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Magazines Deliver High Profit Margins at Low Labor Costs: MPA Study

NEW YORK - Magazines are a profitable supermarket product category with high gross margin performance, compared with overall supermarket performance, according to the results of a Magazine Publishers of America (MPA)-commissioned study on magazine benchmarks.

Boston-based Kreisky Media Consultancy conducted the study for MPA, based on information culled from a number of sources, including publishers, wholesalers, databases, and published information.

"The information that we've collected shows that magazines are an attractive and valuable category for supermarkets," said Michael Pashby, e.v.p. and g.m., MPA. "They are an exciting and relevant part of the supermarket retail experience of attracting key customers who spend more money. Magazines drive sales; when merchandised effectively, magazines can be a strong growth category."

Among the core findings:

-Gross margins: Magazine gross margin performance is above the gross margin performance level of total store. Once trade allowances are included, a representative adjusted gross margin level for magazines, compared with all supermarket categories, is an estimated 33.6 percent vs. 27.6 percent.

-Magazines are not labor-intensive: Because wholesalers supply supermarkets with magazines and generally stock supermarket shelves and displays, labor costs associated with magazines are two percentage points lower than the average for other supermarket categories. Additionally, there are no warehousing costs. Average store labor as a percent of sales is estimated at 10.9 percent, while magazines are 8.6 percent.

-Inventory productivity: Average store inventory turns 8.5 times per year. Magazines average 17.4 turns per year. The superior margins of magazines, coupled with the lower than average inventory investment to satisfy customer sales, result in a high return on inventory investment compared with other products in the store.

-Magazine buyers spend more in supermarkets: Magazine buyers purchase more than average supermarket shoppers, according to the study. When magazines were part of a shopper's "market basket," the total purchase amount was $67, compared with $39 when a shopper didn't buy a magazine.
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