What happens when your supermarket starts selling news?

This is a story that seems strange on its face, but upon reflection, makes perfect sense. The megachain Border’s books (at least the London branch) says that the launch of the Deathly Hollows book is "a terrific evening of parties and events but we don’t expect to make any money from Harry Potter. The book will be available more cheaply from the supermarkets who treat it as a loss leader."

Which is a very instructive lesson in media content distribution and profit margins in a marketplace where everyone is adding products to Harry try to entice customers to walk through the doors.  In this case, supermarkets, who are used to operating on razor-thin margins (1 to 3%, as opposed to the 20-30% margins that newspapers and TV stations enjoy) have gotten into the game. You’ve seen it in the check-out aisles of your local Ralphs/Vons/Piggly Wiggly/Wal-Mart – racks of DVDs, and now racks of Harry Potter books … all right at cost margins.  The supermarket could care less, since if having the book there brings even a few shoppers in, those shoppers will then most likely pick up a box of cholcoate frogs or popcorn or whatever. Just the increased foot traffic is a win-win for them.

For Borders and other outlets where the books are their core product, the prospects are slightly less sunny.  The upside is that the massive parties and all the hoopla will certainly drive more traffic to the bookstore – but the longterm news is that something that should be a mega-hit for them instead winds up possible costing them money.  If having a young audience being conditioned to be enthusiastic about books pans out, that of course would help … but all signs point to the Gen-Y & Z’ers being increasingly married to their computer screens.  Great for publishers/content providers – not so good for the purveyors of dead-tree editions.  Still, the move of Borders and others towards providing a salon-like experience, with coffee and other drinks may still support them – but that space is also being jockeyed for by Starbucks, etc.

But the larger issue is this: One of the great frustrations in the news biz is that no matter who the owners, the demand for an unrealistically fat profit margin (the aforementioned 20-30%) means that in the face of shrinking circulation numbers, the response has been to relentlessly dilute the product. That is, to fire all the journalists who make a newspaper worth reading.

So what happens if, in the future, some supermarket exec has a light bulb go on over his/her head and decides that one of the ways to drive foot traffic to a local market it so offer information to the shoppers…?  What if the supermarket was to branch out and start providing the kinds of hyper-local coverage that is all the meme in journalism these days?  You know that you’re going to get foot traffic and local people – besides high-end niche outlets, who drives miles out of their way to buy kumquats & cheese?  If the local supermarket were to leverage its brand to provide an outlet for news & information, what would that mean for a newspaper trying to own that kind of market? Or would it be better if a supermarket chain were just to buy up the small local papers to eliminate the middlemen in their advertising-retail cycle?