Is this how retailers will dominate media?

Nothing better illustrates the convergence of retail and media than the UK magazines market. Four of the country’s five largest-circulation magazines are produced for supermarket chains. Not far behind are the 450,000-circulation monthlies from online fashion retailer ASOS and stores group John Lewis. Last week, Tesco – the country’s largest retailer – merged its two bi-monthlies into what is now the UK’s largest monthly magazine with a circulation of almost 2million. And besieged publishers are bracing themselves for what’s coming next from the troubling new world of mediatailing.

The UK's biggest magazine...

The UK’s biggest magazine…

The Tesco announcement was reminiscent of the long gone days when mainstream publishers regularly launched new magazines. But the £29bn retailer, with a broad media vision that publishers can only dream about, also unveiled an attack on the mighty Apple. Its cut-price iPad competitor, the Hudl, features high-quality stereo sound and comes loaded with a movie and TV video streaming service from Blinkbox, which Tesco acquired in 2011 before snapping up music streaming (We7) and ebook (Mobcast) services.

Tesco got big by making big bets.

It is 18 years since the launch of its ClubCard with “customer science” leader DunnHumby (now a wholly-owned subsidiary) which helped transform its market position and turbo-charge pioneering ecommerce operations which began in 1996. Today’s 16million ClubCard members are wooed by discounts, free movies and addressable online advertising on “ClubCard TV” on computers, smartphones – and the Hudl.

It’s a remarkably successful customer loyalty programme and marks Tesco’s determination to develop “direct relationships with our customers”. That’s code for: the UK’s most powerful retailer is determined to control its own media  – with its hands all over “big data” and media channels old and new. This is a company which knows all about about its customers. And in a frenzied week when the on-off darling of the London stock market was forced to admit the uncharacteristic but spectacular failure of its $500m US expansion, Tesco’s media and entertainment strategy looks increasingly important to its still-vibrant UK business.

That is why the “customer magazines”, which have dominated UK circulations for the past decade, are more than the mere heirs of a custom publishing tradition that began with farm machinery firm John Deere in the 19th century, led to the 1980s pioneering of single-advertiser titles by Chris Whittle in New York, Redwood’s magazines for American Express and Marks & Spencer in the UK, and inflight magazines almost everywhere. Sponsored media is now part of something much more significant.

These magazines – in hard copy and digital – are spearheading the development of “content marketing”  – the use of relevant, tailored and curated content to build customer relationships and sales. And retailers are all over it, hiring journalists to contribute to their own and other web sites – and social media.

Like their ecommerce rivals, traditional retailers are finding it easier to push into media than media groups trying to push the other way into ecommerce and retailing: relatively small volumes of content go a long way in enticing shoppers, whether in hard copy or online.

For some increasingly-fragile women’s magazine publishing, it is starting to feel like a a distinctly uneven fight for readers.

Getting serious about media

Retailer gets even more serious about media

Major UK food-based retailers are coming off record growth trajectories at a time when battered media companies are still wrestling with journalistic consciences on the whole issue of content marketing. Magazines and newspapers are tormented by their inability to monetize digital audiences. Without online scope for the large-scale display advertising that made newspapers and magazines so profitable for decades, publishers desperately need to develop profitable content strategies that suit readers and advertisers. But, while they talk up their skills with everyday online analytics, most publishers still lack either the ability or the appetite to be radical and develop revenue-generating content that is able to bridge the traditional divide between editorial and advertising. They just cannot escape an analogue world where hard copy ‘advertorials’ still carry a coded  ‘warning’ that the content has been paid-for by advertisers. Digital natives – and retailers – have no such inhibitions.

But it gets worse. Traditional media have even more reasons to fear the ambitions of companies that have, after all, long been their best advertisers. Retail advertising dominates media almost everywhere. And, in the UK, Tesco alone spends some £150m. Even its new magazine looks like a declaration of war on paid-for magazines. It covers “food, family and living”, has a new website and iPad edition with 35 new recipe videos (and hundreds of others) including interactive YouTube programmes where readers/ customers click menus to choose which recipe they want to learn more about – and/or buy ingredients for. There’s interactivity, high-quality content, video and advertising everywhere. And data kings DunnHumby are handling advertising sales across the new print and digital platforms, as well as research and insights into Tesco shoppers. Phew.

It is 95 years since Tesco was founded by self-educated London street trader Jack Cohen with the motto “Pile it high, sell it cheap”.  That was worlds away from today’s multinational business with a broad range of customers at more than 6,000 stores across the UK, Europe, and Asia. Tesco is mass market in every way. But its media ambitions are being mirrored also (in a suitably subtle way) by Waitrose,  the UK’s distinctly upmarket food retailer.

This fast-growing group is part of the UK’s beloved – and employee-owned – John Lewis Group which has also become an online stand-out in UK and international markets. The £6bn-turnover Waitrose is neatly defined by: newspaper images of the world’s favourite princess Kate Middleton with a shopping trolley ;and its Duchy Originals organic products, originally created by the Prince of Wales. It’s high on organic food and charitable contributions, and is the supermarket cheerleader for what Brits quaintly call the “middle classes”. Its media ambitions are equally public.

Every week, hundreds of thousands of Waitrose shoppers pick up a free, high-quality 24-page newspaper “Waitrose Weekend”

Winning supermarket shoppers with a free weekly

Winning supermarket shoppers with a free weekly

which gives advice on what to do, eat, cook, read, and buy. It has big name columnists, TV listings, and is produced in-house by experienced editors. The full-colour tabloid, complete with iPad edition and discount coupons, has a clear role in marketing what is the UK’s fastest-growing supermarket group. It also helps drive home “The Waitrose Way”, the group’s spirited exhortation to customers to: live well, treat people fairly, tread lightly on the environment, and buy British produce. It’s clever marketing alright and runs through the company’s multi-channel media strategy, which CEO Mark Price explains: “The internet is the biggest revolution in retailing since the launch of the self-service supermarket in the 1950s. There is a whole new revolution in retailing. It has changed the way retailers have to think about what they are. Intellectual property is now more important and we have to think about retailers as content providers in which own-brand is important.”

Other Waitrose media initiatives include:

  • The 400,000-circulation monthly magazine “Waitrose Kitchen”
  • Waitrose online TV featuring celebrity chefs Delia Smith and Heston Blumenthal, gardening and lifestyle content
  • The Delia Smith Online Cookery School which offers “an encyclopedic library of lessons and techniques videos, completely free of charge for all users.” It is an extensive food “hub”, teaching everything from cookery basics to advanced techniques – and is supported by more than 150 Delia Smith recipes, seeking to become “the definitive online tool for cookery tuition”.
  • Britain’s bestselling restaurant guide, The 63-year-old “Good Food Guide”, acquired by Waitrose earlier this year.
Not just selling food

Not just selling food

The group’s loyalty card is also growing fast on the back of a 10% discount on 500 key grocery items – and a free cup of coffee while you shop. The growth of Waitrose TV,  which sporadically features a soap opera-like family showing how to live “The Waitrose Way”, is expected to spawn further lifestyle channels. And no one will be surprised if, with an eye on Tesco’s home entertainment strategy, Waitrose starts to provide video streaming, possibly from the BBC (a perfect, symbolic match for Britain’s least predatory supermarkets), National Geographic or Discovery. Insiders suggest that a move into educational video, hard copy and even creche-like centres at stores is another possibility.

So, at either end of the socio-economic spectrum (sort of), UK supermarkets are fast becoming successful mediatailers.

But it is Tesco which seems set to go furthest and fastest.

The sheer depth of its strategic thinking on media may be judged by a confidential presentation ‘The Convergence of Retailers & Publishers”, given by DunnHumby in the US last November. It urged consumer goods manufacturers to re-evaluate the role of retailers in brand marketing. It noted that publishers were lagging behind, and online media was fragmenting and seldom available at the very point a consumer was making a decision to purchase. The conclusion was, straightforwardly, that marketing campaigns with retailers beat publishing campaigns hands-down. That viewpoint explains the Tesco Media web site which seeks to persuade marketers that its range of own-brand media, in-store promotions and database marketing is all they need.

The next steps for retailers may be the integration of tablet computers into the shopping “experience”, as witnessed in the US, where store groups have been among the leaders in spending on mobile advertising. J.C.Penny, for example, has been building custom apps to run on tablets in their stores. Others are showing mobile versions of their websites. More still are using tablets in-store with apps for customer loyalty programs. As retailers increasingly use tablets for in-store marketing, they can see the potential of combining it with social media.

They may, therefore, increasingly encourage shoppers to use social media when they are out with friends or shopping – and , of course, to watch videos and other informative media as they go through their day or round the store. Such interactive media might also help retailers meet the peer-to-peer needs of consumers, more than 80% whom say that their purchasing decisions are directly influenced by user reviews.

Delia and Heston: stars of WaitroseTV

Delia and Heston: culinary stars of Waitrose TV

This is the kind of direct consumer relationship that Waitrose, Tesco and their counterparts in the UK and around the world are contemplating – and third-party app developers are working on. The looming prospect of consumers planning their lives and shopping through retailer-facilitated channels underlines their capacity to become the ultimate media operators – able to talk ‘one-to-one’ or ‘one-to-many’ through messaging, video streaming, hard copy, and whatever comes next. And the continuing growth of online video/TV – increasingly edging into competition with broadcast TV – may eventually help these same retailers move their media seamlessly from the store to the living room.

The current clutch of customer magazines, loyalty cards and online channels might be a worry for traditional media groups concerned about the fate of their paying readers – and the advertisers who are increasingly talking directly to them. But the competitive pain has only just begun.

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