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Published byPeregrine Hines Modified over 8 years ago
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NEW NEWSSTAND REALITIES
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Forces driving change Stagnant growth Declining sales efficiency New retail formats and competitive models Scan based trading Revolution at the checkout
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All Number in 1,000s Celebrity category: one bright spot 2004Q1 4 Titles 42 Million Units Sold Share of Market by Title 2006Q4 6 Titles 63 Million Units Sold Share of Market by Title These charts illustrate the growth of the celebrity market (size of pie) and the increased fragmentation.
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Sales % continues long-term decline
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Implications of low sell-through Financial –Over $1.2 billion spent on returns annually –Increased handling costs for wholesalers Strategic –Competitive disadvantage vs other product categories Environmental –Exacerbates problems with resource/energy-intensive industry –Wal-Mart’s sustainability initiative
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Inefficiency as a symptom of deeper systemic problems Rate bases not reflective of true demand Low break-even marginal efficiencies Cost of entry “Red Ocean” – competing for growth in a mature market “Shifting the blame” paradigm Misaligned financial incentives –e.g. National Distributor brokerage model –Perpetuates “push” supply system vs. “demand-based” supply
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Manufacturing Costs = $0.46 Average Magazine: $3.23 Cover Price $18.60 in annual ad revenue per reader Break-even sell-through of 15%
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Manufacturing Costs = $0.46 $3.23 $18.20
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The marginal cost of “demand overshoot”
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Misaligned financial incentives Marginal Break-even
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“It is difficult to get a man to understand something when his salary depends on him not understanding it” -Upton Sinclair
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Market forces reshaping the supply chain… From supply-driven (“push”) to demand-driven (“pull”) Wholesaler efforts to adapt –ProLogix joint venture –Anderson News reducing copies distributed by 19% –Eliminating service to unprofitable stores –Eliminating marginal titles –Optimizing title mix at store level Retailers increased influence over suppliers –Wal-Mart sustainability initiative –Barnes & Noble managing inventory/assortment using POS
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Yesterday’s Wholesale Business Model 350 Wholesale Locations
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*U.S. Market shares only 2006: Source Purchases Ontario and Washington D.C. from Anderson Anderson Cohen News Group 30% 12% 23% 30% Source Interlink
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Self-scan Expansion Cigarette Kiosks Albertson’s Test Single-serve soda coolers Revolutionary change at checkout
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“No problem can be solved by the same consciousness that created it” -Albert Einstein …or by the same business practices
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Wine Bargain Books Floral Cross-Merchandising Modules Baby Feature Elements of the Reading & Entertainment Zone
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Key Components of the Program Objective Category Management Focus on quality of assortment, not quantity Managed promotional schedule Post-promotional analysis Commitment to waste reduction Creative fixturing High impact visual signage
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Magazines
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Store level data: Opportunities revealed….
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Unprofitable segments can now be identified and quantified
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Better balancing supply and demand ….lowering PP&D costs….improving profits
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Targeted dealer expansion
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Adapting to a consumer-driven market… ….requires a radical new approach From hierarchy/control…….. Focus on the parts (reductionism) Whole= sum of parts Supply chain as linear hierarchy Silos of specialization Accumulation of knowledge Power and leverage To a whole systems approach Focus on relationships between the parts (complex system) Whole is different than sum of the parts Supply chain as an interdependent network Multi-disciplinary collaboration Understanding Innovation/adaptability Alignment of goals and financial incentives
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