MagNet Reports Q3 Stats: Overall Impacted by SID Exit; Non-SID-Affected Stores See Notable Dollar Sales Improvement
As expected, MagNet estimates that magazine single-copy sales were significantly impacted by the temporary but severe channel disruption caused by Source Interlink Distribution's abrupt exit from the distribution business at the end of May. The circumstances made actual sales counts for formerly SID-serviced stores for the period impossible; MagNet said it had to estimate sales for those stores. "Considering that some product delivered by Source was discarded by retailers, it was impossible for MagNet to get an accurate sales number for titles and issues delivered by Source, that were off-sale in the third quarter," reports MagNet, adding that it used the average sales efficiencies from the remaining markets, as well as Source's historical sales efficiencies on those titles, in its calculations. (A similar calculation was also used on those titles and issues delivered by Source that were off-sale in the second quarter, but were never returned to any other wholesaler.) Inclusive of the estimates for formerly SID-serviced stores, total unit sales for Q3 are estimated at 102.56M, down 26.8% vs. Q3 2013, and total Q3 dollar sales are estimated at $543.39M, down 19.6%. On the same basis, inclusive of the affected stores, year-to-date total unit sales are estimated at 346.59M (-17.1%) and YTD total dollar sales are estimated at $1.78B (-11.4%). However, on a same-store basis (43,000 accounts, excluding stores formerly serviced by SID), actual unit sales were down 6.51% for the eight weeks of August and September and down 9.95% for the full quarter July-September. Same-store dollar sales, in part reflecting cover price increases by several leading newsstand titles, increased slightly in August/September (+0.75%), and declined by a moderate 2.25% in the full quarter. "Overall, dollar sales were much improved throughout the 13 weeks of the quarter, providing sales percentage changes that we haven't seen in at least six years," observed MagNet. "Dollar sales of the celebrity weekly titles continue to reinforce the fact that the price hikes made several months ago was the right decision." MagNet also summarizes the operational impacts of SID's exit: "Retailers that collectively represented 30% of the U.S. market were suddenly without service with no way to get fresh magazine product. It was the largest disruption in the history of the magazine distribution industry, considering that Anderson News represented slightly more than a 25% market share when they closed their doors in early 2009...Roughly 30% of all retailer accounts previously receiving magazines didn't receive any service in June. Remaining wholesalers had to sort through legal concerns, negotiate with retailers to finalize contracts, and work with suppliers to get product shipped to their facilities in the right quantities. During July, between 30 and 60 days after Source closed its doors, nearly 90% of the previously Source serviced stores were either receiving deliveries or were in the process of being delivered. In October, five months after the disruption, 99% of the stores were back on service. There are still, in a few cases, logistical problems that some wholesalers are experiencing, as they work to develop infrastructure and improve deliveries to areas far removed from their distribution facilities. We also note through our analyses that, in some cases, title quantities going to different wholesalers could be improved. However, the industry should be commended for getting so many retailer accounts back in service as quickly as it did."
Time Inc. Plays Hardball with Newspaper Guild
NY Post's Keith Kelly writes: "Time Inc. CEO Joe Ripp is starting to play hardball in negotiations with the Newspaper Guild, whose members last month rejected what the company termed its 'last best and final offer.' As the company declares an “impasse,” it is now telling union members that it can begin unilaterally imposing many of the terms, including the right to farm out up to 60 full-time jobs while slashing vacation and medical benefits and eliminating voluntary buyout provisions from future layoffs. The Guild represents just over 200 editorial employees on some of the long-established weeklies, including Time, People and Sports Illustrated. 'The publisher cannot achieve the business ends that are necessary for its long-term success without the ability to change the way work gets done,' said Time Inc. labor attorney Jonathan Sulds at the law firm of Greenberg Traurig in a letter sent November 17 to the Newspaper Guild local representative Anthony Napoli. Under terms now being imposed, all temporary jobs can also be outsourced. It will also eliminate subsidies for medical coverage for future retirees, and eliminate the long-standing agreement of seeking voluntary buyouts before layoffs can be imposed in the future. The rehire provision is also going to be eliminated. On the vacation front, employees will have to work at least five years to be eligible for a third week of vacation. The maximum paid vacation will be cut to four weeks and that will kick in only after 10 years of service. There was one scrap of good news for besieged union membership. The 2.5% pay hike that the union had said was acceptable when the two sides were still actively negotiating will now be instituted, retroactive to Oct. 1...The union is furious about the latest maneuver by Time Inc. “We think they [the proposals] are bad for members, bad for the company and bad for journalism,” added Guild representative Napoli. He told union members who huddled with Guild officials at a meeting on Tuesday that the union has already taken some of its complaints to the National Labor Relations Board, which has started an investigation but has yet to issue any findings."
Advertisers Continue to Move Into Print
According to MediaRadar, across 177 national consumer magazines, the number of brands advertising January-September, 2014 increased by 8.9% to 16,024 total brands year over year. Of these 16,024 advertisers, 7,799 were new brands that did not advertise in these titles January-September, 2013. During this period, the number of advertisers increased across nearly all advertising categories. The home furnishings category experienced the most growth: its number of advertising brands increased 24% to 1,190 total brands. The apparel/accessories category was next, growing 11% to 1,706 total brands. Retail, toiletries/cosmetics, media and athletics were also up. Two exceptions to the growth trend were the non-alcoholic beverages and professional service categories. A chart summarizes the stats.
Forbes, adMarketplace Sign Exclusive Search Ad Deal Replacing Google
The effort by adMarketplace to displace Google AdSense on publisher sites continues. The New York-based independent marketplace has added one more exclusive publisher relationship to its coffer. Forbes has signed a deal that allows the search advertising company to match queries with text ads from brand advertisers on Forbes.com. Apparently, Google continues to have a difficult month, losing the Bloomberg.com search business to adMarketplace and Mozilla Firefox to Yahoo. Forbes.com reached more than 27.5M unique readers in September, per Compete data, ranking 47 in the list of sites. More than half, or 53%, of the website traffic comes from general portals and search that unique visitors share. AdMarketplace expects this traffic to drive "exceptional" advertiser results, particularly in the finance and retail verticals. Adam Epstein, president/COO of adMarketplace, said "it's a bit more like a custom monetization partnership compared with going to a monopoly and taking an ad tag and slapping it on a page." The custom search monetization strategy means that adMarketplace's creative team works with Forbes.com brand and product team to build ads that reflect the look and feel of the site to better support its readers, Epstein said. Asked the total number of ads serving up across its network of publisher sites, he referenced Compete data. "When you look at our Compete data, it's about 100 million unique users see our ads monthly in the United States," he said. "It's the largest search network outside Google and Yahoo."
Interactive Magazines and Multiple Covers for The Holidays
Magazines are leveraging interactive capabilities for their holiday issues. Woman’s Day's cover features a window urging readers to “Open Here for a whiff of gingerbread” and rub and sniff the “cute gingerbread reindeer cookies!” O, The Oprah Magazine's cover has a gate-fold and three windows to open (one on the front cover and two on the inside gate-fold). Each window has a message from Oprah underneath. There's also a message from IKEA, which sponsored all three windows and the ad inside the back cover and its gate-fold. In addition, Hearst's Dr Oz The Good Life and Good Housekeeping are each offering two different cover versions for the holidays (shown in article).
Google to Help Publishers Make Digital Money Without Ads
Google, the biggest seller of online ads, has created a way for publishers to make money without ads. Google on Thursday introduced an invitation-only crowdfunding program called Contributor that lets people pay $1 to $3 each month to visit sites devoid of ads. The Onion, Mashable, WikiHow, Urban Dictionary, ScienceDaily and photo-sharing site Imgur are among the first publishers that have signed on to not serve ads to Contributor subscribers. Google's Contributor is effectively an ad blocker, but one that benefits publishers as well as users. Like a traditional ad blocker, albeit one in which publishers give their cosent, Contributor blocks the ads on a participating publisher's page so that visitors can focus on the content they came for. The space the banners would otherwise occupy will still be there, but the actual ads will be replaced with a "Thank you" message. Google will split with the participating sites some of the money subscribers pay for Contributor, according to a company site announcing the program. The first 10 publishers to participate in Contributor are all part of Google's ad network, but it remains to be determined how Google may open up to off-network publishers and ads sold by other companies. A spokeswoman described Contributor at this stage as "very much an experiment."
Native Ad Spend to Rise Despite Marketers' Reservations
Marketers are bullish about native advertising in 2015, with executives from top brands-- including Ford Motor Co., Kimberly-Clark, General Electric and Hewlett Packard -- telling eMarketer they plan to boost outlays around the tactic in the next year or more. eMarketer forecasts that marketers will spend $4.3B on native advertising in 2015, +34% vs. last year. Marketers' greatest concern about native advertising is how to reach the largest audiences possible. "It can be hard to scale," said Chris Whalen, VP-integrated media platforms at Kimberly-Clark. "Everything is very custom and it's hard to be agile." Meanwhile, publishers are bulking up their headcounts to assist advertisers eager to create custom content and run it on the publishers' sites. The New York Times, Wall Street Journal, Washington Post and Time Inc., for instance, have all created or expanded existing departments for this purpose, following the footsteps of digital-only companies like Gawker and BuzzFeed, which have similar departments. Other media companies--including The Daily Mail, Mashable and Refinery29--have enlisted editorial employees to produce native ads.
Markters Turning Away from RFP/IO Campaigns, to 'Always On' Approach
In an RFP or IO-based campaign, marketers run media for a month, a quarter, or any other predesignated period of time. Automation is now allowing marketers to “constantly test, learn and iterate over a longer period of time,” asserted a TubeMogul representative. TubeMogul, a programmatic video ad platform, has released new research detailing the shift and the impact it's having on campaigns. The always on approach leads to slightly better completion rates, according to TubeMogul’s research. For 15-second pre-roll ads, always on campaigns had a completion rate of 81.5%, compared to 80.7% for shorter campaigns. Similarly, 30-second ads had a completion rate of 73.8% for always on campaigns compared to 72.2% for short campaigns. The data comes from campaigns that have run on TubeMogul’s platforms over the past year. For the purpose of the report, TubeMogul considered campaigns that ran for over 200 days “always on” and campaigns that ran for 2-90 “short.” While the difference in completion rate between always on and short campaigns is marginal, TubeMogul found differences elsewhere. Product awareness, for example, was over three times higher in always on campaigns compared to short campaigns, while cost per viewable impression was nearly 87.2% lower. TubeMogul notes in its report (link below) that “adopting an always on approach does not necessarily mean that advertisers are spreading out their ad spending evenly throughout the year.” It continues: “Seasonality is obviously important to many brands, as is driving up frequency during new product launches.”
HuffPo Said Considering Hosting Brill, Abramson Long-Journalism Start-Up
Jill Abramson, a former executive editor of The New York Times, and the journalist Steven Brill are in talks with The Huffington Post to host a new journalism site that would run long articles monthly and pay writers advances of up to $100,000, according to people briefed on the discussions. The talks, which have included Abramson; Brill; Arianna Huffington, the founder of The Huffington Post; and Tim Armstrong, the head of AOL, are not complete, one source said. But a decision on a deal is likely to be made soon. In a phone interview Thursday, Brill said he and Abramson were talking to several companies about backing the venture. In three cases, he said, “the discussions are fairly serious and reaching a decision point.” Neither he nor HuffPo would comment on whether they are having discussions. In October, Abramson said that she and Brill, the founder of CourtTV and her former boss at American Lawyer, were planning to build a start-up aimed at creating “very ambitious, killer journalism.” This month, Abramson said that she planned to publish “one perfect, great whale of a tale per month.” The venture is expected to seek to charge online subscribers about $3 a month. “I’m desperately worried about what I see,” she said, “a diminution in the quality of writing.” Brill told Capital New York that he was looking for investors for what he envisioned as a subscription-supported news site, adding that it would be “an element of a certain, established website.” Brill has also said that the venture’s articles would be modeled on his own 26,000-word article on health care, published by Time magazine in February 2013.
OTHER NEWS OF NOTE:
Whole Foods to Add 30 Stores in Canada
Whole Foods is committed to expanding in Canada and elsewhere, even as competition in the specialty grocery business intensifies and eats into margins. That’s the message co-CEO Walter Robb shared Wednesday as he oversaw the launch of the new 41,000-sq.ft. WF store in the Canadian capital of Ottawa. It’s the U.S. retailer’s tenth store in Canada, but first foray outside the metro areas of Toronto and Vancouver. Robb told WSJ that WF, which now has about 400 stores in the U.S., Canada and U.K., is looking at adding another 30 Canadian outlets as part of its expansion strategy.
Natural Grocers Up on Q4, 2014 Outlook
Stock in Natural Grocers by Vitamin Cottage was up by 17% early Friday following the release of solid Q4 financials and an optimistic outlook for 2015. The Lakewood, Colo.-based retailer said net earnings in the quarter ended Sept. 30 increased by 43.1% to $3.2M on $135.7M in sales (+17.8%). Comp-store sales rose 3.7%. For the fiscal year, sales of $521M increased by 20.9% and earnings were up 27.7% to $13.5M. Officials said the company expects comps of 5% to 8% in fiscal 2015. It expects to open 18 new stores, three relocations and two remodels, and revamp its marketing behind newly hired CMO Trey Hall, who formerly handled similar roles for restaurant brands including Quizno’s, Smashburger and TGI Friday’s. Kemper Isley, co-president and chairman, described Hall as “an expert at branding companies and getting that message out.” He said Natural Grocers also plans to revamp its website and improve social media presence in 2015. He does not expect growth in total marketing spend as a percent of sales; the plan is to shift spend to digital initiatives vs. newspapers.
Fresh Market Absorbs Inflation, Reports Q3 Increases
The Fresh Market, Greensboro, N.C., said the decision to absorb rising cost inflation while continuing to promote key categories helped boost sales while maintaining strong earnings for the third quarter ended Oct. 26. Net income for the 13-week quarter rose 34.2% to $14.9 million, while sales increased 15.1% to $419.5 million and comparable store sales were up 3.3%. Gross margins fell to 32.9%, from 33.5% year earlier. Number of transactions was up 3% for the quarter and average transaction size grew 0.3%. Craig Carlock, president/CEO, said the company benefited from efforts “to drive customer traffic and grow basket size in a more competitive environment [while] proactively choosing to absorb rising cost inflation and continuing to promote key product categories we know our customers value most.” For the 39-week period, net income fell 12.3% to $42.8M due to the cost of previous store closures in California and Texas. Sales were up 17.2% to $1.3B and comps rose 2.9%.
Tax Fairness Group Claims Wal-Mart Avoids $1B in Taxes Annually
Americans for Tax Fairness, a federal policy watchdog group, asserts that Wal-Mart avoids $1B in federal taxes each year by exploiting loopholes, and could raise that figure by more than 70% if the corporate tax rate is cut. W-M has cut its effective corporate tax rate to 29.1% from 35%, partly through the “accelerated depreciation” of stores and other assets, reports the group. The tactic allows “companies to write off their capital investments considerably faster than the assets actually wear out,” and is “technically a tax deferral, but so long as a company continues to invest, the tax deferral tends to be indefinite.” W-M would save an additional $720M a year if the U.S. corporate tax rate were cut to 25%, the group said. W-M likewise has allowed cash profits overseas to pile up without reinvesting them in the business, more than doubling its overseas profits during the past five years. “That’s evidence of a tax-dodging strategy overseas,” asserted Frank Clemente, who authored the report. “We completely disagree with that report,” a W-M spokesman said. “We operate in 27 countries, and we’re investing in the business domestically and abroad,” he added, noting that W-M’s forecast for the next fiscal year is projected to range between $11.6B and $12.9B.
Alco Begins Liquidation Sales
Going-out-of-business sales began Friday at all Alco stores. Alco, a discount variety chain based in Coppell, Texas, filed for Chapter 11 bankruptcy protection in October. The court on Thursday authorized Tiger Capital Group, SB Capital Group and Great American Group to conduct liquidation sales at all 198 Alco locations, which will continue until all merchandise has been sold. In addition to the liquidation of merchandise inventories, fixtures and equipment from all stores and assets from the company’s 352,000-square-foot distribution center in Abilene, Kan., will also be sold. Alco stores, which average 25,000 square feet in size, are located in Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, Texas, Utah, Wisconsin and Wyoming.
Consumer Prices Unchanged in October
Falling energy prices held overall inflation in check in October, offering relief to consumers squeezed by tepid wage gains and rising costs for food and housing. The CPI was unchanged from September, per the Labor Dept. Core prices, excluding food and energy components, rose a seasonally adjusted 0.2%. From a year earlier, consumer prices were up 1.7%, the third consecutive month at that pace, while core prices rose 1.8%. One positive for consumers: Gasoline prices fell for the fourth straight month and are 5% lower than a year ago. That could allow more spending on nonessentials and help businesses. “Gas prices are considerably lower this year than a year ago, which may give customers a little more discretionary spending power in the coming months,” Greg Foran, president/CEO of Wal-Mart U.S., said last week. But many firms are also careful about passing on additional costs while wage gains remain small and consumers cautious. “There still are a lot of consumers out there whose household incomes have not increased a lot over the last several years,” Emil Brolick, president and CEO of restaurant firm The Wendy’s Company said. “So there’s a lot of families that aren’t feeling all that robust about this.”
CPGs Moving to Location-Based Advertising, Supporting Retail Srategies
CPG companies A report scheduled for release this week estimates a 219% increase in CPG-related mobile spending from 2012 to the middle of 2014, supported by location-based advertising, which has become an important tool. By targeting custom audiences based on location, traffic patterns and habits, along with demographic and transactional information from matching mobile devices to household-level data, CPG ads generated a 74% increase in foot traffic and 56% lift in visit frequency via location-powered media for retailers. The study from Verve analyzed more than 200 campaigns from a variety of CPG categories including household products, food and beverage, personal grooming and pet food. Location-based marketing has traditionally been about retailers andauto dealers driving traffic to stores and lots, said Verve CEO Tom MacIsaac. "We see CPG advertisers have great success transitioning time-tested shopper marketing strategies to mobile through location-based audience data and proximity targeting," he said. A desire to increase foot traffic in retail stores provides the fodder to make investments in location-based advertising. The CPG category uses location advertising tactics more than most other advertising categories. Retail, auto and CPG are the top market verticals in leveraging location data for mobile advertising, with CPG being the fastest-growing of the three. Verve cites recent CPG campaigns for battery and beauty items that aim to drive foot traffic to a specific retail partner. Location-based awareness campaigns drove a 154% increase in foot traffic and 182% visit frequency to the same retailer, compared with non-location-aware creative ads. The campaign showed its strongest engagement from ads on weekends--specifically Sundays, where click-through rates reached levels of 0.53%-0.58%, showing that consumers are more likely to engage with the creative while shopping and running errands. Location-based advertising aims to analyze and measure foot traffic into purchase locations, and leverage that data toward understanding how to target the best prospective customers. Companies have also begun to measure advertising return on investment based on foot traffic lift, frequency of shopper visits, and increase in product sales. In North America, revenue is forecast to grow from about $1.8B in 2013 to nearly $3.8B by 2018, per a study on mobile location-based services from Berg Insight. The majority of the growth will come from increasing ad revenue in social networking and local search, per the research firm. Since real-time location targeting uses location information gathered when an ad is delivered to a mobile user, the ads generate higher returns compared with other mobile advertising. The associated eCPM and click-through rates (CTRs) are several times higher. Berg Insight estimates that the total value of the real-time mobile location-based advertising market worldwide reached $1.51B in 2013, representing 14.5% of the total mobile ad spend. The data firm estimates the location-based advertising market is growing at a compound annual growth rate of 54%, forecast to reach $13.42B in 2018, representing 38.6% of all mobile advertising and marketing. This means location-based advertising and marketing will represent around 7% of digital advertising, or 2% of the total global ad spend for all media, per Berg Insight.
Amazon Launches Black Friday 8 Days Early
Amazon will roll out a slew of deals on toys, tech products and tools beginning today, and it plans on adding new discounts on products every 10 minutes for eight straight days. Macy’s is also previewing its Black Friday deals, but it wants customers to shop in stores.
OTHER NEWS OF NOTE: