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Magazine e-commerce is today’s Holy Grail of publishing. The question is: Will the Grail ever be found?

Publishers are certainly praying it will be. As newsstand and advertising revenues plummet, magazine companies are desperately seeking new streams of revenue to plug the holes. They’re pumping money into TV programming, online videos, native advertising departments and more. Now they’ve turned their attentions back to commerce, as the ease and fast growth of online shopping have reignited their belief that they, too, can become e-tailers. Why not? In their view, they already are arbiters of taste, curators of the best products for their readers, guardians of all that is chic and covetable. Why shouldn’t they sell what they show in their pages?

This story first appeared in the June 3, 2015 issue of WWD.  Subscribe Today.

The problem is, no publishing company has succeeded as an e-tailer up to now.

Then there’s the thorny issue of editorial independence. Will the likes of Anna, Glenda, Robbie, Ariel and Graydon really be happy becoming merchants as well as editors? And while consumer magazines have long been known to blur the lines of Church and State — making sure major advertisers are well taken care of in credits and stories — actually selling their products is a whole different ball game, creating conflicts of interest that come with a shared financial interest.

Not to mention the massive and costly logistical demands.

Naturally, the publishers insist that it’s no big deal and that they are up to the challenge. Skeptics don’t think they are.

“This is a business that is alien to a publishing company,” a former retail executive, who requested anonymity, said. “It’s not going to work. It’s not their field of expertise. There are terrific obstacles.

“The corporation has to have a mentality to get this done,” the executive added. “Have they hired someone who comes out of the retail industry? Logistics are a huge issue. They’ll be faced with free delivery. Inventory is a huge issue. They have to have good amounts of merchandise, and if it doesn’t sell, how do they get rid of it? Apparel returns online are high, you have to be able to sustain returns. Are they prepared to take markdowns, and liquidate? I don’t understand why they are getting into this. I don’t believe they can build enough volume to make it.”

Even publishers themselves agree — to some extent.

“For many years, Time Inc. tried to sell products and services,” said Joe Ripp, the company’s chairman and chief executive officer. “What they did was, they’d assign publishers to sell products and services. What you really need to do is to hire merchandisers to work with people who actually know the business to sell those products and services. Retail and magazine publications are just two different things. The skill sets are different.”

Still, Ripp thinks that consumer magazines — and fashion magazines in particular — “owe” it to their readers to go the extra mile and provide a way for readers to be able to buy the products featured in their pages and on their Web sites.

“When a fashion magazine says: ‘This is what a star is wearing,’ and readers say: ‘I like the look. Where can I get that,’ and we don’t provide it to them, we have failed them,” he contended. “The reason [e-commerce] Web sites have done so well and grown so dramatically online is because they fill that need. In many respects, service magazines have failed because of the strict rule that you can’t sell what you refer to and get the products that we find so interesting.”
It’s a rationale most publishing companies are beginning to adopt. Perhaps the most ambitious venture is coming from Condé Nast, which plans to roll out shopping platforms across several of its magazines. The first step was to transform Style. com, which has long been money-losing, from an editorial site into an e-commerce marketplace, beginning this fall.

Most other publishing firms are more cautious than Condé, at least at this point. Hearst Magazines — after several failed attempts to marry content and commerce — is focusing more on the former than the latter, although it still does have commerce plays at Harper’s Bazaar and Elle Japan. At Time Inc., food and shelter magazines have found a more receptive audience in the e-commerce world, in part because selling home and food-centric goods is “more of a natural extension” than fashion, Ripp said.

As publishers dip — or dive — into the world of commerce, the first thing they must decide is which model they will follow. The three generally accepted paths are the affiliate model; revenue share, or true retail.

The affiliate model is the easiest and most used, but it’s also the least profitable. It entails linking to a retailer’s site from a publication’s one. Publishers typically receive only 4 to 5 percent of the revenue of each sale.

Revenue share is more profitable — sources estimated at least three to four times more — but riskier, as it entails a publisher partnering with a retailer through licensing, or developing revenue share deals on products sold. Publishers do not carry inventory, however, as they would in the third model, which is true retail. That version is the riskiest, as publishers would compete with the very brands and advertisers they feature, but at the same time it could potentially reap the greatest benefits.

The revenue-share model has become increasingly popular with publishers, such as People, which works with e-commerce firm Joyous. People provides video content and editorial curation, while Joyous is responsible for back-end support. It’s a marriage of convenience, in a sense, which allows the publishing company to “understand how content and commerce work together,” said Joseph LaFalce, executive director of business development digital entertainment for People and Entertainment Weekly. Products are featured on People’s StyleWatch site, and according to LaFalce, the partnership has contributed to the bottom line in a “meaningful way.” He wouldn’t comment on how meaningful, but did say the best-selling product to date is a $130 curling iron called the “Beach Waver.”

Hearst’s Harper’s Bazaar was one of the first fashion magazines to try a revenue-share model by creating a marketplace, much like Amazon Marketplace, but on a smaller scale. In 2011, publisher Carol Smith approached editor in chief Glenda Bailey with the idea of making the magazine completely shoppable, and for customers to purchase through Bazaar. The duo created a business plan and with “a little bit of money from David Carey [Hearst Magazines president]” they launched ShopBazaar in October 2012, according to Smith, with Saks Fifth Avenue as a retail partner.

ShopBazaar wasn’t a success in the beginning, but Smith and Bailey eventually found a suitable revenue-share partner in Yoox and they negotiated partnerships independently with designers. They also set up a sponsored content business, in which Bazaar editors help create shoppable collections.

When asked what she would have done differently if she were starting over, Smith said: “I would have brought in a serious e-commerce person to handle the bills. We were missing that element. We went to build before we understood. I think I would have gone out there to talk to as many pure-play e-commerce people to understand and then to marketplace people. We thought we were building a store, but we were building a marketplace.”

Still, Smith noted that the majority of Bazaar’s revenue still comes from advertising, not e-commerce. She justified ShopBazaar’s existence by calling it a “differentiator” for the magazine and wished her competitors trying to pull off the same feat “luck.”

Her competitors include Condé Nast’s rejiggered Style.com, which is expected to launch its new e-commerce model in September. According to Franck Zayan, president of global e-commerce at Condé Nast and Condé Nast International, Style. com will be a marketplace in which brands will provide information on their products. Style.com will handle the transactions, and the fulfillment will be done by the brands. Customers will not be directed to the brands’ sites, and Style.com will not charge the brands to appear on the site, Zayan said, but the publisher will take a commission on the transactions.

He declined to provide revenue projections or percentages for the new site, which will offer a range of categories including fashion, beauty, technology and travel, mirroring the range of the company’s titles, which he said reach an audience of more than 300 million people monthly. Style. com is the first company that straddles Condé Nast U.S. and Condé Nast International and he said the publisher is “putting all its global weight in this venture.”

Zayan, a former Internet and e-commerce director of Galeries Lafayette, added: “We certainly do not want editors to become merchandisers, and the editorial teams of the magazines will not be recommending products to be sold. We must keep that line between what they do and what we’ll do untouched, and they will operate as they have always operated. We want to build Style. com on the assets of Condé Nast, and these assets are their authority and influence. This authority comes, among other things, from their editorial independence.”

Not that the editors aren’t getting involved. According to a source, a few weeks ago, Zayan met with all of Condé Nast’s editors in chief in New York to discuss how the company plans to integrate e-commerce into all of its titles via a new platform developed by the company. The integration will be spearheaded by former Asos creative director Melissa Dick, who was hired by Condé Nast in April to serve as its editorial director of e-commerce, WWD has learned.
This won’t be Condé’s first leap into e-commerce, though. For instance, Allure already works with MasterCard, which created a commerce hub found on the title’s digital editions and Web site. Allure does not get any revenue from the partnership, but instead Web traffic, which it hopes will translate to digital advertising dollars. “The connection between content and commerce has always existed, but before the current technology, it followed a jagged, meandering, slow-as-molasses path,” Allure editor in chief Linda Wells said at WWD’s Beauty Digital Summit in May. “Now, through tech innovations like MasterPass, the path is smooth and seamless. The consumer can complete a purchase without even leaving the page.”

Then there is Lucky. Facing dwindling ad sales, slumping newsstand revenue and a shrinking readership, Condé Nast spun off the title to BeachMint to form The Lucky Group. The venture had rising-star editor in chief Eva Chen juggling several jobs, including working as a merchandiser, writing copy, fulfillment and other back-end jobs. Chen, who has since resigned, declined to comment.

Things only got worse when the group’s chief operations officer left and was never replaced.

“An editor in chief can’t be a chief operations officer,” an insider said, adding that because Lucky holds inventory, it’s crucial to have “every single duck lined up. This is not something to be entered into lightly.”

Lucky’s digital editorial director Verena von Pfetten acknowledged the bumpy start but insisted that since the launch of Lucky Shops in February, the company has signed 150 brands and 100 more are set to come aboard. Pfetten said featured items, such as sunglasses from The Row that retail for $430 and $460, were sold out, as were Edith A. Miller striped T-shirts for $95.

Although she wouldn’t elaborate on how much revenue Lucky has garnered since it began, she did provide a breakdown of sales on a percentage-basis by category.

Beauty makes up 20 percent of sales, and accounts for 50 percent of the items sold on the site. Handbags account for 26 percent of sales and about 10 percent of units sold. Clothing makes up 25 percent of sales, and 15 percent of units sold, while shoes account for 20 percent of sales, or between 12 and 15 percent of units sold. She said the average order is up 25 percent month over month, with May set to grow 25 percent in overall sales.

When asked why editors should be involved in commerce, Pfetten said: “I think in some ways, editors are merchandisers.”

She explained that Lucky had to transition, adding: “Every women’s fashion magazine will have to address in some way their [business] model.”

But some media executives and observers contend that leaping that ethical canyon would undermine any integrity the publication has.

Tyler Brûlé, the founder and owner of Monocle, which publishes a magazine and runs an e-commerce site, as well as six brick-and-mortar shops, said the line is ever blurry between what merchandise belongs on an e-commerce site — and what belongs in an editorial shoot.

“A lot of people are saying that it doesn’t matter because magazines have to survive no matter what it takes. It does matter, though, because it starts to betray the trust of your core readership — and why are you there in the first place,” he said. “And I think [debating that] probably eats up a little bit more time than we’d like, but we have to do it. We have to be able to say, ‘Yes, this is a great brand, but it belongs in our edit pages rather than on the site.’ And vice-versa.”

WWD posed the question of ethics and the role of the editor to several other editors. Condé Nast artistic director Anna Wintour declined to comment, and Elle editor in chief Robbie Myers did not respond to requests seeking comment.

Ariel Foxman, who serves as editorial director for InStyle and StyleWatch, didn’t address the ethics issue directly, but seemed firmly in favor of magazine commerce, saying, “The editor’s role is to inspire, to bring the best of what’s new and undiscovered and most importantly, to deliver expert service to ensure that the user feels most confident when making purchases. We have a mantra here at InStyle: Never leave the reader without next steps. She should always be able to act on the excitement we spark. This is exponentially true in the digital arena where consumers are looking for even more guidance given the plethora of options. Who better than the editors at InStyle to connect with them to make informed and assured decisions?”

Agreeing was Esquire editor in chief David Granger, who was equally as evasive on this ethics issue. “We’ve experimented (and continue to experiment) with various forms of commerce, and the motivation has been the same for each of our experiences and that is: Magazines are really good at creating desire — selecting and recommending products in such a way that people will be inspired to buy them. In various ways, we’ve tried to enable that inspiration to be turned into action,” he said.

For her part, Harper’s Bazaar editor in chief Bailey said: “The role of an editor is to feature the best fashion and beauty — the fact that our readers can buy straight from the page means we’ve made that dream a reality.”

Even journalism professors, far from raising a hue and cry, recognize that the shift to magazine commerce is inevitable in today’s landscape.

“Digital is a completely different beast,” said magazine industry analyst Samir Husni, who is also a professor at the University of Mississippi’s school of journalism. “[The publisher may think] if you order something from a magazine, from my digital side, I expect to get a percentage of that sale. That’s where there’s a bit of danger that I can see looming on the horizon. Because of that digital loophole — if you buy from me via my digital site, then it’s OK to get a cut of the sale, you start wondering [about objectivity]. If their own product is the only one they speak about, yes, I think that would compromise editorial ethics and integrity of a lot of our editors. They’re becoming upscale matchmakers rather than being prostitutes. I don’t think there’s an editor in today’s marketplace who can survive his or her position by turning the magazine into an escort service rather than a matchmaking service. Some now-defunct ‘hand- books’ were practicing prostitution journalism.” “It would be nice if editors were only free to edit, but I think in this world where there is so much electronic invasion on editorial product, it is important for editors to say what’s important and what isn’t,” said Victor Navasky, director for Magazine Journalism at Columbia Journalism School, where he also serves as professor.

As they eye getting deeper and deeper into commerce, magazine companies could be trying to take a page from Net-a-porter Group and its Porter magazine. The title, which was launched in February 2014, has become a symbol for how to seamlessly integrate luxury wares into editorial pages.

“The strength of Porter is the infrastructure,” said Net-a-porter publishing director Tess MacLeod Smith. “The company has the expertise and technology. It takes very different skills to publish the magazine and it takes a whole different skill set to make e-commerce successful.”

For Smith and Lucy Yeomans, Net-a-porter and Porter editor in chief, it took some time to learn the e-commerce side, but the fact that technologists, merchandisers, buyers and editors were under the same roof made it easier.

“What’s interesting for Net-a-porter versus other models is, we get instant feedback from our shoppers,” Yeomans said, referring to data linked to purchases through shoppable digital and print pages. She also underscored the “trust” that the e-tailer has built with consumers since it launched in 2000 — a point of differentiation over all other publishers in terms of customer experience.

What’s been a larger challenge for Porter is getting the publishing model right for international audiences. The duo cited distribution problems, for one, as the magazine is sent to subscribers and sold on newsstands globally. Another issue is credibility. There is an inherent difficulty in maintaining editorial integrity when you’re featuring products sold by the retailer that owns your publication. Yeomans, a former editor in chief of Harper’s Bazaar, shrugged that off, noting she’s “never had more editorial integrity” because she’s not reliant on advertisers’ dollars.

Some magazine executives, though, snipe at the idea that Porter is a true glossy.

“Porter magazine is the version of the Sears magazine in some sense,” said Duncan Edwards, president and ceo of Hearst Magazines International. “I don’t mean that in a pejorative sense. It’s a communication tool. Retailers have always played in media. They have always been producing catalogues or some sort of owned-media communication with their consumers forever, that’s nothing new.”

For the ever-conservative Hearst, the challenge is finding ways to develop new streams of revenue without taking big risks. Hearst does own a retail business that holds inventory through Elle Japan, but Edwards said the publisher would not duplicate that model in other markets, even though he noted that the business now makes money.

“Retail is not an easy business to be in,” Edwards said. “One of the biggest players in the space, which is to Net-a-porter, is a break-even business.”
Hearst is speaking from experience. In 2011, the publisher’s Esquire magazine partnered with J.C. Penney Co. Inc. to form Clad, an e-commerce site that was owned by the retailer. Esquire produced magazine content and helped create editorial offerings on the site. After just three months in business, the struggling Clad was shuttered by Penney’s.

Nor was that the first time Esquire tried to dip into e-commerce. That year, Granger created the Esquire Collection, in which the magazine printed bar codes on its pages to be scanned via mobile phone, allowing users to make instant purchases. Granger told WWD at the time: “I’m sure there were tens of thousands of scans, but it was too complicated and I’m not sure how much product we moved. I bet it wasn’t very much.”

These days, Hearst is focusing on selling content, something the publisher understands. Edwards cited the sale of courses through Hearst’s Good Housekeeping brand and subscriptions to its CosmoBody fitness channel, although it’s questionable how well those endeavors are going.

“Look, it’s completely understandable why all magazines have been talking about commerce for the last 10 years. We have the audience. We bring the audience,” Edwards offered. “It’s completely natural, but our view is to test and try. So far, we’ve found that it’s quite a challenging business — turning that business into a fulfilling business for the consumer and for us is a difficult job.”

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