Alternate routes to single-copy sales

Alternate routes to single-copy sales Wooden Boat--a quintessential special interest title--sells 50,000 copies per issue on the newsstand. It handles all its U.S. single-copy distribution in-house, going directly to wholesalers and retailers and bypassing the national distributor. Explains circulation director Lynne Blair, "We got involved in the newsstand doing it this way because we had no choice. No national distributor eight years ago would touch us. Our circulation was under 30,000."

Wooden Boat's situation is mirrored throughout the publishing industry as small circulation or special interest titles wanting newsstand exposure find that the traditional national distributor-wholesaler network is not the best, or only, way to get it. Like Wooden Boat when it first tackled the newsstand, some magazines are simply too small to be taken on by the national distributor/wholesaler system, whose economics generally require high volume or mass market titles. And also like Wooden Boat, which sells well in such places as marinas and hardware stores, many special interest magazines find their best homes in outlets beyond the reach of traditional wholesalers, whose bread and butter is supermarkets and convenience stores. Still others who do gain entree to the national distributor/independent distributor network find that the sell-throughs are so low--and the accompanying printing waste so high--that the payoffs evaporate. Such magazines are turning to alternative distribution channels, either as the sole link to the newsstand, or as a complement to their national distributor's efforts.

Thorn in the side

While most agree that the traditional channels don't work well for small or specialty titles, the topic of alternatives is still a touchy one for the magazine industry. National distributors and wholesalers naturally prefer to maintain their tight grip on the distribution chain. "Secondary" wholesalers have long been tolerated as something of a thorn in the side of the independent distributors--annoying, but hardly threatening. Since secondaries generally work on the fringe of the distribution channel, delivering to outlets and/or carrying titles that the independents find uneconomical to handle, the two coexist in relative peace.

The bigger threat to the traditional network comes from firms that ship magazines directly to retailers, bypassing the national distributors and independent distributors completely. Eastern News, now owned by ICD/Hearst, is the oldest and most established national direct distributor, and in the past there has been no love lost between Eastern and the wholesalers whose paths it crosses.

But the real rub has occurred in the last five years, when major bookstore chains, including Waldenbooks and B. Dalton, began carrying magazines and buying the bulk of their special interest titles from direct distributors. Firms that didn't exist before 1982--such as Periodical Marketing Services Co. (PMSC) in Hackensack, New Jersey, and DirectShip (a service of Prairie News Agency) in Chicago--have grown large on the coattails of these book chains. And their way of doing business--eliminating a middleman and in the process offering retailers larger discounts--presents real competition to the national distributor/independent distributor network.

This is not to say that the mainstream distributors are completely unresponsive to small and special interest publishers. Several of the national distributors (though by no means all) do deal with secondaries in an effort to get their titles into nontraditional outlets. A few have tried to establish specialty sales divisions, but have had a hard time making these divisions profitable. Too, some of the more progressive wholesalers, Metro Toronto News in Canada and Chas. Levy Circulating Co. in Chicago, for example, have attempted to broaden their net of outlets served to include more specialty stores. Mary Donnellon, Levy's vice president of sales and marketing, says a major reason behind Levy's effort is to keep publishers from going direct.

However the single-copy distribution industry ultimately handles its task, one point seems clear: The proliferation of special interest titles and their desire for access to the single-copy marketplace demands that workable channels of distribution open to them. Says Adrienne Tracy, circulation director for Cook's magazine, "With over 2,000 magazines out there, obviously the bulk of them are more specialty oriented. With that, we need specialty-oriented distribution. If 2,000 magazines are going to survive, something in the way our distribution network is organized is going to have to change."

Combinations of alternatives used

Of the dozen circulation executives who shared their alternative single-copy tactics with FOLIO:, none used only one method for getting a title on the newsstand. Instead, all pushed their products out there through a combination of channels: "do it yourself" direct to retailers; selling direct to independent distributors and secondaries; using a national direct distributor such as Eastern or PMSC. The benefits were consistently high sell-throughs--upwards of 55 percent--because of more carefully targeted allotments; relief from the RDA tangle; and a comfortable feeling of having more control over the entire distribution process.

Direct to retailers

Selling directly to specialty retailers and managing that process in-house is how Raben Publishing supplements the regular newsstand distribution of Ultrasport and Bicycle Guide, both of which are handled nationally by Select Magazines. Beginning with Ultrasport a year and a half ago, circulation director Holly Patrick has now built the direct-to-dealer program to about 1,500 outlets, primarily bicycle, running and cross-country ski shops and health clubs. Patrick's motivation was to put the young magazines in the hands of their primary audiences: sports fanatics.

"These people go into bike shops and running stores, and we had a magazine that nobody had heard of. We wanted the exposure," she explains.

Patrick solicits retailers by mailing wrapped copies of the magazines to lists of appropriate outlets. The wrap details the program and the discount structure; interested retailers return a coupon included as part of the wrap. A thousand prospects receive the wrapped copies each month.

A second method she uses for linking up with retailer clients is to rent a booth at trade shows. Patrick promotes the program at three major bicycle trade shows a year. She has found a useful technique for encouraging retailers to sign up on the spot at the shows: Immediate signers receive a bottle of champagne. Why not a sports-related gift? The dealers are inundated with biking paraphernalia at the trade shows, Patrick says. Champagne is a real incentive.

Horticulture also sells directly to 2,000 retailers, primarily garden centers and some bookstores. The magazine used telemarketing aggressively for a year to attract clients, but has since stopped promoting to let the account base "settle out," according to Chris Salem, associate publisher. "We've found it's great to have a presence on the newsstand--it's right where our natural audience is and that's a boon for advertisers. We also get a lot of subs from the copies out there," she says. But Salem cautions against signing on too many accounts too quickly--a trap that is easy to fall into with telemarketing.

"I'd probably stay away from the intense telemarketing we did," she says. "It's often a new product for retailers. They have to be educated on how to handle magazines, how to return them. And if you're not on top of pay, you can run into bad pay problems."

Bad pay is often cited as the biggest problem for circulators dealing directly with retailers. Prospective outlets should be qualified carefully before signing them on, they counsel. How can pay-up be assured once retailers are in the program? Keep after them. Says Horticulture's Salem: "It takes a lot of hand holding, a lot of prodding."

Attractive discounts

Publishers generally keep more of the cover price when selling directly to retailers than when working through a middleman such as a national distributor. Though the figures vary, a typical discount to retailers is 30 percent to 40 percent off cover. The publisher, however, carries the cost of shipping to the retailer--usually via UPS or second class mail. Returns are commonly accepted. That, notes one circulator, encourages small retailers to carry the magazines because they incur no risk. Although many publishers use outside service bureaus to process orders, produce mailing labels and mail invoices, several said they handle collections and returns in-house--the better to monitor them.

Another option in selling direct to retailers is to accept no returns, but offer the retailer a deeper discount. Cook's is switching to a no-returns system this month for the 1,000 gourmet, kitchen and cheese shops it sells to directly. The decision was prompted by Cook's consistently high sell-through in these outlets--85 percent, according to Tracy. As compensation, the retailers will keep a greater portion of the cover price.

GPI Publications has a very successful direct-to-retailer program for Guitar Player, Frets and Keyboard. It sells the titles in 3,000 to 4,000 record shops and music stores--many of them Mom and Pop stores--and for the most part, it accepts no returns. It does offer a 50 percent discount and "comfortable" minimum draws, according to Jake Hunter, director of newsstand sales.

Another choice

One of the obvious drawbacks in a direct-to-retailer program is that, unlike in a national distributor system, the publisher has to deal with hundreds, even thousands, of vendors. It takes planning and manpower to set up a system to solicit, service and monitor those accounts. According to several circulation executives, the programs, once in a maintenance mode, require the time of one to two staffers to manage. The effort can be well worth it for the exposure, attractive discount, the advertising sales tool, and, of course, the additional paid circulation.

Some magazines, however, have found their efforts to get into certain specialty accounts stymied. Reports Greg Carey, publisher of The Family Handyman, "We have felt very strongly that, if we could find an effective way to display our magazine in home centers and hardware stores, we would sell very well there. We tried going direct ourselves and were only minimally successful."

Carey turned to Retailers' Magazine Service (RMS), a division of 3M Media Services. RMS has targeted eight categories of specialty outlets that have not traditionally carried magazines, including home centers and hardware stores, automotive and cycle shops, photography stores, tack shops and sporting goods stores. It solicits retailers in those categories to carry a package of four different titles that tie in closely with the retailer's product line.

For a discount of 55 percent off cover price, RMS handles all the distribution work, billing, collection and returns. (Retailers keep 30 percent). Using labels generated by RMS, the publisher is responsible for shipping the magazine from the printing plant to the retail outlets. The publisher also assumes the first 5 percent of bad debt.

RMS now services nearly 10,000 retailers with about 60 titles, according to Susan Ollinick, manager. The magazines that are most appropriate for this kind of distribution, Ollinick explains, are those that speak to a "strong, passionate special interest that can be directly linked to a retail market." Retailers don't expect to make much money on the sales of the magazines, she continues; they agree to carry them because of the products the magazines can help to sell.

Carey is optimistic about his magazine's growth potential through the RMS program. From an initial one-city test of 500 copies, distribution grew to a high of 15,000 copies. Since then some unprofitable Mom and Pop stores have been cut, knocking off 3,000 to 4,000 copies, and the emphasis is now on hardware and home center chains. "Given enough time, it will pay off," Carey says. "This is a program that both parties have to be committed to for a while."

Using national directs

Of appeal to a broader range of small and special interest titles are the national direct distribution programs offered by the likes of Eastern News, PMSC, Prairie News and others. These firms specialize in providing high-quality special interest and literary magazines to bookstores, but they do reach a variety of other chain and independent specialty stores, and they continue to expand. In some cases the clients overlap with those served by independent distributors, but the national directs are quick to point out that they rarely compete directly with the traditional distribution chain because they carry different titles.

Retailers like the direct distribution program because they earn a better discount with it than they can from independent wholesalers, and there is no RDA paperwork to contend with. In essence, the higher discount incorporates a guaranteed RDA. For special interest publishers, the benefits are several: They get distribution in appropriate book and specialty outlets nationwide; the direct distributors take over the management details of the direct program, including order regulation, billing, returns and collection; and publishers need only deal with one contact--the direct distributor. Particularly for chain retail accounts, publishers can monitor their sales chain-wide through one report from the national direct distributor.

The distributors don't all handle shipments in the same way. Wooden Boat, for instance, sends 11,000 copies each bimonthly issue to Waldenbooks through PMSC and to B. Dalton via Prairie's DirectShip. For copies going to B. Dalton, DirectShip sends mailing labels and galleys to Wooden Boat's printer, which then sends the magazines to the individual stores. DirectShip and other firms like it are known as "galley operators."

PMSC recently changed over from a galley system to a reship operation. Instead of mailing directly to outlets, Wooden Boat trucks the copies in bulk to PMSC's warehouse. PMSC then breaks up the copies for shipment to individual Waldenbook stores, combining titles in the process. It charges each publisher a per-piece shipping charge.

Cost difference 'a wash'

The difference in cost for Wooden Boat, says circulation director Blair, is about a penny per copy--basically "a wash."

"It's a little more expensive one way and a little more work the other," she says.

Magazines that use these kinds of alternate distributors seem genuinely pleased with the service offered. In fact, some who have subsequently been accepted by a national distributor have insisted that their distribution to the chain bookstores be excluded from the national distributor's contract. Cook's, for instance, signed on with a national distributor in 1984 but remained with PMSC and DirectShip for delivery to Waldenbooks, B. Dalton and Coles bookstores.

"We found that distribution through these companies allows us to monitor sales much more closely," explains Tracy, circulation director at Cook's, who also cites higher sell-throughs and better discount as factors in the decision to exclude these outlets. The national distributor would obviously rather have it the other way, she notes. She does run into an occasional problem with dual distribution, when independent wholesalers who now carry Cook's deliver copies to the bookstores. That causes foul-ups in returns. She also finds that some independent distributors won't "bend over backwards" for Cook's in markets where she is using alternate distributors as well.

Eastern News: Open to ideas

Taunton Press, publisher of the bimonthlies Fine Woodworking, Fine Homebuilding and the new Threads, has had considerable single-copy success through Eastern News. Eastern, which is a reship operator, has gotten the magazines into the major bookstore chains and independents, on better newsstands (such as in the Pan Am building in New York) and in selected specialty outlets, including museums and certain hotels. In the last couple of years, Fine Homebuilding and Fine Woodworking have been among Eastern's top 10 on sell-through, averaging 65 percent to 80 percent, reports Dale Brown, Taunton's director of marketing.

Eastern, he says, is very receptive to new ideas from its publisher clients. Brown, for instance, felt his titles could be in more Waldenbooks outlets, so he was encouraged to make a presentation to its buyer. The result: Instead of 300 outlets, the titles are now in all 900 Waldenbooks.

Eastern's ownership by ICD/Hearst, a national distributor, has also produced a rare opportunity for Threads. ICD is testing the fiber arts bimonthly with a draw of 12,000 copies in certain mass market stores (convenience stores, pharmacies, grocery stores). The success is yet to be determined, but Threads' early shot at the mass market undoubtedly would not have occurred without the Eastern-ICD connection.

Shipping direct to wholesalers

Another alternative channel to the newsstand is to work directly with wholesalers, either secondaries or regular independent wholesalers. Publishers say that the tactic carries many of the same benefits as working directly with retailers--notably, tighter control over distribution plans and order regulation. But it also brings similar headaches--bad pay and the hassle of working with many individual vendors. It also, of course, gives specialty titles access to the newsstand that they couldn't get through traditional channels.

Just how many secondary wholesalers exist is difficult to say. One estimate puts the total at about 80 nationwide. The national direct distributors, for the most part, grew out of secondary wholesaler operations--PMSC from Total Circulation Services in Manhattan; DirectShip from Prairie News Agency, Chicago. International Periodical Distributors, another national direct serving B. Dalton and other stores, grew out of Jech Distributing, a large San Diego secondary. Some of the pure secondaries, such as Serendipity and Levity in California, are established operations that have been around for years; others, as one source describes, "operate out of the back of a station wagon."

Yoga Journal, a nonprofit bimonthly magazine, has long-standing and profitable relationships with 25 to 30 alternate distributors across the country, including secondaries and national direct distributors. It sells an average of 11,500 copies an issue through bookstores, health food stores and other specialty outlets. Publisher Michael Gliksohn speaks from hard experience when he touts the advantages of working with alternate distributors. He had switched to a national distributor several years ago after the distributor expanded its specialty sales division. (The operations have since been curtailed, as have those of several other national distributors.)

Bungled distribution

The experience was not a happy one, Gliksohn says. Independent distributors bungled the distributions, sell-throughs slipped precariously, alternate distributors accustomed to getting a 50 percent discount from Gliksohn had to accept 36 percent from the national distributor and so began dropping the title, and so on. "Luckily, I survived three years with a national distributor. I went back to alternate distributors," the publisher states.

Gliksohn ships Yoga Journal in bulk, by truck or UPS, to each alternate distributor. Those who take at least 100 copies are given a 50 percent discount. Returns are handled typically by affidavit. A simple microcomputer software package is used for invoicing, keeping track of receivables, order regulation and other details. As publisher, Gliksohn says he spends about 10 percent to 15 percent of his time managing newsstand distribution, including a separate direct sales effort to yoga teachers and other retailers.

Asked for advice to publishers wishing to approach secondaries for distribution, Gliksohn responds that it is smart to get a list of titles that the secondary distributes and then call publishers to see if the secondary pays reliably--an informal credit check. A publisher who is unfamiliar with a secondary may also press for masthead returns rather than affidavit, he advises.

Some secondaries may be willing to take a title on a trial basis and test it in key outlets. In that way a publisher can test certain markets in the country, Gliksohn notes. He is also finding that it pays to call his alternate distributors in the middle of the on-sale period and inquire if they have checked on his title for sell-outs, display and so on. While most secondaries do not have formal monitoring capabilities, they do deliver regularly, so a little prodding may get a title some extra attention.

Mixing IDs and secondaries

While Yoga Journal sells direct primarily to secondaries, GPI Publications' Jake Hunter has fine-tuned a network of approximately 135 independent wholesalers and secondaries nationwide to distribute his three music titles. Hunter had at one time used a national distributor, but he believes this system allows him much greater control over distribution.

"We felt we could allot the number of copies for each title more realistically and cautiously; we could monitor draw and sale more carefully and could change allotments up or down based on the success a title was having in an area. We could also monitor what types of outlets each wholesaler is going into," he explains. Hunter looks for an average 52 percent to 60 percent sell-through--a rarity in the traditional distribution system.

Do problems arise because of overlap between independent distributors and secondaries serving the same territory? Hunter says he researches his choice of distributor very carefully and pinpoints where overlap may occur. The gray areas are worked out by consulting with each party. "If I'm planning on hitting another area, I'll discuss it with our major distributor there. Usually it's not a problem--I'm not saying never," he remarks.

Hunter has found most of his wholesalers through the Playboy roster of distributors--known affectionately by some as the "Bunny book." The rest come from wholesalers who have contacted GPI, and from word of mouth.

Yet another entree to the secondary market is through Direct Marketing Inc. (DMI), a three-year-old firm under the umbrella of Progressive Magazines Inc., in Montvale, New Jersey. DMI is similar to some national direct distributors in that it solicits accounts for publisher clients and prepares galleys and shipping labels, but it does not have a tie with a major bookstore chain as its base. DMI arranges distribution to secondaries and jobbers and direct to about 2,500 retail outlets around the country. It handles approximately 300 titles--including Ultrasport and Yoga Journal--almost all of which are signed on with a national distributor, according to William Townsend, president. Like other alternate distributors, DMI steers clear of outlets served by the national distributor/wholesaler network. What it can offer publishers is clout with the secondaries, developed over Townsend's years in the magazine distribution industry. "If a magazine tries to do it itself, it's just like trying to get the wholesalers' or national distributors' attention," he remarks. His intermediation, of course, costs publishers a deeper cut off the cover price than if they did it themselves.

When it's time for an ND

"I have been turned down many times by wholesalers who won't deal with us because we're not with a national distributor," comments GPI's Hunter. He raises a problem encountered by other publishers who try to build large networks of independent distributors willing to handle their titles directly. Cook's, for instance, had signed on 230 independent distributors--half the total in the United States. But it could go no further. The remaining wholesalers' business came primarily from large chainstores, and the chains generally will not authorize distribution of a title that doesn't have a national distributor behind it. Stymied, Cook's decided it was time to sign on with a national distributor and take advantage of what the relationship could offer, explains its circulation director.

At Byte, the scenario was similar. Before last September, when Byte signed on with a national distributor, it handled all of its single-copy distribution in-house, including direct sales to more than 200 wholesalers and to 18,000 computer stores.

"We felt it was time to go to a national distributor because they would offer us distribution and marketing services that we couldn't provide ourselves. We were in that phase of our newsstand maturity," observes Jim Bingham, single-copy sales manager. If he had had any problems dealing directly with wholesalers before the switch, Bingham says, it was that Byte was not in the wholesalers' general routine, both from a distribution and from a billing perspective. A number of wholesalers also wouldn't take on the independent title--it was more bother than it was worth to them. He continues: "We felt we would get better attention and better response from wholesalers now that Byte is part of a national distributor's billing and marketing group."

Committed to the alternate route

But Lynne Blair of Wooden Boat has also reached that juncture, and she remains committed to the alternate route. "We've been approached by a couple of national distributors. Five years ago I would have killed for it," she admits. "But now, it's hard to think about sacrificing the control. They'd get a deeper discount, and we'd have to get involved in RDAs. Our sell-through would go down--we have an overall sell-through of 60 percent--and Wooden Boat is very expensive to print."

Their direct operation, she concludes, "is still making sense."

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