The Fine Print

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The Fine Print

By John Lofstock - 10/06/2002
In an era when margins throughout the store are stretched to their limits, periodicals are providing surprising financial relief for many convenience stores.

After a one-year hiatus, publications reemerged this year as a top 10 c-store category in the CSNews 2002 Industry Report. Publication sales industrywide jumped 0.6 percent to $2.2 billion last year, fueled primarily by newspaper and magazine coverage of the Sept. 11 terrorist attacks. The average store totaled $18,340 in publication sales last year.

Jerry Straub, marketing manager for Petr-All Corp., operator of 49 Express Mart convenience stores, said magazines and newspapers have also grown into a top 10 category for the Dewitt, N.Y.-based chain. Express Mart started noticing growth opportunities about two years ago as it began remerchandising stores.

The impetus for change at Express Mart was the company's fear that its planograms had gone stale. So to boost sales of historically weaker categories, Straub helped deploy a marketing strategy that shuttled customers to different destinations throughout the store.

With periodicals merchandised in the back of the store, for example, customers were only vaguely aware that the stores even sold magazines. Express Mart took some of its top-selling magazine titles, such as Maxim, FHM and Time, and started marketing them at display racks near the registers. "Where we have done this, we have boosted sales tremendously," Straub said.

The easel-type racks, some of which rotate, stand 54 inches tall and hold 12 titles. Larger displays hold up to 20 titles. Express Mart stores typically offer 45 to 70 magazine banners, depending on location and demographics. Each layout is based on annual sales data and a period of trial and error.

One key discovery during its trials was that magazine sales didn't usurp newspaper sales — it helped them. Furthermore, the two types of reading materials make a good team for boosting other categories. "When merchandised together, newspaper and magazine sales promote incremental growth in other categories," Straub said. "Customers come in and get newspapers and magazines with their coffee, foodservice items and snacks."

The majority of periodicals customers are men, but the number of women consumers is growing, and so are Express Mart's magazine titles aimed at women, including top sellers Cosmopolitan and Woman's Day.

Another key finding is that periodicals is one of the biggest impulse categories in the store and that customers judge the books by their covers. To capitalize on the impulse nature of the category, Express Mart tries to display newspaper and magazine covers entirely. "We found that if customers can see the cover and there is something on there that appeals to them, they will buy it," Straub said.

The company's biggest challenge during this process has been making sure vendors are honest. "There seems to be a lot of room for taking advantage of retailers," Straub said. "Some vendors do drop ship instead of letting you check them in. Their invoicing is suspect."

As a result, Express Mart has clerks closely monitor magazine shipments, logging each delivery, taking inventory and scrutinizing invoices for inaccuracies. "We just couldn't believe the bogus charges on our invoices that we must have been paying needlessly for years, such as delivery and shipment charges that don't exist," Straub said. "Many vendors will try to get away with it until you catch them."

The results impressed even Straub. "The bottom line was affected two ways: closer management of the category helped us identify top sellers and free up inventory dollars by discontinuing titles that weren't selling," he said. "Then you combine that with the cost saving we are seeing on the front end by eliminating phony delivery charges. The lesson for us has been that as our focus on the category grew, we found amazing results."

Read All About It

Detailed design and layout are vital, but in the end bottom-line results determine whether a retailer's strategy is a good one. Four convenience store chains, the focus of case studies by the Newspaper Association of America (NAA), reported strong sales spikes and hefty returns through partnerships with their local newspapers. The results of the studies were provided to Convenience Store News by the NAA (see "In the News," Page 98).

"Convenience stores have come a long way in partnering with newspapers," said John Murray, NAA's vice president of circulation marketing. "In fact, corporate and regional managers of companies like 7-Eleven and Speedway SuperAmerica regularly speak at gatherings for newspaper marketers."

One such partnership was forged last year by The (N.Y.) Democrat and Chronicle with Amerada Hess Corp. at 28 Hess Express convenience stores in Rochester, N.Y. The two sides tied the promotion to a marketwide reader contest featuring a trip as the grand prize.

The two-month campaign included a "buy four newspapers get one free" promotion, plus a cup of coffee with the purchase. Store employees punched a specially designed Hess Express loyalty card that was punched each time customers purchased a newspaper.

Point-of-purchase materials included in-store signage and cash register displays. Newspaper officials met regularly with district managers, store managers and sales associates, according to Katy Bridgett, an area marketing manager for Hess, who oversaw the promotion for the Woodbridge, N.J.-based chain.

The Democrat and Chronicle additionally set up a contest to boost sales. Each loyalty card included an entry form that gave customers a chance to win a free trip to Cancun, Mexico.

The promotion produced exceptional results for both sides. Hess experienced increased store traffic during the promotion, Bridgett reported. But the real victory came from a spike in cross-category sales, such as coffee, candy, snacks and beverages.

According to scan data gathered at the stores, customers coming in for a newspaper shopped other sections of the stores. The morning hours produced noticeable increases in coffee and breakfast items. Afternoon and evening newspaper sales led to higher sales of candy, snacks and beverages.

Joe Serio, a marketing manager for The Democrat and Chronicle, said the promotion "yielded a year-over-year circulation spike of more than 200 papers to the daily average and 150 to the Saturday average."

Other companies have experienced similar successes with newspaper promotions. B&R Oil Co., a 41-store Phillips Petroleum jobber, signed on as the sponsor of a readership contest last year run by the South Bend (Ind.) Tribune.

On a per-store basis, the South Bend, Ind.-based chain averaged a 7-percent jump in coffee sales, primarily in the morning hours, a result of customer participation in the newspaper's word scramble contest, said Mike Dobson, vice president of B&R.

Just a Suggestion

Another important piece of information for retailers uncovered by NAA was that suggestive selling, even with publications, works.

"Eye-catching P-O-P and well-positioned displays are good marketing tools for sales associates and store managers, but few things are more effective than the verbal interaction between associates and customers," said Murray, of the Vienna, Va.-based newspaper association. "Customers have shown they appreciate personalized reminders from employees, especially when it benefits them."

For example, some customers may not be cognizant of the fact that a store is giving away a newspaper in the morning with the purchase of gas or a cup of coffee. In this case, when a customer buys one of those two items, the clerk should tell them they are entitled to the newspaper. "That's how you build loyalty and get repeat business," Murray said.

Retailers are taking notice. Another instance of successful suggestive selling could be found at Pittsburgh-based Buy N Fly's 10 stores. During a 2001 promotion, Buy N Fly sold hot and cold dispensed beverages for 50 cents. The chain allowed the Pittsburgh Tribune to join the action and began offering a beverage and a newspaper for 59 cents.

Both companies monitored sales closely and supported the program with multiple in-store displays, including employee buttons that advertised both the store's 50-cent beverage and the 59-cent promotion with the Tribune, said John DeAugustine, Buy N Fly's marketing manager.

But since the companies really wanted to test the power of suggestive selling, they took the promotion a step further. Mystery shoppers regularly tested clerks and store-manager bonuses were tied into how many promotional beverage/newspaper sales were made.

During the promotion, newspaper executives also set up kiosks in each store to sign up home delivery subscriptions. In return, the convenience store chain received weekly promotional ads in The Tribune encouraging readers to visit Buy N Fly stores to subscribe.

As a result, in the 30 days the promotion ran, a total of 4,270 newspapers were sold, DeAugustine said. That marked a 152-percent increase in newspaper sales. The company also experienced strong cross-category sales of snacks, dairy items and baked goods from women and older consumers, he added.

Sometimes newspapers could also be handy tools simply to promote a convenience store chain. One such example comes annually from Xtra Mart convenience stores, a division of Providence, R.I.-based Warren Equities Inc.

As sponsor of the Xtra Mart 125, held at Thompson International Speedway in Thompson, Conn., company officials took a calculated risk that they could drive traffic to the event and showcase Xtra Mart stores with information packets included in daily issues of The Providence Journal. The Journal promoted the packets in prints ads and radio spots.

The packets were also made available at 22 Xtra Mart convenience stores in the paper's primary market and five stores that were out of its market, but close to the event.

During the weeks leading up to the race, which highlighted two days of racing events, newspapers sales climbed 25 percent. The net effect on in-store sales was a 4.5-percent increase in merchandise sales at the 22 stores in Providence and a 1.2-percent increase in sales at the 5 stores in Connecticut.

To build awareness for its retail brand, Xtra Mart distributed 2,000 copies of the newspaper, provided by The Journal at a discounted rate, and store fliers to fans at the speedway each day as they waited for the events to begin.

"The fans were thrilled to get their morning papers delivered right to their doorstep," said Dick Galloway, advertising director for Xtra Mart. "The grounds that surrounded the speedway were a self-contained city where RVs, tents and cars were used as a home away from home for the weekend. These people had time on their hands and no place to go. The complimentary paper was a welcome amenity."

Xtra Mart and The Journal have partnered on several sporting events over the past three years. These partners in particular have developed an outstanding business and working relationship benefiting both sides. "The added exposure in the store, on the radio and at the events has driven incremental traffic to the stores, increasing newspaper and merchandise sales," Galloway said.