Wednesday, June 25, 2014

Bare Shelves in the Magazine Aisle

There's nothing "OK!" about these magazine racks.

Here’s how a store’s checkout racks and magazine aisle look after going weeks without delivery of magazines.

Magazines strike out at checkout.
While most grocery and book stores this week were sporting July issues, this CVS store on the East Coast was stuck with May and June copies of monthlies and and a few early-May issues of weekly magazines. Thank God for bookazines, which stay on sale at least a couple of months, or else the entire magazine section would have looked even more barren.

CVS had the misfortune (or poor judgment) less than a year ago to go all in on magazine distribution with Source Interlink, which collapsed last month and Monday went Chapter 22 (its second trip through Chapter 11 bankruptcy reorganization).

Bookazines fill the void.
Any solution for Source-tied retailers like CVS will inevitably involve the country’s largest wholesaler, TNG. But it will take weeks for TNG to bulk up its distribution network to handle the majority of Source’s former customers.

Complicating the move is that TNG is demanding that publishers sign off on new terms, which include new fees and a transition to “pay on scan.” Source and TNG both apparently ran into trouble by grabbing market share with agreements to pay retailers based on the number of copies rung up at cash registers, not the number that were distributed but never returned.

Empty slots and out-of-date issues
Without reciprocal agreements from publishers, the two big wholesalers have been squeezed by the “shrink” – copies that are stolen, lost, or damaged. TNG now seems to have the power to impose pay-on-scan for publishers, including compensation to publishers for estimated shrink.

Meanwhile, the magazine racks at many stores, especially in former Source strongholds in the Midwest, are being depleted. Will they remain empty until the industry is ready to deliver its product once again, or will impatient retailers just turn the space over to other products that are probably less profitable but also more reliable?

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