Dunnes pay-on-scan causing turmoil in the industry
Dunnes Stores sets chain of events in motion that could lead to a windfall for the independent sector, although all remains unclear for now
9 September 2009
The two main distributors of magazines and newspapers in Ireland may no longer be supplying Dunnes Stores as of this weekend, according to reports from within the trade.
During the week, EM News’ dispute with Dunnes Stores over its decision to enforce pay-on-scan escaleted. Following a meeting in which the retailer said it is going ahead with pay-on-scan, the distributor decided to discontinue supply of its newspaper and magazine titles.
It has been reported that EM is anxious to work with Dunnes Stores however, and has managed to convince the retailer to allow a "shrink doctor" to analyse three months of data. It is also alleged that EM is to meet the retailer again in two to three weeks, at which time the matter will be discussed further.
When contacted, a spokesperson for EM said that talks are ongoing but the company has no further comment to make at this point.
Newspread meanwhile has also met with Dunnes about the application of pay-on-scan to its titles in addition to the Irish Independent (which is already subject to pay-on-scan), in particular its magazines. It is reported that as of this weekend, the distributor’s titles will no longer be available through Dunnes’ outlets, possibly, it is alleged, by order of Dunnes Stores to its managers to refuse the products at store level.
When contacted, Newspread also said that it remains “a very big supplier” to Dunnes and it is “still in dialogue” with the retailer.
In particular, weekly magazines such as the RTÉ Guide, Woman’s Weekly and TV Now, as well as several national news titles including The Irish Sun, The News of the World, and The Sunday Times, are said to be worried about the potential loss of sales without Dunnes. Publisher’s association, Magazines Ireland has said it hopes for a swift resolution of business, although at the moment the group is “in the dark” about where the situation is headed.
According to industry experts, the pay-on-scan system will cause shrinkage to increase, with no incentive on Dunnes’ part to rectify the decline, leading to greater stock loss and serious devaluing of newsstand products. Publishers and suppliers are therefore unlikely ever to agree to the system, which is reportedly causing significant losses for Independent Newspapers.
Many insiders have said however, that the diversion of the uprooted publications to adjacent small shops and newsagents will mean a windfall for these retailers, and a positive outcome for the indpendent sector. Recent research conducted by Amarach Consultants found that newspaper purchasers are brand loyal and will switch to another shop in order to get their choice of paper. They are also inclined to buy other items with their newspaper, especially on Saturdays.
The recent decision by Dunnes to unilaterally change its newsstand suppliers’ terms is said to have been precipitated by Independent Newspapers’ insistance that the retailer apply the system to other newspapers, as it had thought was going to be the case when it agreed to it for the Irish Independent some time ago.
Dunnes susbequently informed EM that it was applying pay-on-scan to its news titles, with payment by cheque rather than direct debit. Following talks, magazines were next brought into the frame, which brought the issue back to INM’s own wholly-owned subsidiary, Newspread.
Former Independent Newspapers managing director Joe Web, who is said to have started the Dunnes debacle three weeks ago, has just been appointed chief executive of INM Ireland, and directly responsible for Newspread.