Re: Inside The Wholesaler Dynamic

Editor's Note: Probably some of the most interesting series of articles on the current status of the newsstand industry and it's future have come from publishing consultant and "Folio Magazine" contributor Linda Ruth. Linda is a veteran of the newsstand industry and has successfully added the digital realm of the publishing world to her portfolio. That's a model I am striving to follow. Recently she's published some articles on what the newsstand world's "Plan B" could look like. This week's article, included some interesting "reveals" from former Buffalo, NY wholesaler Larry Scheur. It was then picked up and re-posted by industry guru Bob Sacks. It's sparked much reaction. What I have written below is my response to some comments, calls and emails directed my way. I suggest you read Linda's  article to get the gist of what I am trying to say.

I never called on Larry Scheur in Buffalo and don’t know him personally. However, I do know him by reputation and I respect him for his creation of the “Buffalo System.” I've seen it in action in several forms and it was, in my opinion, one of the better single entry systems in use. Moreover, I do know many people who did call on his Buffalo and Jamestown, NY warehouses and they reported that the operations were well run.

But since the publication of this article, I've received a decent sized flow of  “See, I told you they were all corrupt!” and a “Pox on all their houses!” comments so some sort of response seems appropriate.

The former Mobile News Company. Mobile, AL

Yes, some magazine wholesalers did try to screw around with their systems. One of the reasons we know about them is because they were called out at some point and compelled to pony up and correct their ways. There's a reason national distributors have auditors. From my experience, most of what these auditors catch are honest mistakes in the system.

Hell, I still have to correct people I meet who have heard some version of the “Phony Book Cover” returns story. The one is what, at least forty years old? It was a hoary old chestnut back when I walked into the business and there have always been multiple versions of that story. Even science fiction author Ben Bova includes a version of it in his prescient novel Cyberbooks.

Yes, many wholesalers may have made a portion of their total profit from delivery fees charged to retailers. They may have even made money from overages, shortages and the like. From my experience, however, it really depended on the wholesaler, the market that was serviced, and their individual corporate culture. If you traveled around and called on as many US and Canadian based wholesalers as I did back in the day, you got pretty good at figuring out who worked hard, who was clean, who was good at merchandising, who put interesting and effective ideas into action, and who made money in spite of themselves.

The former Austin Periodicals. Terre Haute, IN

Frequent readers of this blog know that I grew up in this business and have an excellent source of my own about how things were pre-consolidation and even pre-computerization. My father, who managed an agency for over twenty years (and the book side of the company before that) claims that he ran a very tight ship. I’m inclined to believe him and not just because he’s my dad.  Yes, they may have made some money from service charges. But most of their profits came from sales and most of their sales were from magazines (although they sold books, newspapers and ran a very profitable bookstore and school book business). Where they clean? Yes. Why? He always said it was because they didn’t want to lose an audit from a national distributor. He also felt that the few “tricks” that were talked about were more complicated than they were worth. Remember the old adage: "When you tell the truth you have less to remember?"

Were there concerns about cheating? Mostly they were about things falling off of the back of a delivery truck and into the hands of the local "Friendly Neighborhood Bootlegger".

The former Klein News Company. Cleveland, OH

Did some wholesalers play with the float on returns crediting with their retailers? We heard that often enough. There is conjecture that it may be one of the numerous reasons the big national chains put the business up for bid. However, I've never had a retailer say that to me.

But all in all, this was, and still is, a straightforward business. You take stuff in, you put it out. It either sells, or it doesn't. If you screw around with your privileges, you'll either be caught and forced to pay up, or you will gain a reputation and no one will trust you.

As for Larry’s ideas: The time for magazine mass merchandising on a grand scale may have come and gone and neither of those solutions would solve the problem of getting the rest of the mainstream and niche titles to market. That doesn’t mean these ideas shouldn’t be explored, but I would hope that anyone who currently works in the newsstand distribution business at any level would challenge any supposed “solution” that would result in the sales of this business getting any smaller than they currently are. We know people are going into stores. We know that people are looking for magazines. If the major publishers won’t help themselves save their single copy sales, then the rest of the industry will have to do it for them because they sure as heck won’t help anyone else but themselves (And why should we expect it to be otherwise?)

The former Interstate Periodicals. Madison, WI (And one of my favorite cities and wholesalers to visit).

As for O&R “over regulating” the business. I think that is a fascinating comment from someone who had a hand in developing the order regulation system (Although I always thought the first system to market was the DataMan system). Does he regret it? The big problem with order regulation is that the sell throughs and sell through targets mean different things to different links in the chain. A 30% sell through may break even or even make money for a publisher. It may be a loser for the wholesaler. Both the retailer and the national distributor make money on everything that’s sold.

Finally, with regards to the story about the national distributor offering “skiffs” to Larry. Who am I to dispute his story? He did the right thing by leaving and the "well-respected" VP was in the wrong. Were similar offers made to other wholesalers? Maybe. Most likely, I would surmise. But that is my opinion. Show me some other business in or outside of the publishing world where everything is clean, tidy, shiny and perfectly honest and I'll show you some Sunday morning pontificator on cable TV bloviating about something he knows nothing about.

From my experience, most "deals" between ND’s and wholesalers involved fees and payments for additional distribution and dealer adds. Occasionally additional discounts would be offered in lieu of fees. This was a successful way to launch a new title or the relaunch of a stagnant veteran. I have to confess that I did that myself more than a few times at the behest of publishers I worked for.

If I have any fear, it is that this article will be remembered not for Larry’s discussion of ideas on how to fix things, which is worthwhile. Rather, it will be used to confirm the “publics'” worst fears about a broken business model that is in dire need of repair.

Oh well.