Supermarkets have been trying to dominate magazines and newspapers since they were allowed into the market in 1994.
Since the Monopolies & Mergers Commission allowed general retailers to enter the market, supermarkets have seen it as a vast growth area. If Asda has its way, it is going to be the first to crack its potential.
The supermarket stocks 400 magazine titles – double that of rivals – and is to run a “three for the price of two” magazine offer as part of its campaign as consumer champion.
The UK newspaper market is worth 2.5bn, while the magazines sector is worth 1.3bn.
IPC Magazines circulation director David Greene says: “If the supermarkets are going to service the news trade properly they should invest time and effort. It is a labour intensive job, keeping the area tidy, putting inserts in, having the best shelving. It’s a different retail environment for them.”
This is what Asda is about to do. An overhaul of its news trade section, which already has dedicated staff, will be backed up by staff training, new racking across its 218 stores and monthly meetings with newspaper wholesalers.
The wholesalers – a third-party middleman in the distribution chain dominated by WH Smith and John Menzies – are one of the peculiarities of the industry.
Supermarkets are used to controlling their own distribution and calling the shots. Wholesalers are used to imposing terms on the traditional and virtually powerless Confectionists Tobacconists and Newsagents (CTN).
Speculation about the supermarkets establishing their own deals with the publishers and cutting out the distributors would seem more achievable if they upped their share of the market, currently 17 per cent, according to Verdict Research.
Newspapers and magazines are not like other non-food lines, industry observers agree. They need special attention and this is where Asda is getting ahead of the competition.
But as Verdict analyst Clive Vaughan points out: “A third of newspapers are still delivered and are the preserve of the traditional CTN. The enormous profits are attractive but they cannot be promoted in the same way as other products.”
Delivered newspapers make up 25 per cent of all newspaper sales, which are worth 625m.
Vaughan, like many in the industry, concludes: “Magazines are a much more fertile area for the supermarkets, there are so many more titles, they are more price-elastic and offer greater scope for promotion.”
The Asda offer is not the supermarket’s first attempt to promote magazines in a similar way to its other retail lines.
Last October, Tesco cut 20 per cent off women’s weeklies. Asda retaliated by slashing 15 per cent off all its titles for a week.
But Asda is not so keen to cut the cover prices of magazines again and has opted for a “value for money” offer. One magazine publisher says: “Asda privately admitted to us that cutting the cover prices did not work.”
When parent focus groups complained that the price of children’s comics was inflated, Asda resp onded by cutting comics priced 1.40 to 1.
But IPC’s Greene says: “We believe the majority of magazines are fairly priced. All our research says customers believe they offer value for money.”
He adds: “A ‘three for the price of two’ offer across the board is really tantamount to reducing the prices of magazines.”
Asda is reluctant to say how its offer will be financed, but industry insiders believe it means Asda taking a loss.
And although a title’s circulation would receive a boost if promotions like this take off, publishers fear existing cover prices will appear inflated.
The Audit Bureau of Circulations (ABC) head of sales and marketing Austen Hawkins says this kind of promotion is one to watch: “It is a new issue in the market and it may be that our working party has to take a look at it.”
Hawkins’ party will look to see what impact this has on circulation figures. From January 1999 the ABC will tighten its regulations governing circulation figures (MW June 18). A new column will show the percentage of a title’s circulation that is not paid for.
But if the magazines given away are fully paid for by the retailer, such as Asda, they will not show up on a title’s ABC certificate as “not paid for”, and will therefore not give publishers or the ABC any cause for concern.
Austen says: “If Asda buys the titles at full price, it takes the hit. We wouldn’t know which were free and it wouldn’t affect the ABC certificate. It is a marketing position for Asda at retail level.”
Greene adds: “Supermarkets sit very nicely with magazines, it would be foolish to ignore them, but they are a habitual purchase and independent retailers offer a specialist service and home delivery.”
The traditional corner shop newsagents sell 75 per cent of newspapers and 78 per cent of magazines, the supermarkets sell 16 per cent and 14 per cent respectively, according to Verdict.
But the figures belie the fact that despite local knowledge and personal service, the traditional CTN has been plunged into crisis since the 1994 deregulation – 11,000 outlets closed in 1996, according to Verdict.
Asda has realised the personal touch is required and is attempting to introduce the homely CTN service-oriented approach in the supermarket’s anonymous aisles.
If it succeeds, other supermarkets are likely to follow Asda’s lead. It is at that point that publishers, newspaper wholesalers and magazine distributors may find they no longer control margins and availability.