“Surviving the global stress test” is the subtitle of a new report just published by Distripress, the international press distribution association.  The report underlines three key points.  First, that 2017 is turning out to be a really tough trading year globally.  Second, that consolidation and disruption are hitting press supply chains around the world, not just in the UK.  Third, that this “stress test” can produce positive and creative improvements.  Or not…..

It looks like 2017 is turning out to be the year of the stress test.  All the pressures that have been building up for some time appear to be exploding all at the same time and in every direction.

First, look at the economic indicators – volatile and getting weaker all the time, not helped by Brexit uncertainty.  Yet there are also signs that the more self-confident companies are taking the current turmoil as an opportunity to grab market position through increased marketing spend and to take bold steps to reshape their organisations.

Move on to publishing and the cross-currents are surging even more swiftly.  The latest newspaper ABCs are worrying and the magazine ABCs the normal, confusing curate’s egg.  Yet the positive is that “dynamic distribution” (to borrow Hearst’s expression) is very much in evidence: taking a more joined-up and proactive approach by forcing publishing product into readers’ hands rather than hoping that they will pick it up if it is simply made available. However, dynamic distribution brings along with it some major issues which are discussed in this issue.  One topic is variable pricing by channel; another is the implied increased reliance on advertiser funding at a time when everyone says that they are trying to reduce it.

Then there is retail, which has turned into an absolute maelstrom of activity.  Operational change is being focused on cost cutting, range reduction, margin enhancement and the reshaping of complete organisations and processes. More structural change will spin off from the blur of M&A activity.  This has the potential to reshape the retail landscape for years to come.  It will also rejig complete supply chains. Both factors will have major impacts on the Newspaper & Magazine (N&M) category even if they are not immediate.  And then there is Amazon, whose serious entry into bricks-and-mortar retail through its £14bn acquisition of Whole Food Markets will have a major and unpredictable effect on UK retail.

Digital is pretty active too.  Readly’s doubling of its reading metric in a year is a sign that mid-tech (boring old digital editions) can sometimes deliver better returns than high-tech or the hot platform of the moment (VAAs, socially distributed content, video, etc).  It is essential to try new things, but Conde Nast’s $100m ecommerce disaster in the shape of style.com is not an example of “failing cheaply”.

All this brings us on to the middlemen and the supply chain where the maelstrom is rotating most savagely.  It is clear that consolidation in every area of wholesaling is now both logical and inevitable.  Yet this is also linked to deeper questions as to what the middlemen in all supply chains actually do.  And for how much.  The major UK retailers are currently deep into vertical integration up their supply chains.  The result is that the old wholesaler/retailer divide is becoming increasingly blurred.  And here again, Amazon is quietly building an online wholesaling operation in Amazon Business UK.

Zooming in specifically on N&M, and the sad, slow demise of COMAG has dominated many publishers’ perspective, understandably.  Yet this is a mere side-show to the questions about the long-term future and direction of Menzies Distribution.  The description of the Menzies deal with DX as “tying two rocks together to see if they float” is a haunting one which will hopefully not be accurate. But what if it is?

So, returning to the Distripress report, 2017 is turning out to be a tough year for N&M in most parts of the world.  It is the year of the stress test.  For some, the stress test has pushed them beyond the limit.  Others are holding on by their fingertips, with many simply delaying the inevitable through repeated cost-cut after cost-cut without any real change in strategic direction.  Yet more positively, there are still many companies who will pass the stress test to emerge in much better shape to face the future.  Or to face Amazon…..

The Big Picture is the editorial comment page from the wessendenbriefing newsletter.  Click here to download a sample issue.

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