Busting black market magazine traders

A hidden camera shot of the magazines displayed at the taxi rank.

The Bree Street taxi rank in the Johannesburg CBD is always bustling by day, with commuters catching taxis to all corners of the city. Vendors have set up stalls to provide the briskly moving throngs with cigarettes, food, sandals - and allegedly stolen magazines.

Acting on a tip-off, The Media reporters went to the rank at the beginning of November last year and found three men selling the latest issues of major titles, such as FAIRLADY, Good Housekeeping, Bona, Kick Off, Glamour and FHM. The magazines were from major magazine publishers, including Caxton, Media24 and Associated Media Publishing, and were to be distributed by both of South Africa's major magazine distributors, RNA and On The Dot. Thanks to The Media's investigation and tip off to the publishing houses, two of these hawkers where arrested and their stock has been recovered.

Doing a brisk trade

When we first went undercover to visit the rank, we chatted to the traders and witnessed them at work. It was not even rush hour and they were doing a brisk trade; at times, there were even people lining up to buy magazines. Of the three men selling, one kept his substantial stock in a shopping trolley about 30m away from the other two and would replenish their stock when it ran out.

The Media bought a selection of magazines for R65. They were all genuine, complete with plastic covers and advertising inserts. The latest (November) issue of FHM, which has a cover price of R40, was going for R15, as was Women's Health, which retails in stores for R31. Magazines from October were cheaper: a back issue of Your Family cost R10. When we asked why the prices were so low, the 'stock controller' (with the trolley) said he had bought them cheaply from the publishers themselves. "I get a special discount for the magazines," he said. "Don't go to Pick n Pay anymore, come here. We have new ones every month."

The Media immediately alerted On The Dot and Caxton and they leapt into action. Within a week, the SA Police Service arrested two of the vendors. On the Dot CEO Andreij Horn confirms: "The hawkers discovered at the central taxi rank and station in Johannesburg were arrested and the stock secured.

"(The hawkers') supplier had managed to pull together copies of the leading magazines in South Africa. On The Dot and RNA compete with each other for market share. These criminals found a way to secure stock from the supply chains of both."

No concrete answers

On The Dot apparently questioned the arrested men but were unable to get concrete information as to how the hawkers got the magazines. And the publishers to whom The Media spoke said they weren't able to establish at precisely what point the stock was being stolen.

RNA Distribution National Publications Manager Francois Kruger says the magazines The Media bought suggested theft at multiple points along the chain. All the RNA titles were back issues, or returns, whereas the On The Dot titles were that month's issues. "So the process of how they are getting them may not be identical," says Kruger.

Multiple loopholes

There are so many points at which this might happen, even though there are strict security measures in place. The magazines are printed at a variety of printers around the country. They are then delivered to depots in the major cities and taken to distribution hubs (RNA, for instance, has 24 hubs throughout the country). The distributors hire a network of independent contractors to deliver the magazines to retailers, the newsagents, bookstores and supermarkets. If any magazines remain unsold, they are given back to the contractors and then they are pulped. At every link of the chain, numbers of stock are vetted.

The extent of the black market sale of magazines is unclear. However, it does need to be addressed as a serious issue, says MD of Associated Media Publishing Julia Raphaely. "Our products have value and obviously this (theft) negates the value," she says, adding that getting magazines to the public is not cheap. "Publishers in South Africa take all the risk in producing a quality product: paying for it to get out to the market and then taking it back after a month if it doesn't sell."

Another expense lies not only in the theft itself, but also in the efforts that are taken to prevent it from happening.

In-house investigation, risk control teams

Horn says On The Dot do a lot to combat theft of their stock, as any brand owner must, and take black market activity seriously. "Like most, we nowadays employ our own formally trained and experienced detectives and risk control teams. This represents a significant cost, but has become a basic requirement," Horn says. In this way, On The Dot have "so far successfully managed to keep shrinkage levels extremely low".

The Magazine Publishers Association of SA (Mpasa) and Caxton group's magazine executive Anton Botes is emphatic that the problem needs to be tackled urgently, to nip in the bud a profitable illegal industry. "Even if it isn't widespread now, if it works for these guys, it could become a big problem," he says. He adds that he is determined to tackle this problem more because of "the principle of the thing" than the effect it might have on Audit Bureau of Circulation (ABC) data, because the theft is unlikely to make a dent in the numbers. "What bothers me is that we've paid for this," he says, holding up a magazine, "but someone else is making a living off it."

Media expert Gordon Muller says the effect on magazines' ABCs would be negligible. "Impact on the ABC would be zero or minimal depending on the quantum. What percentage of total print order is being stolen? 0,5% ? 1%? ... If it's being stolen off the printing presses then it doesn't make any difference to the ABC because it doesn't get reported under distribution. If they're being stolen during distribution or in-store, it doesn't make any difference because it doesn't get reported under sales. If they're being stolen from the returns depot, it doesn't make any difference because returns don't get reported under circulation anyway."

'ABCs pay the bill, so I want to account for every copy'

However, Botes says that ultimately ABCs are a concern. "If someone wanted to buy or sell back copies legitimately, that's OK, I could account for it. ABCs pay the bill, so I want to account for every copy."

Media 24 magazines GM and Mpasa chairman Willem Breytenbach says the problem is more one of "loss of income and waste for publishers". This being the case, black market sales might be expected to hit smaller titles harder. The Gardener is a niche gardening publication based in KwaZulu-Natal. The title - one of the ones we bought at the rank - boasts a readership of 46,000. It cost us R8 for the November issue, as opposed to the cover price of R27,95. The title is part owned by Caxton, but functions largely independently, without the security of corporate backing. Editor Tanya Visser says the black market sales of her magazine make her feel "powerless" because "we have so little control over distribution". She adds, "Printing costs so much money. It is our main cost. It's one thing for the big corporates, but to a small operation like us, it's devastating to find out this sort of thing is happening."

In a country where many historically disadvantaged people are poor and excluded from the formal economy, theft and the illegal sale of stock at cut prices will be a risk to businesses. Like any brands, magazine publishers and distributors need to work together to plug leaks in their supply chains. After all, as Botes says, "No system (of distribution) is foolproof."

Botes and Raphaely are both emphatic that the way to tackle theft from distributors is to act as an industry, through Mpasa. "The advantage of Mpasa is that it involves everyone and we can tackle this together. It's in our interests to address it," says Botes.

This story was first published in the January 2013 issue of The Media magazine.