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Linda Ruth

A New Era of Newsstand Sales Begins

Linda Ruth Audience Development - 06/24/2014-13:37 PM

 

After several difficult weeks, many of the former Source Interlink retailers have begun to transition their business to Hudson News, to TNG (formerly The News Group). The two big players that remain have begun a rapid and disciplined process of creating distributions for some of the copies that have been languishing on docks and for copies being printed and shipped now.

As part of that process, TNG is “asking” publishers for return of signed copies of what we laughingly call an “agreement.” Covering several hot-button issues that have perplexed many of us in the past, such as what a Pay-on-Scan business might look like, this agreement begins to outline how this business will run now that a single wholesaler calls the shots. The choice to the publisher seems to be: Do you want to play? Or do you want to take your bat and your ball and go home?

A few publishers are going gentle into that good night, lambs to the slaughter. Others are going kicking and screaming. Some, as they make their choices today, are defaulting to a Niebuhr-esque approach, seeking to parse what is necessary and what is not, taking on the things that might be changed and letting go of the things that can’t.

But Catherine Lee, the Founder and CEO of Discovery Girls magazine, is looking to the future.

“This is an opportunity for us all,” she said when I made that tough call—the one in which I had to tell her what her options were. “We have endured, as an industry, so much over the past year, two years, five years. Now it’s time to pick up and go forward.”

I had called her with the expectation of a very different response. Catherine, like most independent publishers, has been challenged by the increasing demands of the business, the dropping revenue, the slipping efficiencies. Would she, I privately wondered, even want to stay in the game? And if she, and many other publishers, were to choose not to, what then? What happens to the newsstand distribution business? What happens to consumer magazines? What happens to print?

“We need to turn this into an opportunity,” Catherine told me. “An opportunity for channel partners to get together and help each other. We need to be successful, and the remaining wholesale groups need to be successful. We need to work with them, and to make the best of this.”

With wholesalers representing over 40 percent of the business exiting within the past nine months, and the rest desperately looking for ways to survive, how could this be viewed, I wondered, as an opportunity?

“The forces in the market are bringing us together,” Catherine responded. “It is important for us to stand together to meet the future. We need to get together with TNG, with Hudson News, with everyone still out there, and create a platform for success for all of us.”

Every remaining channel partner, I suggested, was still trying to navigate this transition and keep their heads above water. Would anyone be ready to begin those conversations, to figure out what comes next?

“Our wholesaler partners need our magazines to sell,” Catherine said. “We need our wholesaler partners to distribute our magazines efficiently. We can’t sink into a black hole. We need to make things better. We need to get together with the players, to start brainstorming, to start creating our future. We’re going to figure this out. It needs to start somewhere.

“This is the first time in a long time that I’ve been excited about our industry’s prospects,” she concluded. “The first time in a long time I could begin thinking that things are going to change.”

 

 

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Linda Ruth

Goodbye to Source Interlink Distribution

Linda Ruth Audience Development - 06/03/2014-10:57 AM

 

We are stunned, we are blindsided, or we saw this coming all along. We are scrambling for distribution, we are crying for attention, we are vying for our places in the lifeboat. Messages in my inbox and voices on my phone reflect fear, concern, survivors’ guilt, schadenfreude.

But most of all, in the scramble to find our feet, to ride this out, to get our copies out of the printers and off the docks and into the retail outlets, we—or at least I—feel grief. Old-fashioned, honest-to-God grief, like the kind you might feel when you lose a human friend.

As one of Source’s executives wrote me: “This is such a sad day as you note for not only Source, but for the industry as a whole. We did our best to keep it afloat but, in the end, the model is just broken and it has to be fixed. One can just hope that in the midst of disruption that something positive can evolve. As you can imagine, my priority has been trying to work through the human aspect of this, as it affects so many good people who dedicated years and years of their lives to Source.”

Among the first people I ever met in this business were Bill Jech and Dave Buescher, founders of IPD, later sold to Source Interlink as the basis of their distribution business. I watched as the direct distribution model was scaled up to national, merged back into mainstream, broken out in tielines and pick and packs; I watched as warehouses were set up and taken down, and information evolved and was reworked, as people came and went and systems improved or were replaced.

And in the course of those years, I met smart, hard-working people doing their best to find a way to keep their business afloat. People who worked to improve merchandising, to improve customer service, to improve warehousing, to improve efficiency. People who helped me, and my clients, solve difficult problems.

Practically, there are lots of questions that are not yet answered. Who will pick up all that retail business, and what portion of it will go away? Which publications will survive this upheaval—and which will not? What will happen to our industry when only two large wholesale groups, both of which share ownership of one major national distributor, control virtually all the distribution? Is there still a role for a national distributor when what you have is essentially a national wholesaler? And if no one has been making money until now, how will this change enable them to start doing so?

Those questions won’t be answered today, or tomorrow, or this month. We will revisit those questions, again and again. But for today, I can only think about the 6,000 Source Interlink people who are out of their jobs, and the company executives I have known for years, and the magazine business without a Source Interlink to turn to.

Goodbye, Source Interlink. We will miss you.

 

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Linda Ruth

Inside the Wholesaler Distribution Dynamic

Linda Ruth Audience Development - 05/15/2014-15:36 PM

 

While readers of my blog often contact me with intriguing and sometimes unexpected information or ideas, it isn’t often that anyone brings up topics that I don’t think I already know something about.

Larry Scheur succeeded in doing that in a recent series of communications.

Larry is a real old-time independent wholesaler from Buffalo New York. He created “The Buffalo System,” which pioneered the use of title- and retailer-specific formulas into order regulation. And he asserts that NO ONE truly understands the economics of magazine distribution from the wholesaler standpoint.

Based on what he’s been telling me, that is certainly an assertion that applies to me.

What the wholesalers are saying about being unable to make money under existing conditions, Larry told me, is absolutely true. In fact, he says, wholesalers rarely—if ever—made money from sales. Profits, he says, came from “service charges, retailer under claims, retailer bankruptcies, return over claims, shortages, unreported overages, and special deals with national distributors.”

Naturally I—like anyone who’s been in newsstand distribution for enough years—had heard rumors of some irregularities in the old days of our business; but the concept that these irregularities might be so institutionalized as to provide the very basis of the survival of our business was (and is) astonishing to me. Larry, however, was willing to provide many examples.

“A highly respected EVP of a major national distributor once took to me to lunch,” he offered. “He said he would approve all my affidavits, no matter what the claim, for a 10 percent fee. I was shocked and upset. He called after me as I ran from the restaurant, ‘It's all right, I already have three wholesalers on board.’”

The Buffalo System was, Larry tells me, the first single-entry returns system. The purpose of the single-entry system is to ensure that the total (bulk) sales on the wholesaler system reconcile with the sales tracked by individual retail outlet.

As an example, Larry told me about a wholesaler whose system showed two programs. One was designated “OverReturn” and the other was named “ShortReturn.” OverReturn added the totaled retailer returns for a title and issue and compared it to the wholesaler bulk record file for the same title/issue. If the retailer returns were higher, the program added a compensating amount to the bulk record for processing to the ND. The ShortReturn program functioned similarly. If the O&R returns totaled less than the bulk return, the program determined the missing amount and either created a stock account or multiplied returns over a determined number by the factorial difference.

Improvements in auditing and tracking must have cleaned up these irregularities to a fair degree, though Larry maintains there is still an element going on today. Although, he admits, there were some wholesalers—Bob Cohen of Hudson News was one—who kept everything strictly above-board. “He wanted everything legit,” Larry said. “A very clean system.”

Regardless of what may have happened in the wild-west days of magazine distribution, the situation is considerably more precarious today. I told Larry about a consultant who contacted me with to talk about “Plan B”—code for, “how are we all going to keep our jobs?” This consultant asked, “Even with all of the recent technology, how are returns going to be handled if, as some people have suggested, we bypass the wholesaler? What happens to the affidavit? Can the retailers scan returns the way the wholesalers can? And doesn’t setting up direct relationships give the retailer a license to steal?”

Larry thinks there are possible direct-distribution-based solutions to our current predicament; and to put them in place he suggests, as another former independent wholesaler did not long ago, going “back to the future.”

His suggestions:

1) Re-implement the once highly successful Family Circle/Woman's Day direct model, devoid of national distributor involvement, utilizing cross-docking. (Cross-docking is a term used in shipping logistics that involves moving product from truck-to-truck without the intermediate warehousing; WalMart has used it to move retail product since the 1980s).

2) Similarly, Larry suggested, the industry should take a look at the once highly controversial Kresge/TV Guide system. This system, Larry explained, was similar to the Family Circle/Woman’s Day model, with the addition of expedited delivery. “TV Guide printed on Saturday and shipped 20 million copies with over 170 editions to wholesalers expecting Monday on sale,” Larry explained. “TV Guide made deals with national chains—Kresge, Neisners, F.W. Woolworths, W.T Grants, etc.—that were not typically wholesaler serviced. They required the wholesaler to deliver the predetermined allotment as well as collect the unsolds (if any) for a small fee paid by TV Guide. A store stamp verified delivery. As some of these stores were in rural areas, wholesalers sometimes used busses and trains, hiring a delivery agent in these areas. A reship allowance was paid by Triangle Publications to wholesalers providing this service. 

These solutions, I thought, appear tailored to the large general-interest publications whose day has come and gone. What about the special interest publications and the independent publishers?

Systems today, Larry pointed out, are also tailored around those mass-market publishers. “Look at the Order & Regulation systems,” he said. “Prior to UPCs, only 10 percent of titles were tracked issue by issue. Comparatives worked. They built the crosswords category. Wholesalers maintained O&R on the top two or three crosswords and used those sales to determine retail store allocations for the rest of the line.”

What does that mean for the special-interest publisher? I asked. Was he expressing the idea that a more targeted publisher can be hurt by over-regulation?

But Larry was talking about more than a publisher or a publication. His point was that a whole category—a whole industry—can be hurt by over-regulation. “O&R destroyed comics,” he said. “You start a downward trend which then negatively affect allocations. Thirty percent sell through—what you get with the niche publications—needs no O&R. Look at history, and you will see how it works.”

 

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Linda Ruth

Industry Ideas for a Newsstand 'Plan B'

Linda Ruth Audience Development - 05/05/2014-11:30 AM

 

Every now and then a blog post I do gets people talking. That’s always fun, and the ideas that bubble up are often fresh and useful.

Irwin Krimke, whose work with Backwoodsman magazine has been very successful, contacted me to say that I neglected, in my reporting of a recent conversation with him, to give appropriate credit to the wholesalers with whom he’s been partnering, and especially to Kable News Company, which has worked to grow his client publication over 600 percent since they took it over. Hats off to everyone involved in this great success story!

See Also: The Newsstand Is Not All "Doom and Gloom"

From a reader responding to the notion that the conversation has become too negative: Does anyone seriously believe that retailers do not notice how their sales are down? Please. What would be really strange is if we as an industry didn’t address these issues.

Ideas and suggestions have also been pouring in about Plan B. Many have to do with eliminating one layer from the distribution process—either the national distributor or the national wholesaler network. Suggestions center around setting up direct-style distribution, drop-shipping from distribution hubs, and eliminating merchandising or doing it on a fee-for-service basis. Here is a sampling:

• From a former direct distributor: "Based on the free market system, if this system collapses another will arise to take its place. Currently I am working with India-based businesses on outsourcing solutions for data analysis that might prove useful to publishers and distributors."

• From a newsstand consultant: "Wholesalers are clear they cannot stay in business without more money; publishers are clear they cannot provide more money. If we don’t listen we are perpetuating a vicious cycle. What if the printers were to develop tie lines for the pick and pack and drop ship direct to retailers? Wholesalers could reduce their business to merchandising on a fee-for-service basis; national distributors can bill and collect the retailers on behalf of the publishers. It takes a step and several costs out of the process."

• From a group publisher: "Set up the tie lines/distribution hubs at the Clark (or other trucker) warehouses and ship direct from there. Retailers take back merchandising responsibility."

• From an independent publisher: "Work with the major retailers to truck to their distribution centers and ship from there."

• From a national distributor executive: "Use a system already in place to swing to direct distribution." 

Are any of these plans strong candidates for Plan B? What do you think?

 

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Linda Ruth

The Newsstand Is Not All “Doom and Gloom”

Linda Ruth Consumer - 04/22/2014-15:29 PM

 

It’s been a fun week talking to some old friends in the industry. They all called to say hey, why was I depressing the heck out of them with all this talk of Plan B? And they offered me their thoughts.

Irwin Krimke, a magazine industry veteran, was on the phone with me recently with a penetrating question, namely: Why would I want to quote John Harrington and Baird Davis? “Linda, I have no clue why you would do that,” he said. “No clue whatsoever. I call them Dr. Doom and Dr. Gloom. They’re killing us. Retailers read this stuff and take away our space. Now do we need that?”

No, I conceded, we did want to keep our space at retail. “Bad enough,” Irwin continued, “that TNG has a virtual monopoly now. But listen, things are not so bad as that. I’ve got a magazine, Backwoodsman. I took them to Kable News Company, they were putting out 38,000 copies; now they’re sending 209,000 copies and selling at close to 50 percent. If I could take away the prematures I could sell in the 60s.”

But while the numbers are impressive, I admitted, wasn’t that part of the problem? The lack of follow up at retail. The loss of display. The prematures.

“Linda, listen, sure it’s part of the problem,” he said. “Before this consolidation the wholesaler route men took care of the display. But look, the wholesalers can’t afford that anymore. All they can afford are part time people with no benefits. These people are supposed to work 19 hours. They get three or four stores. The turnover is 100 percent a year. It’s been a mess for a long time. It’s always been a mess, so it’s the same thing today, only more so.”

What does he do, I ask, to grow his title? “It takes luck, is what it takes. Luck and a whole lot of hard work. Same as always. And hitting people on the head—over and over. I say to them, can you keep this title on sale instead of dumping it in the returns to pay your bills? A couple of these chain buyers have been very difficult. They love getting their money upfront, but the checkout is passé.”

And digital, I prompt him. Digital is a factor, isn’t it? “I don’t think digital has hurt magazines that much,” Irwin said. “It’s hurt the books. It’s hurt paperback and hardcover books tremendously. My wife switched us over. Before that we were buying our books at Sams. But you know what? I read faster on tablet than with the book. A third faster, because you don’t have to turn the page. But magazines, no. You still want them in print.”

Can I quote you? I ask. Lots of people call with their thoughts, but no one wants to be quoted. “Linda, I’m 85 years old. Of course you can quote me. What difference does it make?”

Then what, I asked, is your advice for the rest of us? “I have always had three little words for this industry: simple, practical and complicated. And everyone’s forgotten the first two.” Irwin said. “But let me tell you this, with all this talk about our industry dying. If this title, this client of mine, is able to grow 600 percent, don’t tell me there aren’t other titles out there that can do it. You find those titles and you work the heck out of them.”

 

 

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Linda Ruth

For Newsstand Publishers, What is Plan B?

Linda Ruth Audience Development - 04/08/2014-15:11 PM

 

When John Harrington says the sky is falling, it’s time to look up. So, publishers, it’s offical: We need a plan B.

Bo Sacks recently shared a dialog between Harrington and Baird Davis on the state of the newsstand that was chilling. These two industry veterans agreed that publishers have “seriously underestimated” the possibility of collapse of the newsstand channel; that such a collapse could take place within a year to 18 months; and that unless publishers begin to work together—not in a happy-happy “let’s all get together” kind of way but in a serious “we need to re-create an entire channel of distribution” kind of way—there isn’t much hope of survival.

One thing that was extremely sobering was that I couldn’t really find a way of arguing with their conclusions. What will it take to collapse this industry? At this point, not much. The loss of a single wholesaler—TNG—would do it; and TNG has already told us they have an unsustainable business model. Consider this:

• A large national distributor recently sent its publishers a list of all the wholesalers that they intend to cut off if certain financial terms aren’t met. The list included…pretty much everyone.
• A second national distributor has indicated to one of the major wholesale groups that their latest financial proposal, if implemented, will result in the termination of their business relationship.
• Two of the four major national distributors have begun to refuse to cover bad debt liability for their publishers.

None of which is a testimony to a deep and abiding faith in this business’s sustainability.

Without going into a litany of all the ills, dangers, sorrows and shortcomings of our industry—we’ve all heard lots about them—the need for deep and fundamental change is the point to key off of here. Baird and John did mention a few ways in which publishers could work together—co-marketing, embrace SBT, address the mistrust that exist among channel partners—all of which are good ideas, even important ones. But they are small fish to throw into this sea of troubles.

Baird calls the publishers out on their passivity in the face of this impending collapse. The answer, he suggests, is to look to the seven top newsstand publishers to take a leadership position in representing consumer publishers’ newsstand interests.

Will rest-of-the-line publishers do so? And, when a perception exists that the top publishers have used some of their leverage to maintain short discounts at the expense of specialty publishers; when many publishers are convinced that the top publishers would like nothing more than to see the specialty publishers clear off the racks, leaving them open for the big guys; in such an environment can that mutual trust be established?

If the scenario is to play out, it may have to.

An industry veteran shared with me the following scenario: In the event of channel collapse, the top publishers will go direct to the top five retailers in the country. They are setting up the relationships and the distribution channels now. Every other publisher will have to scramble to follow. But these top publishers aren’t throwing a ring out of the lifeboat just yet.

But we do need to look to setting up new ways of reaching these retailers. Our current channel partners are telling us explicitly, in every way they know how, that they might not be here tomorrow.

Can we live without newsstand? Of course we could survive. But newsstand remains an important, if not indispensable, part of the distribution of consumer publishers large and small. There is no question that a channel collapse would take many publishers down with it.

For most publishers, working independently at this scale, away from the umbrella of their national distributors, is not a possibility. They rely on those national distributors to find the solutions and provide leadership. But many of these publishers have ideas to contribute. For example, one industry watcher suggested, what about a partnership with one of the largest distributors of print product in the country?

Amazon.com. 

 

 

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Linda Ruth

Changes at Time Warner Retail

Linda Ruth Audience Development - 03/18/2014-14:22 PM

 

For those who are wondering, Time Warner Retail did not just lay off its field force. At least, not all of it.

With rumors flying, I called a high-ranking executive still with the company. He didn’t want to go on record, but he did answer my questions.

I had gotten a lot of snippets from a lot of people. People working in agencies who said it looked as if the Regional Managers had lost their jobs; other people in the industry who said the Order Regulation was being outsourced to India.

There’s a kernel of truth in many of the rumors, but, my source explained, the truth is very simple. The industry is changing, and Time Warner Retail is changing with it.

While it’s never easy to lose people, the changes, he explained, were inevitable.

“We followed the trail of business,” he said. With the continued consolidation of the magazine distribution channel—over the past few months wholesalers in Canada, Minnesota, Texas and elsewhere have gone out of business—a consolidation of field personnel became inevitable. As agencies closed, people at the agency level lost their jobs. Much of the business moved to agencies where Time Warner Retail already had people, who were able to accommodate the shift in retail coverage.

While it has reduced its distribution team, my source continued, Time Warner Retail has expanded its marketing team.

“Time Warner Retail is more retailer-centric than any distributor," he said. "We put more focus into calling on retailers than any other part of the distribution channel. That is the portion of our business we are building.”
 
Time Warner Retail is also, he said, using technology to manage its business to a degree no one else in the industry is doing. Its MagNet-driven AIMS process enables the company to manage distribution electronically from a centralized location to the wholesaler place of business.

Centralized in India?, I asked.
 
Time Warner has some employees in India, but the order regulation is not outsourced, was the reply. Some backroom operations might be outsourced, but the order regulation, regardless of where on the planet it is done, is done by Time Warner employees, using MagNet data, making changes in the wholesaler system from their remote location.
 
The source did not provide any details on the number of employees let go. “I won’t give you a number,” he said, “but I will say that we still have by far the largest representation of all the companies in the business. I could probably combine the other three and we'd still have more.
 
“And any time any business goes through a re-organization, rumors fly. Time Warner Retail lost a few long-timers, and that was tough. But we’re in a tough industry. We have to adjust for the changes in the field. But overall, there have been more positive twists than negative.”

 

 

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Linda Ruth

Reports of Continued Distribution to U.S. Military Were Premature

Linda Ruth Audience Development - 02/28/2014-10:20 AM

 

I don't have a complete new post today, just an update—but it's an important one.

My last post reported that PMG, distributor to the U.S. military and other locations overseas, had closed its doors for its military, South American, and Hawaii business. The important U.S. military portion of the business was said to be taken over by TNG (formerly The News Group).

Today we hear that the agreement with TNG has not, in fact, materialized. As of this morning it appears that there is no finalized agreement to ship magazines to the U.S. military overseas, not with TNG, not with anyone.

Publishers are instructed to hold all product directed to U.S. military and to await further developments.

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Linda Ruth

Distributor to U.S. Military Overseas Ceases Operation

Linda Ruth Audience Development - 02/20/2014-14:52 PM

 

Not too long ago, notifications were sent to publishers from all national distributors that PMG International, LTD was to cease operating its facilities that service Hawaii, the Caribbean, South America, and the U.S. overseas military.

The notifications indicated that all magazine product on its way to those locations was being put on hold at the printers or shippers. Publishers with issues ready to print or ship, were instructed to put those issues on hold as well.

The news was quickly overshadowed by the startling developments with HDA, the distributor of magazines and books to specialty stores including Michaels, Lowes, Dollar General, and Menards. Though many publishers did not do business with HDA at all, for the ones that did, the quantities could be significant. By contrast, for most publishers, PMG allotments were relatively small. Many might barely notice the loss, either because they didn’t send copies to the military or South America, or because they did in such small quantities that red flags won’t be raised.

See Also: Magazine Distributor Shuts Down While It Restructures Debt

But for publishers that pay attention to their international distribution and sale, PMG was important. The importance of the military to publishers comes from several factors: the audience is American; it may be appropriately targeted to a publication; and, since the bases serve an English-speaking market overseas, military distribution makes up an often-significant portion of overall overseas sales for American publishers.

Since that tough week, some solutions have emerged for publishers losing distribution from PMG. Copies bound for Hawaii were briefly diverted to Source Interlink’s California facility, then veered to settle on TNG, through their West Sacramento warehouse. TNG is also picking up the important overseas military through their Atlanta, Georgia facility.

In the midst of these changes, there are some small bits of good news. The word is that Phil Bagnall, the well-liked publisher liaison, will still be involved as magazine buyer. Also, PMG’s Mexico operation, DIMSA, which does a good bit of volume, is to remain in business.

The rest of Latin America remains to be settled.

 

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Linda Ruth

Magazine Distributor Shuts Down While It Restructures Debt

Linda Ruth Audience Development - 02/05/2014-16:38 PM

 

HDA is a  St. Louis-based distributor that has been the magazine and book supplier of specialty magazines to specialty stores since 1983. Recent events, however, have indicated the company is dealing with some major problems.

A client of mine had been blindsided by HDA’s refusal to receive 57,000 copies of their magazine. The copies were bound for Lowes, Menards, and Dollar General. A confused shipper contacted the client to find out what was up. The publisher had no idea.

Neither, it appeared, did anyone else. Calls to national distributors were received with shock and confusion. Calls to some of HDA’s retail partners were met with blank disbelief. Even now, no official announcement has been made. There is no press release, notice, explanation, or any kind of acknowledgement at all on the HDA website.

According to Bob Ketterer, HDA Inc.'s president, CEO and chairman, the company is working through a significant debt restructuring.

“We don’t intend to file for bankruptcy protection," he said in a phone call. "We are in a reorganization, but have neither declared nor been forced into bankruptcy. Our intention is to continue as a book and magazine distributor. The process had to be sped up because of our arrangement with the bank. We ship to 16,000 locations around the U.S. The locations are 100-percent SBT (scan based trading). What that means is that we own that debt load. It drove up the debt to a level the bank and the secured creditors found unacceptable, and we were forced to cut overhead dramatically. Banks are both risk-averse and unfamiliar with the way our business works. The restructuring process was hastened based on the bank demands.”

HDA employees, I am told, showed up at work Monday morning to find the doors to their company locked. Each received a letter indicating that it was the last day of work and the last day of insurance coverage.

People with whom I spoke were stunned. There had been a shared perception that things had been going well; only a few days before they had been informed by Lowes that they could count on continuing as magazine category manager for the Loews stores through 2017.

“It wasn’t ideal,” Ketterer acknowledged. “In fact, it was one of the saddest days of my life. I started this business 30 years ago. Some of those people were with us 15-20 years. It was rough. But we really had no choice.” 

What about the hundreds of magazine and book publishers with whom they work to distribute several thousand titles to the specialty market? What about the outstanding payments owed? I asked Ketterer about my client’s receivables—the publisher, whose publication is Lowe’s top-selling magazine, is looking for contractually agreed-upon payment that hasn’t been received.

“We want to continue to do so. We’re still very much in business. We are working with the bank and an investor to restructure and move forward. We are going to be leaner and meaner. We would like our publishing and retailer partners to work with us.”

According to a source, HDA hopes to re-open within eight to ten days, and hire back a team from the employees turned away on Monday. Ketterer did not immediately confirm this.

I mentioned this to my publisher client. “It’s got to be a two-way street,” the publisher replied. “We have always worked cooperatively with HDA, delivering to them Lowes' top-selling magazine. Lowes has been paying HDA every week, based on the very-healthy POS sales. I haven’t seen that money, and I haven’t had a return call from the distributor. If I’m to work with HDA, HDA needs to work with me.”

 

 

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Linda Ruth

Back to the Future in 2014: A Former Wholesaler’s Prediction

Linda Ruth Audience Development - 01/15/2014-14:10 PM

 

My first day at work in 2014, I was delighted to get a call from a very dear mentor of mine, a former wholesaler who built his business in the years when there were hundreds of them and closed it when independent wholesalers were losing their place in the changing distribution model.

This wholesaler has a few bookstores left from the old days and keeps his finger on the pulse of magazine distribution through his stores and his friends in the business. He’s always had a remarkable sense of the ebb and flow of business trends and what they indicate, so when I’m lucky enough to hear from him I always listen attentively to what he has to say. Naturally I wanted to know what he thinks about our current magazine landscape.

What he sees is opportunity.

“The business today is just the same as it was when I first got into it,” he said. “Dominated by very large distributors who couldn’t maintain profit by sending product to such far-flung locations. Magazines are disappearing from the shelves because no one could afford to distribute them to the stores. Racks are getting smaller as a result. Handling all those magazines—that’s a lot of work.”

Maybe so, but where, I wondered, was the opportunity? It looks like the opposite, doesn’t it?

Not for a trucker or a shipper or a warehouse, my friend responded. Not for someone starting out and looking for a need to fill. “If I were a young man, I’d do now what I did then,” he said. “I’d start a wholesale agency. I’d pick up local businesses, the stores that can’t make it work getting their shipments from thousands of miles away, and I’d bring them magazines and I’d do it well. We had consolidation, then we had fragmentation, and now we have consolidation again. It’s time for the pendulum to swing back.”

My old friend is quick to acknowledge the differences today—the national chains doing their buying nationally, the loss of the mom and pop businesses that once played such a key role, the growth of digital sales. But problems, in his world, equal opportunities, and a broken model demands fundamental shifts.

“Throughout this country we still have local businesses,” he said. “They’re starting up all the time. Chain stores are closing down here and there and independent retailers are moving into their old space. And some chains want local service for their stores.

“You’ll be seeing changes in the coming years, even just in this year. And one way the changes could go is to have new local agencies pop up, to do the work the big guys can’t.”

 

 

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Linda Ruth

Jim Pattison Group Consolidates Coast to Coast's Back Office

Linda Ruth Audience Development - 12/12/2013-16:32 PM

 

When the Jim Pattison Group, owners of the largest wholesaler group in North America, first became a co-owner of the Comag Marketing Group, one of America’s four major national distributors, benefits that were mentioned included “reducing redundancies.” I didn’t have a clue what that meant, unless it was a special code for triggering layoffs.

Last week I got an announcement from Glenn Morgan, President of Coast to Coast Newsstand Services. Coast to Coast isn’t on the radar of a lot of U.S. publishers, but it is a major Canadian national distributor. Also, its ownership structure has some things in common with Comag’s. Namely, the Jim Pattison Group.

Coast to Coast announced that it’s going to outsource its billing, collection, print order and galley prep, and other back office functions to Genera, the Pattison- and Hudson News-owned company that does Comag’s back office.

Coast to Coast is also contracting with Comag for their North American field work. Some Coast to Coast field reps will join the combined team.

So this is a step in the reduction of redundancies, and it makes sense to me. I’m not a fan of consolidation for consolidation’s sake—or, in fact, consolidation at all, necessarily—but believe me, I am a fervent convert to taking costs out of a wildly expensive newsstand distribution system.

How will this partnership affect the relationship between Comag and Coast to Coast? Will the two companies grow ever closer, with C2C eventually acting as Comag’s Canada arm? Will the savings implied by the reduction of redundancies find its way back to publisher clients? Will all this vertical integration give Comag/Coast to Coast an edge over the other national distributors?

I don’t really know—I just read the press release, and am passing it along to you. But as soon as I have inside knowledge—at least the kind inside knowledge that a blogger is allowed to pass on—I will share that knowledge with you.

 

 

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