Retailers need publishers' help

I've been involved with magazines and books for over 30 years--10 years with American News and 23 with Safeway. I like the magazine/book category, and I would like to see our magazine and book sections developed to a point where Safeway would be recognized as having the best Reading Centers in town. But to do this, I need your help--you, the publishers, distributors and wholesalers. If I get it, together we can make progress.

Magazines and books are very important to us. For one thing, they satisfy our customers' needs for one-stop shopping. Good Reading Centers add appeal to our stores and add to the one-stop shopping convenience. But customer convenience is not all. The sales of magazines and books in the United States totaled $4 billion in 1983. We supply 6 percent of the grocery store products sold in the United States. Six percent of $4 billion in magazine sales in $240 million. Which means Safeway's potential sales for magazines and books is $240 million.

Which means I have to ask myself a question. Why do our customers go elsewhere to buy reading material that we stock? It can't be price--our prices are the same. It is presentation? Do our Reading Centers look as appealing as our competitors' areas? (Our competitors are any retail outlet where our food customers go to buy reading material.) Does it have anything to do with turns?

A change for the better

Thirty years ago, I was telling retailers about 52 turns per year on weeklies, 12 turns per year on monthlies, four turns per year on quarterlies. I still hear that pitch. But something has changed, and changed radically. That something is the computer.

Safeway now has over 600 scan stores, and we're installing more at a rapid pace. Our divisions will be totally scan operated in the next few years. As a result, turns will be figured on movement through the checkstand--not on incoming shipments.

We are already married to the computer backstage, and our present equipment is being updated to the latest state of the computer art. As a result, our division merchandising people will be operating with fact, not feel. Every foot of shelf space in our stores will be evaluated on dollars sales, unit sales and return on investment (ROI). As a result, magazines will be competing with every other category in the store for space.

Let's take a look at one category, greeting cards, and see how today's technical sophistication has affected the amount of factual information we can obtain about it.

In response to our phone call, each of three vendors could supply the following information: Lineal feet of department by store, district and division; dollar sales and profit per store per week; percent of sales by subcategory; seasonal promotional sales by season; percent of seasonal promotional returns; and recommendations for improvement. And all this is based on facts.

And these are the sorts of facts we need from you about your magazines. After all, greeting cards are not that dissimilar from magazines. They have dating--seasonal after returns. And they have in-store service--daily, if needed. Their gross profit? Fifty percent.

Improvements are needed

I believe the magazine industry needs to make some changes if magazines are to compete in our stores on a reasonable basis. Stocking plans need to be customized by store, with space based on subcategory sales. You need to help us improve our inventory investment. You must help us reduce our labor costs by enabling us to cut down on handling unnecessary amounts of returns. Realize that our ROI will improve only when every publication truly can stand on its own results.

Retail Display Allowances (RDA) are another problem. As an industry, you should take steps to correct the RDA situation. For example, Safeway's RDA allowances in 1983 were approximately six times what it normally has out in accounts receivable. We are borrowing money and paying interest to cover those accounts receivable. It takes about seven months for us to collect RDA's--that is the average time from the sale of product to receipt of allowance.

Remember that as publishers, you are not getting the full mileage from RDAs either. They are not included in operating reports used to reflect last week's or last month's store sales and profit.

Publishers are going to be competing for space with other categories of merchandise whose vendors reflect allowances off-invoice. An example is Procter & Gamble. We agree to promotional activity required in a specific offering. The allowance comes off-invoice. If we fail to perform, we return the money.

How much money are we all wasting on bookkeeping to handle RDAs in the present manner? At Safeway, there is no other category of merchandise on which it is so difficult to collect allowances we have earned. There needs to be a change! Remember the old story--"If you operate with your head in the sand, you still have some vital organs exposed!"

Problems will increase

Let me give you an example of the sort of problem publishers are going to face as scanning becomes more widely used. In a 100-store test over a 10-week period, we collected scan sales records by title, dollar sales and units. The results were as follows:

* There were 359 titles on the authorized list.

* 70 percent of our dollar sales came from 46 titles.

* 70 percent of our unit sales came from 17 titles.

* 91 titles had sales of less than 100 copies, or less than one sale per store in 10 weeks.

* The 100 slowest titles averaged $150 in sales, or $0.15 per store per week.

Now, if you were a Safeway merchandising manager looking for shelf space and evaluating these facts, what would you do? You would call the wholesaler/publisher for some answers--and I hope they would be good ones.

We also need to take a moment to think about the authorized list. You should ask yourself the following questions:

* Are you selecting, from that list of titles, which title will sell in each store? Or does a title go in if it's authorized?

* Does the old 80/20 rule apply? Are 80 percent of sales made in the first 20 percent of the sales period?

* If so, is that last 80 percent of the sales period a good investment for us? Or for you?

* How about specials, annuals, quarterlies and miscellaneous items? That 20 percent could drag down the average sale and profit to an unacceptable level.

* And what about returns? Excesive returns can cause us to lose space, selection and credibility.

Now think about your stocking plan. About 70 percent of our customers are women. Is our selection of magazines for the convenience of their shopping? Is space allocated to the titles desired by the traffic in a specific store? Are the prime shelf spaces used for best selling titles? Should we have "flats" on fixtures? Are the quarterlies and one-shots removed from the store when they should be?

That magazine fixture is our link with the customer. For our sake and yours, it had better be used as intelligently as possible. I cannot justify investing Safeway money in a product that only sells 55 percent and returns 45 percent. Labor expenses and inventory dollars are far too high today for that type of investment. We pay interest on borrowed money to invest in inventory.

Are there drawbacks?

Given that the scanner is the way of the future, does it have any drawbacks? It's great for information, but there is an amount of inflexibility.

* Price changes must have a new uniform price code (UPC) number.

* Our division buying office must be notified in advance of price changes.

* Delivery schedule per day must be coordinated with our division office.

* Only one price per title can be accepted.

* You must use separate UPCs for special editions.

Nonetheless, we must make scanning work for magazines or the category will suffer due to lack of information. A competitive disadvantage will be the result.

Work together

We're in a very simple business: "Give them what they want." Do that, and our customers will make us, and you, successful. But the computer age is here, and there is just no market for BS any more.

We will soon be in a position to sell you information on your sales more quickly than ever before. And it will be more accurate than any you can get in any other way. We have an opportunity to take the space now allocated to magazines and books in our stores and fine tune it, make it more productive. We will share in the success of this effort, but we need your help. You are the experts in the magazine and book business.

As I said earlier, I would like to see our magazine and book sections developed to a point where Safeway would be recognized as having the best Reading Centers in town. I want us to realize the $240 million potential in sales. So please go back to the drawing board. Give us the guidance we need to defend our allocation of space to magazines and books.

You have the product. We have the customers. If we give them what they want to buy, we will all be happy with the results.

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