Sparks begin to fly as the magazine sector explodes

As trade secretary Patricia Hewitt finally rules on the question of whether or not Granada and Carlton will be permitted to merge, another company to which she and the Competition Commission have been paying close attention has been discussing market share and the media.

At first sight, Safeway has little in common with the ITV companies, apart from its grilling at the hands of the competition regulator. The supermarket chain’s future became slightly clearer last month, when Tesco, Asda and Sainsbury’s were ruled out as prospective buyers, leaving the original takeover bidder, Morrisons, to fight it out with Philip Green of Bhs. Now Safeway’s director of communications has made a remarkable forecast about supermarkets’ growing dominance of magazine sales. Kevin Hawkins knows a fair bit about magazines – before he joined Safeway eight years ago, he was director of corporate affairs at WH Smith.

Hawkins was speaking last week at MagSell 03 – a new event for publishers and retailers, organised by the Periodical Publishers Association – and he revealed just how large a slice of magazine sales the supermarkets have carved out for themselves. Between 1997 and 2001, he said, the grocers’ share of the market had grown from 19 per cent to 33 per cent, while the independent stores’ share had fallen from 45 per cent to 32 per cent and that of the high street stores from 15 per cent to 11 per cent. And with overall magazine sales growing steadily, it’s an area the superstores still want to develop.

I asked how far the trend could go. Within seven years, he said, supermarkets could increase their share to between 40 and 45 per cent – depending on how hard other retailers fight back.

Not everyone accepts Hawkins’ figures. Speaking at the same conference, WH Smith News chairman Tim Hely-Hutchinson put the supermarkets’ share a good deal lower, but there is no doubting the huge inroads the grocers have made into the magazine business recently. Yet for years, publishers were prevented from distributing their products alongside bread, cornflakes and soap powders.

Remember when the only magazines on sale in supermarkets were the two Thomson titles, Family Circle and Living?

For almost 25 years, from 1964 to 1988, Thomson had an exclusive deal with the supermarkets, with a guaranteed position right by the checkouts for maximum pick-up power. At its height, Family Circle’s circulation exceeded 1 million, making it easily the top-selling women’s monthly. But towards the end of that period, other publishers and some supermarkets – led by Tesco – began chipping away at the arrangement. Thomson saw the writing on the wall and sold the titles to IPC, and soon the whole picture was very different.

That was 15 years ago. Hawkins gave some of the reasons why, since then, magazines have become such an attractive item for supermarkets: high levels of repeat buying; relatively low prices; topical content; good value; potential for impulse buying; and synergy with other media-based products, such as CDs and books.

In addition, he said, magazines facilitate the development of eye-catching displays at the front of the store. Safeway has used this to provide a “browser” and coffee shop seating area, a relaxed environment where customers are positively encouraged to “look and try” magazines, books and CDs.

Technology and distribution systems have also helped, bringing magazines into line with other fast-moving consumer goods. The time it takes to bring a product to market has been cut, allowing publishers to produce more launches and special issues. Better systems allow better promotions and more targeted price activity.

Hawkins believes this process will continue, because supermarkets are determined to expand the whole of their non-food business. He quoted Tesco deputy chairman David Reid, speaking last month: “It’s not good enough. We’ve only got five per cent of the non-food market.”

Not so long ago, you would have been unlikely to hear such frank speaking at a PPA conference, for the battle between supermarkets, independents and high street multiples such as WH Smith has been an incredibly sensitive subject. Some saw the publishers’ move into supermarkets as a betrayal of their traditional outlets, the newsagents, and there has been strong disagreement on issues such as the high level of returns, and the margin split between wholesalers and retailers.

Vox pops shown at the event showed that the public is very keen on magazines but often believes they are displayed badly by retailers.

Now, it seems the industry is much more prepared to work together to increase magazine sales as a whole. Speaking for WH Smith News, Hely-Hutchinson said he was more interested in cutting costs and increasing sales for the benefit of all parties, rather than arguing about moving margins around within the industry. Glamour editor Jo Elvin and Heat editor Mark Frith agreed that retailers are crucial in ensuring magazines reach as many potential buyers as possible.

In fact, of course, magazines need all three retail sectors if they are to prosper – supermarkets, independents and high street multiples. Research commissioned by the PPA from Brandlab showed that each sector has different strengths, and that customers use different outlets for different types of magazine purchase.

Will supermarkets take a 45 per cent share of magazine sales? That depends on whether their rivals can raise their games.

Torin Douglas is media correspondent for BBC News