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Publishing in the knowledge economy Issues for competitiveness 16.4 Establishing better routes to the customer In common with any business, publishing needs to secure its routes to the customer. Publishing faces some unique challenges in that many of its products are highly time-critical – a newspaper which doesn’t arrive on the newsstand to catch the passing commuter or in the shop in time for delivery to a home is a useless commodity. Consumers expect their magazines to appear on certain days of the week. In the book trade there is the enormous challenge of many thousands of unique products to be kept track of through the process of ordering, shipping, sale and return. Many orders are very small, but when a customer wants a particular book at a particular time, and nothing else is a substitute. As a result of the very large increase in the number of magazine titles and book titles in the last ten to twenty years, both these sectors face an issue with the availability of retail shelf space to display the range that is available. Newspapers face issues about the number and site of outlets. All sectors face consequences from the changes in consumer shopping habits and the shift in retail structure. 16.4.1 Strengths and opportunities Magazine and newspaper publishers all made the point that the UK newstrade is one of the most efficient and vibrant in the world. They contrasted it with countries like the US, where magazines have to be delivered by post because there are many areas where they could not be purchased in a shop. To quote one leading consumer magazine publisher: “The UK newstrade has to be seen in international context. They do a fantastic job. There is still a vibrant newstrade with a healthy CTN sector, though shifts are occurring between independents and multiples. The cost of entry to the magazine market is still relatively low – third party distributors do a good job both for big publishers and start-ups. Helps to keep a flow of new ideas. If you were to try to launch straight into the US market it could cost $50m to establish a viable level of subscriptions against an entry cost of £3-£4m here.” Another consumer magazine publisher said: “In the US they lose money on every copy they sell by subscription. They are forced to do it to build readership for advertisers and because the country is so big that many people wouldn’t get magazines any other way. We wouldn’t want to go that route. Britain has an extremely efficient newstrade distribution.” The UK is a densely populated country and is well served with news outlets, although the number has started declining and the mix is changing (see challenges below). For its part, the book trade has successfully handled a vast increase in the numbers of titles available, with the aid of increasing use of e-commerce processes within the supply chain. Internet bookselling has been developing as a significant new channel, which appears to be growing the market and helping to sell backlist books which would not otherwise find shelf space. The complexity of the book supply chain and the issue of returns, which add considerably to the industry’s costs, persist, but at least the industry has faced up to the problems with the Publishers’ Association/Booksellers’ Association supported report on the book supply chain in 1997 and the initiatives that have flowed from it. Books have also found new outlets in supermarkets and garden centres and other non-traditional stockists. Though this mainly favours discounted bestsellers, the Internet channel theoretically compensates. The predicted catastrophe for independent booksellers as a result of the ending of the Net Book Agreement has not materialised, although some publishers believe that the widespread entry of US booksellers means that the end game has not been reached. 16.4.2 Challenges There are a series of interlinked challenges to the magazine and newspaper supply chain. They centre around changes in retail structure and power. 106
Issues for competitiveness Publishing in the knowledge economy • Changing shopping patterns and changing retailer mix (see table 16.1). New high volume outlets in the form of out of town shopping centres and supermarkets and declines in independent CTNs (confectioners, tobacconist, newsagents). Declines in the high street now seem to be slowing, but only in the ’better’ high streets. • Growth in power of super retailers, both those with high ranges of magazines (WHS) and those with high volume, but small ranges (supermarkets) • Falling retail margins • Pressure from super retailers for special national distribution arrangements which would exacerbate the decline of primary news providers. The consequences of these changes and pressures are different for newspapers and magazines, even though they derive from the same causes. Table 16.1 Number of press retailers by type Retailer Definition 1992 2000 Change Convenience stores Store trading 7 days a week, approx 14 hours per day. Varied stock which may include food, news, off licence, chemist, video hire 2178 7794 +5616 Petrol stations Shops or kiosks trading on petrol station forecourts 1469 5791 +4322 Supermarkets/ hypermarkets Large self service grocery and household stores, including kiosks outside checkout areas 1334 3751 +2417 Grocery and general stores Traditional grocery stores with majority of space dedicated to grocery items 6714 7633 +919 Travel points Airports, rail/bus/tube stations and motorway service stations 979 1082 +103 News store Major stores with many departments including newspapers and magazines 1823 1829 +6 Seasonal points Only trading in holiday periods (e.g. holiday camps) 400 404 +4 Roundsman Trades by delivery only 1249 1201 -48 Street point Street seller or kiosk other than at travel point 490 296 -194 News primary News is primary profit contributor in a substantial shop with a quality display of newspapers and magazines 9561 8612 -949 News secondary Smaller than primary, more likely to be in a neighbourhood location 17,253 15,053 -2200 Miscellaneous Unclassified 1024 1175 +151 TOTAL 44,474 54,261 +10,147 Source Wessenden Marketing/ANMW > 107
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