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Eduard Gams, Russia

Magazine Subscriptions as On-line Retailing Products

The use of the telephone as a communication media for information and ordering has helped expansion of the trade. Other, interactive media like audiotext, videotext, electronic catalogue have helped to further open the way to more progress. Today we can see the fast penetration of sales through the Internet (e-commerce, on-line retailing) offering a multi-channel approach in the contacts between company and consumer. These new communication technologies enable a better and more direct contact and dialogue with customers.

Many Russian magazine publishers and subscription agencies are in the on-line retailing business of selling subscriptions. And these magazines and agencies are the biggest single users of e –mail in the country. There are literally hundreds of magazines and some subscription agencies in the on-line retailing business in Russia.

Magazines sell subscriptions to their own magazines. But there are also various types of subscription firms that sell subscriptions essentially as agents for magazines. For example, Agency “Kniga-Service” offers about thousand different magazines from Vogue to Atomic Energy and Education & Culture at cut prices direct to customers. It sells by direct mail and e-mails five hundred thousands of pieces per half-year. It is a huge operation, run by the former circulation director of a major magazine. Reportedly, this operation required a large sum of money to organize, and it did not become profitable for quite a while. It makes its profits, like the magazines themselves, on reorders rather than on initial subscriptions. There is 4-20% of libraries among subscribers to scientific magazines. About 2,4% customers subscribes to some technical magazines through Internet because only 2,5% of population use it in every day life. Unfortunately 54 thousands of Russian inhabited localities have no telephone communication at all.

Sometimes all these operations are drop-ship operations. All they do is solicit orders, collect money, and take out their commission before forwarding the money to the magazines. But usually they handle merchandize and send magazines to customers. Naturally they must sell at bargain prices (though never less than 30% of the listed rate, or the magazine does not get all credit for the subscription). And they must get bedrock deals from the magazines. Since magazines themselves often expect to spent every ruble they get in subscriptions revenues in soliciting subscriptions, it is likely that this firms are sometimes able to arrange to keep the most part of the subscription revenue they take in.

Elementary for e-commerce or on-line retailing to be ever more accepted and grow is the element of confidence: customers need to be convinced that they have to do with reliable companies in terms of offering, delivery, privacy protection and secure payment. Therefore, customer care is highly developed in the relationship with clients, offering them good quality at competitive prices.

Recent studies rightly identify as essential elements for e-commerce to succeed a modern and effective logistical system. Goods ordered need to be delivered as soon as possible. Russian companies such as Central Office for the Distribution of Books to Scientific Libraries, Agency “Kniga-Service” have a long-year experience in the delivery of books and magazines. Many other companies have set up 48 hours and the same-day-delivery. Russian mail-order companies are close to their customers and have pledged in specific codes of conduct and systems of labeling both nationally and on the international level to abide by high standards of fair-trading.

In addition to existing national legal and deontological regulations the European Convention on Crossborder Mail Order and Distant Sales, laying down professional rules of conduct for cross border dealings, was established. In 1999 a revised text was prepared in answer to the further penetration of on-line technology as well as on the introduction of several European directives, such as distance selling, data protection, access to justice and e-commerce. This Convention is to be implemented within the national codes of conduct and foresees a system of cross border complaints.

Electronic shopping, supported by digitalization of data, is improving transborder dialogues, whatever the linguistic differences. The modern communication equipment at the disposal of the consumer must be easy to handle, not too cumbersome, inexpensive and permit conviviality without unnecessary constraints. 

Executive Overview

Agency “Kniga-Service” in Moscow (www.akc.ru) is a $ 1,2 million a year company that specializes in realization of subscription campaigns, sorting and distributing magazines from their customers in such a way as to give the customer the lowest possible postal rates and labor costs. Postal rates are figured on the number of pieces of mail going to a certain zip code. The greater the number of pieces, the lower the rate. The company purchases mailing lists to aid the customer in reaching the clients they need to increase their sales of subscriptions. The company has a marketing department, data processing department, an accounting department and a production department that has sub-departments arranged by machine.

The company is a highly automated and computerized industry as far as machinery in the shop. The machines in the shop are hooked up to a main computer that downloads the information to the machines in the shop as to type of processing needed- ink jet, permit, stamp, sorting by zip code, customers and information on them are all transmitted from the computer to the machines. The machines all have the capabilities to record job, time, number of pieces processed, etc., but this is not being utilized. The Accounting was being kept on 2 different systems. The Accounts Receivable was on a self-contained system that generated invoices and recorded the Accounts Receivable and Sales. The Accounts Payable was kept on Sybase software as was cash received on Accounts Receivable. The General Ledger was kept on Parus. In the old system none of the two Accounting systems could communicate with each other and the shop computer could not communicate with the office computers. Payroll could also not be transferred the old system while now Payroll can be generated by Parus in the nearest future with the costs being more accurately applied to jobs and departments.

Eduard Gams, the General Manager, would like to see the Information Systems progress to where every job can be tracked by income and cost in a timely fashion. He would also like to see an integrated system that can exchange information freely with as few steps as possible. Currently costs are not being tracked by job, so he would like to see the machines in the shop send their time and cost to the computers in the office so it can be determined if jobs are profitable or not.

The key strategy for Kniga-Service in the next 2 years is to increase sales greatly with a small increase in cost. Eduard feels that the company is staffed (based on his previous experience) for a sales figure of $150,000 a month, while sales are currently $100,000. With the old system it appears that massive discounts were given without approval or certain tasks on jobs were not charged for. That has been corrected with the implementation of Parus, as all job tasks must be listed and any discounts given accounted for.

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