies swallowed up the underachievers. The biggest gulp came when Anderson acquired Aramark Corporation, a substantially bigger competitor with a huge urban dealer base.

"Among the important benefits to retailers," CEO Anderson said at the time, "will be the company's ability to provide new technologies in information systems and enhanced services over a broader geographic system."

He was referring to PASS (Publisher Access Sales System), a 200-gigabyte data warehouse servicing Anderson's 58 field offices via the company's proprietary software and containing at least two years worth of sales and return information for over 10,000 products.

"What we're trying to do is provide a central point at which we can diagnose and repair distribution problems all over the country," says Rick DeLand, Anderson's systems development manager. "The bottom line is we're trying to get the right magazine to the right stores."

Jim Robinson, MIS manager at Anderson's Austin, Texas, distribution system describes the advantages of PASS this way: "Back before scan codes and BIPAD numbers, we basically worked on standing orders or retailers calling us wanting to decrease their order by five copies or whatever," he says. "Now it's all automatic. The sales history of every issue of every magazine is in the system and the number of copies of the next issue to be delivered to each dealer is determined by the computer, routed to the appropriate delivery agent, added to the total draw of all out dealers, and posted to the server in Knoxville."

The back end of PASS is comprised of a Netron Fusion-developed Cobol system running on an IBM AS/400 server. The front end is a three-layer client/server system running a Visual Basic presentation program simultaneously in NT and Cobol. Data exchanges with remote users are fielded by the Visual Basic program running on NT, which talks to a Cobol client that's also running on the NT machine. The client program hands off the data to the Cobol program running on the AS/400.

Among the advantages the NT interchange gives Anderson is the ability to give field representatives from national distributors and publishers the same access to such decision-critical data as sales history, issue efficiency and distribution coverage that Anderson's own agents get.

As Robinson cheerfully puts it, "We still get occasional publisher's sales reps down here trying to force more magazines into the distribution channel. They've got their laptops full of data to show that increasing the draw will generate more sales. But it never works- -because our data is always more accurate than theirs."

Playing the Field
Magazine distribution reps in the field negotiate no prices, generate no contracts, connect no bills and generally accept no orders. What they do is access, verify and generate information. Their goal is to check whether the agreements made by the dealers and the sales people at the regional offices are being kept.
A field rep's core concern is ensuring that the dealers are displaying the magazines in the proper positions.

Publishers pay significantly more to have their magazines in specific locations, and the occasional publisher's rep has been known to offer bribes to store managers to, for example, substitute one magazine for another in a prime location even though a publisher has paid the chain a massive sum to be in that spot.

Given the number of multi-million dollar magazines that fail for lack of visibility every year, placement is a billion-dollar issue in the publication industry. So the problem for a distribution field rep has always been how to keep all the facts and figures and contract agreements straight? The typical rep may be handling hundreds of titles scattered about many newsstands and racks. He needs to know- -instantly- -what titles are in the right and the wrong place at the right and wrong times.

In the early 1990s many agencies went under because they simply couldn't get a handle on how to track this information directly from the field. The complexity of the rules by which magazines are placed in a given store, on a given rack- -or not- -couldn't be tracked and tabulated by small, independent agencies using pencils, paper and pay phones.

Anderson reps manage the flood of intricate information with mobile technology and customized software. Barcode scanners on handheld tablets or portable computers (the choice of what hardware to utilize is left up to the user) gives a field rep all the data collection capabilities he needs. He swipes one copy of any given title and the database returns the codes for where it should be on display and for how long. If Newsweek is in a Time spot, the rep's computer will tell him instantly.

Using the same technology, the field rep can connect to the network wirelessly from the field or via a wireline phone jack to track the sales progress of certain select titles in real time on a weekly or even bi-weekly basis. Prior to this, a publisher might have had to wait up to three months to get final sales figures.

Clearly it isn't practical to scan 1,000 magazines to get return figures while they are on the rack- -that's still done in the warehouse long after all the copies are collected- -but some publishers are willing to pay huge amounts to avoid having to wait for weeks after the issue goes off sale to get instant sell-through results, particularly if they are test marketing new concepts.

All the sales and contract compliance information collected by the field reps is neatly tabulated by Anderson's customized system during the night. By morning, the appropriate employees have a complete data cube displaying all the statistics on each magazine being monitored by total sales and sell-through percentage nationally, regionally and by types of stores and locations. A rep can, for example, research how floor display copies are selling relative to locations where the magazine is going ‘run of newsstand' and the publisher is not paying for any special placement at all. Keeping everyone informed on a real-time basis via portable technology used in the field has been one of the prime keys to Anderson's success.

Challenges Ahead
Heading into the twenty-first century, the newsstand magazine distribution business is once again being forced to reinvent itself by forces beyond its control- -in this case, the iron grip of large retail chains like Wal-Mart and Target. Like the buyers for all other departments in the store, they have a very inflexible quota for the minimum amount of revenue each square foot of display space in their department must generate. If sales reps cannot convince them that a given magazine will pull its weight, that magazine will never make it onto those racks.

Other challenges include the emergence of book superstores- -which historically have been serviced by specialized agencies outside the national distributor/wholesaler channel- -as major magazine vendors and the consolidation of supermarket chains.

On the plus side, consumer demand for magazines remains strong and a government crackdown on false and misleading claims by several promoters of magazine subscription sweepstakes has substantially decreased, at least for the moment, the competition for magazine sales.

The potential for mining gold out of ink and paper is still there for everyone in the rush, from the biggest advertisers and publishers to the smallest curbside vendors. The quintessential middlemen- -wholesalers such as Anderson- -have staked their claim and seek their share of the nuggets. The success of Anderson News proves that to the technologically enabled go the spoils.

Page 1
To contact the editors, please email editor@destinationCRM.com
Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.
Search
Popular Articles
 

BodyBGRight
Home | Get CRM Magazine | CRM eWeekly | CRM Topic Centers | CRM Industry Solutions | CRM News | Viewpoints | Web Events | Events Calendar
DestinationCRM.com RSS Feeds RSS Feeds | About destinationCRM | Advertise | Getting Covered | Report Problems | Contact Us