Australian Convenience Store News: Adult Magazines

hile there's no doubt they can make a strong contribution to the bottom line, adult magazines have to be handled carefully to maximise their potential.

If you can leave your own personal attitude out of the equation, adult magazines can be a real winner for the convenience trade.

C-Stores are the perfect outlet for this type of magazine - by the very nature of their stand-alone locations, their hours of operation and the associated anonymity. There's also the nature of the product itself, which is for many people an impulse buy. One expert suggests as much as 80 per cent of the very high total product is sold through route.

That's because the customer who wants this type of product does not want to advertise the fact he is buying it so he prefers a C-Store to his local newsagent where he may be recognised. In many cases, the purchase will be made in the early hours of the morning and, quite often, that could be the only traffic through the till at that time of day.

However, it is important to note that this type of customer also wants to have access to the very latest in the product. And, maximum profit depends on servicing the demand efficiently. The stock needs to be turned over regularly and that means relying on a good supplier with a complete understanding of the market rather than trying to do the job yourself.

For the retailer, it's hard to argue with a margin that can be as high as 100 per cent (wholesale $7 on a product which sells for $13.95), and that's through a reputable supplier. Experts contacted for this story pointed out that illicit trade is still quite rife, that is, operators who will supply more hard core material than is legally allowed under state guidelines. There is arguably more profit involved in these magazines, but the retailer who sells them is taking a big risk.

Keep it Legal
According to Chris Sargent, MD of AIP Distributors, the biggest issue for those handling the distribution and sale of adult magazines is the Office of Film and Literature Classification - and on which side of the OLFC retailers are prepared to operate.

"All products have to go through them for classification and to be legal, Category One is the highest level for anything that is going to be sold in C-stores and service stations.

"Effectively that means everything except penetration. If that's shown in that particular magazine, it has to be covered, and we have four people working full-time, sticking on black dots to comply with those regulations. Interestingly, often the pictures and the words are acceptable and it's the advertising that causes most headaches," Mr Sargent says.

Off the record, our experts pointed out that the process is by no means cut and dried, that there's no way you can guarantee which way the OLFC will jump. For that reason too, it's hard to know when and if prosecution is likely but it is always a risk if you gamble with what's acceptable for the type of retail outlet you operate. It's important to know that a reputable supplier will be able to show you classification certificates from the OFLC for every magazine they're offering you for sale.

As said, Category One is the highest level permissible in general retail (over the counter); Category Two is reserved for under-the-counter, specialty sex shops distribution. That being said, apparently with Category One, there are different regulations in different states (Queensland is the toughest) but what's acceptable to one censor one month, may not be to another the next month.

Mr Sargent refers to some magazines that were refused classification because the girls pictured were wearing bobby-sox. Any reference to children, teenagers or 'young' is very definitely a no-go zone and the result - 'Refused Classification from the OFLC' - means the magazines can't be sold in Australia.

"We follow all the rulings from the OLFC," says George Kaye, national sales manager for Pacific Optics, which includes distribution of adult magazines among its wide range of products. We classify and modify according to their rulings so we never have any illegal product on the shelf or on display. Some suppliers are willing to take chances by supplying illegal product but we won't do that, because it puts our other businesses in jeopardy and we're not prepared to take that risk."

"Eighty per cent of the market is covered by suppliers who are doing the right thing," says Chris Friedrich, MD of Premier Publication. The company is now working in tandem with Miller Imports, making the combination a very powerful force in the distribution of adult magazines.

"Twenty per cent would be the illegal suppliers, the people who are not complying with the government regulations and they're not being hunted down as aggressively as we would like. We'd like to see them out of business."

Four Step Selling Process
Lack of continuity on what's acceptable and what's not can also make it difficult for the suppliers to get their products into the market on time, depending on what modifications are required each time.

However, once the magazines have been classified and the modifications have been done, there is a four-step selling process for the final products and all experts contacted for this story have a similar method of operation.

The 'new date' magazines are the most profitable. These are the latest magazines out of the US (major producer) which must go to the OLFC before they go on sale. They come back with instructions as to what must be done for them to comply with the regulations. The process of submitting them and then modifying and re-packaging the finished result can take up to six weeks - then they can go on sale.

If they don't sell in that first month, a 'recycling' process kicks in. The first step is that the new product is loaded onto the shelves and any old stock is collected by the supplier.

Those 'old' magazines get downgraded to a cheaper price bracket (from, say, $13.95 to $10.95) and get put out as what some call 'Top Shelf' product. They stay on the shelf for a month and whatever remains unsold is then repackaged again in a 'bonus pack', with two magazines in one pack (perhaps around $19.95 for the two).

Usually the magazine sells during one of those three stages. If not, they are recycled again into a 'video pack' combining a magazine and an R-rated video pack: "and I've never had a product that doesn't sell in a video pack, so that's generally the end of the line for our products," says AIP's Mr Sargent.

Whatever stage of the life cycle they are in, these magazines have to be around 80 per cent covered with opaque packaging to avoid the risk of prosecution. If the package is opened, the retailer is supposed to take it off the shelf, which is a sales opportunity lost. Many suppliers have provided their products in tamper-proof packaging.

Definitely a Growing Market
And if you have any doubt that 'sex sells', it's important to note that the market for these magazines is big - and growing. And, while the likes of Penthouse, Playboy and Hustler, which are essentially 'soft-core', are still popular, their numbers are declining steadily in favour of more hard-core material.

The distributors handling this material say their businesses are growing healthily - doubling each year - and regular customers will call to find out when the next issue of their favourite is due on the shelf and then trek down to their nearest outlet to buy it.

From a retailer's perspective, the message is they're worth having in stock but it may take time for word to get out that you do stock them. Our experts advise perseverance for three to six months before making any decision to cancel your order.

"Some people can be disappointed the first time they stock these magazines. They might have 20 on their shelf the first month and only one or two are sold and they think we've been kidding them about the popularity," says AIP's Mr Sargent.

"But we come back each month and re-stock the shelves with new product and gradually the word gets out and the product starts to work for the retailer because it's selling out and he has to increase his order. We have some retailers who started with 10 magazines on the shelf and now stock over 100 and they sell most of them each month."

"It's up to us as suppliers to continue growing the market and that means improving the products that are available, and making sure we're servicing our customers properly," says Pacific Optics' Mr Kaye.

"But I think it's safe to say there will always be an upward trend. And, of course, the more exposure you give the product, the better the sales will. If you run a predominantly family-type store, you might want to hide the product from general view, but it is important to stock it because the people who want it will find it," Mr Kaye.

"We're not interested in turning your store into a sex shop," says Premium's Mr Friedrich.

"Nor are we interested in over-stocking you with product that you won't sell. These magazines are like any other product you have in stock - you want the best return you can get from the real estate that you have invested in that product.

"There's no other magazine that will have the sell-through rate that these do, and for a commitment of a minimum number of shelves. If you were to work out the square metre rate as to return on investment, these would be up there with gold!" Mr Friedrich says.

Aside from the moral decision of where to place this stock, it's important to keep it within sight in some way. These magazines have a very high theft rate and they're a very expensive product to lose.

Pacific Optics' Mr Kaye says these products are not a seasonal item - the sales are solid all year and it's not uncommon for a retailer to be turning over 150-200 magazines a month with the associated profit.

Obviously POS material is not appropriate but the experts do have a marketing suggestion. Put your supply and re-stocking in the hands of a reputable supplier who takes care of everything for you - including making sure your stock is as up-to-date as possible - and the results will make a very handsome addition to your bottom line.