retail news in context, analysis with attitude

On Tuesday, I took note of a story saying that the recession is hitting the nation’s magazine business, with newsstand sales down 11 percent in the second half of 2008 compared to the same period a year earlier. The declines seem to be pretty much across the board, with two bright spots - People and Entertainment Weekly.

My comment, in part:

Retailers should think about just getting rid of their magazine sections and using the space for something more 21st century. (You can keep a few at checkout if you like.)

My logic is this. Sales are down, but not just because of the recession. More people than ever are getting their news via the Internet, and at some point the bulk of the customer base won’t be reading paper magazines and newspapers. (Just as they won’t be listing to music on CDs or watching movies on DVDs.)

We can see it already as newspapers and magazines go out of business, or try to restructure themselves in a way that makes sense for a 21st century readership. So maybe food retailers need to do the same thing. Restructure for a 21st century customer base.

Maybe all those magazines are just so much wasted space. Get rid of them. Get ahead of the curve, and figure out what tomorrow’s customer wants. And if you are in the magazine business, my advice is the same.

Got a bunch of emails from folks who thought I was misguided, mistaken or just delusional.

MNB user John Corbett wrote:

Rumours about the demise of magazines are greatly exaggerated. Sure there are undoubtedly too many and some should and will go, but some are likely to stay around for quite some time yet, especially high end glossies. You just can't get what they do via a screen, especially their tactile effect.

MNB user Rob Johnson wrote:

Regarding your comment on reducing magazines, I buy one magazine each year, Fantasy Football Index. Yes, I am one of those Fantasy geeks, it may be my biggest vice and my wife considers herself a football widow. But honestly, if I don't find my magazine in the local grocery market, there will be hell to pay. I may be old fashioned, but it is most difficult working on a lap top when there are 11 other fantasy "coaches", beer and pizza involved.

MNB user John Harrington wrote:

I'm disappointed with you. Even with the recent dreary figures, magazines are still one of the most general merchandise categories for supermarkets. Maybe I'm missing something, but I haven't heard that anything is selling very well.

Internet's biggest hit for publishing is in advertising, and that impacts newspapers more than magazines, although they have suffered too. To a surprising degree, consumers prefer print, especially when reading something beyond headlines and sports scores.

On top of that, you have always struck me as a guy who reads a lot of magazines, although you probably get them through subscriptions.

MNB user Jane M. Williams wrote:

Maybe the reason retailers aren’t selling as many magazines is they’re not selling the right ones. I can’t imagine doing without my reading material and, since I’m about ready to retire, I am building the costs into my budget! After all, you can’t take the computer into the “home reading room.” (Actually, I guess you could take a laptop, but how bulky….a magazine is much easier.) When I get my Smithsonian, Yankee, and Alaska magazines, I almost immediately read them cover to cover and then pass them along to friends. I cannot imagine doing without the printed (on paper) word and hope this never changes.

MNB user Jerry Lynch wrote:

Adversity can help a category to surface with renewed vigor and purpose, why not this category and why not in supermarkets? Taking a 4 billion dollar category and jumping ship sure sounds like a radical idea but that doesn’t make it right. Customers, while buying less right now, like magazines and still buy a lot at retail. Why?... because it is great product and a great value. If that isn’t enough reason to support magazines then note that the category delivers superior bottom line results overall and per foot. Generally it is the number one or two category in GM. Magazines are more than just news, they deliver great content with health and wellness information, recipes and cooking techniques, home trends and many more topics that are high on retailers lists and drive sales in store . Rather than running away from adversity why not, as Mr. Sansolo says…take a currently Sad Song and Make it Better. PS, I liked the article on Every Day with Rachael Ray magazine launching a new section in April called “Supermarket 101,” …..that’s better!

And MNB user Chris Daugert wrote:

You don't know anyone in a Nursing Home, do you?

Not everyone disagreed with me, however.

One MNB user wrote:

I used to enjoy People magazine as a subscriber and read it religiously cover to cover. Then the price went way up (obscene amounts per issue), the real content went down, and it became pages and pages of advertising as is true with most magazines these days. You have to play detective to find the articles. There are other ways to get the info (internet, TV) and better ways to get more bang for your buck.

Another MNB user wrote:

Your readers should check out, where they can select a FREE 1-year subscription to one of several digital magazines (choices include Parenting, Popular Science, Saveur, Elle, Men’s Journal, US News and World Report, and many more). This is the new world of magazines.

And still another MNB user chimed in:

Your thoughts on magazines, on a day where the new Kindle (your toy) is announced, is timely.

However, one place still exists where you need something printed - the plane. On take offs and landings, you have to turn off your approved portable electronic devices.

I have a couple of other places too, but they are more personal...

So, the real question is - what is that balance and what will it look like in a few years?

Look, I’m not really arguing that stores should dump their magazine sections tomorrow. What I am saying is that the world is changing, and that the ways in which people get their information is changing. If you have children, you know that it is true. If you don't, borrow one for a few hours and you’ll see what I mean. (You can have one of mine. No charge.)

I like magazines. Wrote for them for years. Still do columns from time to time. I treasure my New Yorker subscription, and probably get a dozen titles each month.

But that’s not the point, because I am not the customer of the future!

And neither are most of the people arguing that the magazine business remains vital and credible.

One thing that stores can do immediately is to look a lot more carefully at the titles they carry, and align them better with the interests of their core customers. But they have to consider that in the not too distant future, the magazine business – along with the CD and DVD business – may be irrelevant to most of their customers.

You’re right. I don't have anyone in a nursing home right now that I am visiting and to whom I am bringing magazines.

But at the risk of being roundly criticized, I’m going to be brutally cold about this.

Something like eight percent of all the US citizens over age 75 are in nursing homes…and while they might like reading magazines, they are going to die. The people who replace them in those nursing homes, at least eventually, will know how to use computers and Kindles and other pieces of technology that allow them to access information and journalism electronically rather than on paper. (BTW…paper may be tactile, but online access can offer text, pictures, video and audio…which strikes me as far superior.)

Again, this isn’t all going to happen tomorrow. But it is going to happen. All I am suggesting is that we all have to open our minds to the likelihood that the world is not going to look like we’re used to it looking, and we have to open our minds to the possibilities and opportunities that exist.

To do otherwise would not just be delusional, but would shortchange our businesses and stakeholders.

MNB took note yesterday of a story in US News & World Report pointing out 15 companies likely to be out of business, or radically altered, by the end of the year – including Rite Aid, Sbarro, Krispy Kreme and Blockbuster.

I commented:

The question that I ask when I see these companies identified this way is how, if at all, they are relevant for a 21st century consumer in a 21st century economy. We live at a time when people are buying what they need, not what they want; and they are looking for retail options that make a compelling case for why a person should go there and not someone else.

I can make the argument that three of them are close to irrelevant … at least from my perspective as a consumer. Can’t imagine buying anything at Sbarro or Krispy Kreme anymore, and I haven't walked into a Blockbuster store to buy or rent anything in at least five years, maybe longer.

Rite Aid is the one exception, but it may simply be in so much trouble, facing too much competition, to be able to become a vibrant competitor.

Relevance is the key. Without it, you can’t open the door to the consumer’s heart and mind and stomach.

MNB user Bob Shaw responded:

Slightly different reaction as a former retailer turned marketer. Retail actually allows companies that are extremely weak to survive much longer than almost ANY other industry – and it takes a major event like the economic issues of late to create shakeout. Look at Kmart the past 20 years, look at the final 15 years of Montgomery Wards. Look, to your point, at how many stores Blockbuster still has OPEN. Look at how many years Circuit City lingered in the shadow of Best Buy – definitely not state of the art in a state of the art industry. Personally though I like Sbarro pizza and an occasional Krispy Kreme !

And MNB user Bernie Ellis chimed in:

I just finished reading your comments on Rite Aid, Sbarro and Krispy Kreme and I'm struck by the negativism in your comments. While you cannot imagine buying anything from Sbarro and KK, a great many people do. Bakery and pizza businesses are strong retail segments across the country . The issue is not just one or relevance, it is one of decisions made that fit a time and place that has changed in short time frame. Sbarro strategically placed their stores in malls, once the center of retailing, a great decision. Unfortunately, a recession has sent those retailing meccas into a downward spiral that no one could have imagined a year ago... not even you.

Krispy Kreme and Rite Aid made growth decisions that were unsustainable if cash availability was limited. Did you foresee the credit crisis three years ago?? A viable business must foresee these ups and downs and plan for them as the original article states. You on the other hand blame them for not seeing the recession coming. Great Monday morning quarterbacking but not very realistic if you manage a business. With the breath and depth this recession is having on retailers, and with your view point, almost all CEO's should be fired for not being clairvoyant.

Bad decisions were made by at least two of these companies but you are doing too much pontificating and not enough analysis to understand the real issues they faced yesterday and tomorrow. Today we need CEO's that have vision and who are pragmatic in their thought process. CEO'S who are willing to sponsor ideas, not own them.

You’re right. I was and am pretty negative.

I’m not sure I agree that Krispy Kreme can be absolved of its missteps because there was no way to foresee the credit crisis. That company has a lot more systemic problems, and has experienced some bad luck as well. It just seems to me that Krispy Kreme’s value equation doesn’t add up.

Rite Aid and Sbarro are different stories. But I’ve been arguing for years that Blockbuster has been dependent on a soon-to-be obsolete business model…so I am not new to this party. I’ve also been saying for a couple of years that the economy is undergoing fundamental changes…not because I am an economist or a fortune teller or an analyst or a pontificator, but because I was looking at the world around me, paying attention to what was happening to people I know all over the country.

Another MNB user has my back on this one:

It doesn't take a crystal ball to see that the companies you mentioned today are probably DBA (Dead Before Arrival), the poor economy may just be the thing that finally puts them out of their misery. Of the companies you mentioned, there does not seem to be a slice of excellence anywhere to be found. Rite Aid is not only over leveraged, its stores a typically poorly laid out, poorly stocked and poorly staffed. There is not a reason for anyone to go in there, unless the location is so good that there is no other choice (in this case they should sell that property to someone like Walgreens. Sbarro....... I have never had anyone say to me (nor have I heard any testimonials), that I have to try this wonderful (or at least very good) slice of pizza at this place in the mall that I do would have to go out of my way to visit...... In a downturn you better be cheap or very good. not just convenient (unless again you have the only gig in town - which does not last). Blockbuster, Krispy Kreme, who cares? Yes I love a hot doughnut and Blockbuster had its day, but I also have an old BetaMax next to my 8 track player in my garage that are irrelevant too (I hid them from my wife, she sees clutter, I see nostalgia).

Here are a couple others to lump in:

• Kmart
• 50% of the newspaper industry (maybe more)
• Applebees (if they were gone, would someone really mourn?)
• Circuit City (oops, already gone)

Look, the real issue for me is the notion of a sustainable business model that is focused on relevance and excellence, not on mediocrity and survival. All four of those companies may make it to the end of the year and beyond as they currently are constituted. Or, they may be bought or sold or diluted.

But I would argue that none of these four companies make a convincing case that they have sustainable business plans that will carry them into the next decade as vibrant, relevant business entities. And I think that’s what we all need to be reaching for in our businesses.

KC's View: