CINCINNATI -- Retailers like Kroger Co. here have begun testing new ways to profit from magazine sales after watching newsstand sales units slip. The company began testing Instant Start, a program that allows customers to purchase a full year's monthly magazine subscription at the checkout.
Two Delhaize America subsidiaries, including all Kash n' Karry Stores, Tampa, Fla., and 531 Food Lion stores, Salisbury, N.C., will roll out the program starting next month, said Food Lion's spokesperson Tawn Earnest.
"With magazines being a high impulse item, this program is an added service and convenience to our customers," Earnest said. She said it is especially convenient to customers who buy the subscriptions as birthday gifts.
Other supermarkets said to be considering the program for the first quarter of 2001 are Hy-Vee Food Stores, West Des Moines, Iowa, and King Soopers, Denver.
"It gives the consumers another option when purchasing magazines," said Jay Clarke, president and chief executive officer of magazines.com, a Nashville, Tenn.-based on-line subscription company that developed the program with wholesaler Anderson News, Knoxville, Tenn. "Prior to this program, a retailer couldn't get involved in the subscription channel." With Instant Start, the sale is split four ways between the retailer, the wholesaler, magazines.com and the publisher, said Clarke without further elaborating on the split.
Initially, 20 titles are involved in the program, including Glamour, Good Housekeeping and Teen People, but Clarke said that number is expected to grow. In the second quarter of 2001, he said weekly magazines will also link to the program. "Logistically, it is easier to manage monthly magazines right now," he said. The weekly magazines will contain the response card in one or two issues a month, according to Clarke.
Although Kroger declined to comment, Clarke said the chain has been very pleased with the results of the program, which began running in September.
According to Clarke, the customer pays for the subscription at the checkout, then gives their name and address through www.magazines.com or a mail-in response card. If they have a customer loyalty card, their name and address is automatically captured at checkout and the magazine's 11 remaining issues are sent to their home through regular mail.
Anderson News president Charlie Anderson said retailers and wholesalers look at subscriptions as competition. "Every retailer we've contacted is extremely excited because it lets them participate in an industry that is three or four times larger than single copy." While single-copy sales are seemingly more profitable for the retailer and wholesaler, Anderson said very few consumers buy 12 monthly issues of a magazine. "[Relying on single-copy sales] may not be more lucrative," said Anderson. "Subscription sales will be a whole different sale."
According to the New York-based Magazine Publishers of America, single-copy sales have suffered in part because of the substantial distributor turnover in the past six years: in 1994, there were 185 magazine distributors. Today, only four major players remain, accounting for 90% of the wholesale industry. According to the MPA's 2000 statistics provided by the Audit Bureau of Circulation in Schaumberg, Ill., virtually every top 100 magazine posted lagging single-copy circulation from the previous year, while subscription circulation climbed. Downturn has been more gradual in single-copy sales, but there is still a decline. The MPA said 17% of 1999 magazine sales go to single-copy sales, a 1% decrease from 1998, while 83% go to subscription, a 1% increase.
Mike Tetmeyer, vice president of marketing at Hy-Vee Food Stores, said programs like Instant Start could increase sales and it would be convenient to customers.
Michael Pashby, MPA executive vice president of consumer marketing, said programs like this one are a sensible way to to generate profit. "Testing any method of selling magazines is a good idea," he said. "Why shouldn't the retailer share in the blow-in card revenue?"
Pashby said the consolidation has caused distributors to drop many retailers, and that has had "a slow impact over time." He added, "Sales aren't soft on all magazines, but consolidation has been a big part of the drop-off."
Book retailer Barnes & Noble ran a similar program to Instant Start during last year's holiday season, according to Pashby. He said National Geographic magazine offered gift subscriptions that could be bought at the checkout, and it was successful.