Direct distribution can offset Single-Copy falloff: Here's a step-by-step primer on how to develop a successful direct-to-retail program

Folio: The Magazine for Magazine Management, Jan, 2002 by Ralph Monti

When Anderson News, the country's largest magazine wholesaler, announced plans to increase single-copy sales efficiencies by removing 400 million copies from its distribution system, the magazine industry was presented with a serious blow. This massive draw reduction, which selectively reduces the number of copies that make their way to retail checkout lines and mainline shelves, is designed to achieve an average sales efficiency of between 50 to 52 percent. That's quite a leap from the industry's average sell-through rate, which hovered around 38 percent.

This program arrived on the heels of Anderson's other big announcement, which called for the creation of a two-tiered distribution system. Under this program, less efficient magazines are required to pay higher fees for retail distribution.

Other major wholesalers announced similar programs to trim draws and boost efficiencies. This streamlining could potentially have a detrimental impact on single-copy sales. Many publishers stand to lose anywhere from 10 to 18 percent of unit sales. Therefore, publishers are seriously ex-ploring any and all alternate distribution avenues, including direct distribution. Here's how to start your own program:

First, decide whether to build an in-house program or to contract out to a direct distributor. Many publishers chose to implement a combination of both strategies. Be aware, however, that creating a direct-to-retail network is time consuming and labor intensive. You'll need a full-time staff whose sole purpose is to find new retail outlets for your magazine. If your circulation staff is already stretched, and/or you don't have the resources to bring in additional help, opt for retaining an experienced direct-to-retail distributor.

Next, identify retail outlets whose demographics match your magazine's profile. Study your reader survey and analyze its psychographics. Asking a basic question like, "What do my readers do when they aren't reading my magazine?" will provide valuable insight on where to distribute. Learning and understanding your readers' behavior- where they shop, vacation and entertain themselves-is critical for identifying new outlets. To find these retail outlets, pursue diverse strategies, from attending trade shows to researching retail chains on the Internet.

Many of the elements that go into a sound marketing plan should be the foundation of your direct distribution program: Set sales goals, calculate costs and project net estimates per copy. Budget into your program a variety of retail promotions such as merchandising allowances, in-store promos and advertising. Be conservative when it comes to sales goals for that first year. Only by exhaustively analyzing your costs- budgeting your cost per copy, factoring in your distributor's discount, freight costs and any additional fees-will you be able to determine the profitability of your program. Direct distributors' fees generally include all billing and collection from retail outlets, order regulation, bad debt, telemarketing and in-store merchandising. If you're establishing an in-house program, be sure to account for these costs yourself.

Retailers may at first be resistant to handling magazines. You may hear them complain that magazines require too much labor or too much display space. Results won't come overnight-it may take a year or more to realize sales goals and create sizable, stable distribution.

COSTS ARE HIGHER

Direct programs can also be wrought with file churn-especially if you're serving many independent retail outlets in addition to chain stores. Moreover, costs for direct distribution tend to be higher than the traditional ID/wholesaler method, although costs can be offset by the higher efficiencies found at direct outlets.

At first look, alternate direct programs may not seem worth the sweat and effort. But as mass distribution becomes increasingly difficult, smaller magazines may have little choice but to invest in a direct program. Getting aboard sooner may make all the difference later.

Ralph Monti is president of Special Interest Media Inc., a Bloomfield, New Jersey, magazine management consulting firm.