Sunday, April 27, 2008
BoSacks Speaks Out: Here is an interesting story of a small eclectic magazine store going out of business. I thought that the response of the owner interesting and quite telling.
Such as this remark:
The effect of industry consolidation was to reduce competition. The way so many wholesalers competed with each other was to offer good terms and lengthy lists of titles including many low-circulation, specialized magazines. After consolidation, the remaining wholesalers learned to respect each other's turf, reducing competition more. They tightened up terms with retailers considerably. And they reduced their lists of titles by expelling the kind of low-circulation specialty magazines Magpie thrived on.
Well industry . . . What do you have to say to that? Decreased competition and a reduction of magazine titles. Is that the way for our continued sustainability and success? Or do you think it is a good thing for us to be at the mercy of Wal-Mart who at any moment can lop off another "unnecessary" printed 1,000 titles.
Business is a good game - lots of competition and a minimum of rules. You keep score with money.
Atari founder Nolan Bushnell
Vancouver's Magpie Magazine Gallery to close
Running a proper magazine store, one that reflects the owners' sensibilities and carries offbeat, quirky and hard-to-find titles is not an easy job and sometimes the job just gets too much. Hence, one of Vancouver's most engaging magazine stores, Magpie Magazine Gallery, is closing this Saturday after 15 years in business. The reasons given are sobering.According to a heartfelt tribute by Chad Christie in the Vancouver Sun and a personal note to his readers by Magpie owner Kevin Potvin, the store was done in by the usual suspects: Amazon, the internet, changing public tastes. As Christie put it:
It offered not the facade of intelligence -- a fake fireplace, decorative library ladders, a comfy "leather" chair -- but rather its own raw eccentricities.
Magpie was perhaps the only bookstore in the entire country that didn't play the same euro-centric classical music all day long. There, one could negotiate the sounds of Gracie Fields one minute and Public Enemy the next, Zhou Xuan and Madonna, Yma Sumac and Nine Inch Nails, Emmett Miller and Rodney Graham, among others.
Almost instantly Magpie became a community resource, the nexus of something new. In 2000 the owner of the store, Kevin Potvin, published a manifesto for the area in the Vancouver Courier entitled the "People's Republic of East Vancouver."
The article drew so much attention that I designed a logo for it, the merchandise of which -- stickers, magnets, T-shirts -- remained popular sale items to this day. Several local festivals and even realty brochures now refer to the area as such, and Potvin soon established the at times infamous Republic of East Vancouver newspaper, copies of which are subscribed to from all over the world.
Kevin Potvin, the Magpie's owner, writes in the current issue of The Republic of East Vancouver:
I am sad to be closing Magpie, but I'm very happy to have operated so long on this wonderful street bringing to residents of my community such a wide array of interesting magazines and good books. It was always a delight, and it remains one now.
Potvin says that changing public habits (staring off into space on the bus with ipods in their ears, rather than reading books, using laptops in coffee shops, staying home and surfing the web) were one of the blows. Another was the consolidation of the distribution industry.
Where once the store had magazine supply contracts with up to 42 wholesale distributors, today only three remain after a serious round of mergers, takeovers, consolidations and collapses.
The effect of industry consolidation was to reduce competition. The way so many wholesalers competed with each other was to offer good terms and lengthy lists of titles including many low-circulation, specialized magazines. After consolidation, the remaining wholesalers learned to respect each other's turf, reducing competition more. They tightened up terms with retailers considerably. And they reduced their lists of titles by expelling the kind of low-circulation specialty magazines Magpie thrived on. Just as supply of these types of magazines became harder, demand dropped as well, as particularly those readers who sought out specialized content were among the first to discover the internet as a source.... But there are things the periodical industry could have done had they perceived the changes in time and had they imagined solutions that were available.
For example, it is well-known in the magazine and newspaper businesses that the proceeds from sales of single copies at stores have never more than covered the accounting, collections, distribution and wasted copies costs of supplying stores. The only benefit to publishers of single copy sales in stores has always been the chance to attract new subscribers. The real business of periodicals is in advertising, a business that requires eyeballs at almost any cost.
Publishers could have perceived the same changes already sweeping the digital music business and switched their way of doing business by offering stores directly-shipped free copies of their products, sill with a cover price, with the stores responsible for paying for shipping only. The result for publishers would have been the same neutral cost they already accept by employing the lecherous distribution industry, but they would have helped create many more flourishing stores happy to make space to push sales of what would then be very high profit margin products. I wrote an article seven years ago for the leading magazine-industry magazine explaining this solution. The article was rejected. That magazine itself went out of business the following year due to the same pressures.
And, finally, it was finances that finished the quirky independent off:
Magpie itself had developed intractable business problems. Around 2000, after operating for six years and arriving, as expected, at a time to re-capitalize, the unexpected arrival on the scene of Chapters Bookstores, with its predatory schemes-successfully executed-to wipe out most independent bookstores, made it suddenly impossible for any remaining bookstores to negotiate ordinary business re-capitalization loans at banks. The only financing available was through credit cards. Rather than close after six years, I made the choice to take credit card money, the crack of financial markets.
Since then, the amount the store has paid in interest rates on credit cards is equal to almost two times the capital borrowed against them. Credit card interest rates, though at a period of historically very low Bank of Canada overnight borrowing rates, were such that Magpie had in seven years paid the borrowed capital back twice over and yet still owed the total amount again. Pleas for lower more reasonable rates fell on coldly deaf ears.