Macworld reported overnight that a software upgrade for North American users of the Sony PSP delivers RSS feed support making it even more of a content player than a games console. Back here in Australia newsagents are using the PSP to replace printed newspaper delivery run lists – the device Velcros nicely to the dashboard.
Interesting report from the International Federation of the Periodical Press about magazine launches around the world and in particular their report of the launch of Total Kakuro. Here’s part of what they say:
Justine Wall, publisher of Future’s puzzle portfolio, said: “The word of mouth around Kakuro is steadily building and is set to be the biggest new challenge for puzzlers next year. Not only is it incredibly addictive, but it’s for everyone who has mastered Su Doku and is now looking for a new and taxing challenge.â€
The crossword segment is very strong in Australia and the Sudoku market has reached a plateau recently so a new game to take Sudoku fans to a new level would be good to see.
This MediaPost report is further proof of the impact the video iPod and similar devices will have on publishing. While all of the attention is on more traditional TV and film entertainment, the attraction of younger consumers must interest magazine and newspaper publishers.
In some respects it’s like the existing supply print distribution channel has a cancer and while we can mitigate and or delay the impact, the impact itself will not change. Hence my regular calls for the distribution channel (aka newsagents) to hop on the surfboard and ride the wave of change rather than stand in awe while it dumps on them.
Talk to anyone in business of brand management and they will agree that Australia Post is a superbrand. Indeed, do a search on the Net and Australia Post is lauded as a brand success story. Read Australia Post’s 2004/05 Annual Report and you can see why their brand is so successful. Their postal service is loved with 94.9% of domestic letters delivered on time.
The majority of the goodwill invested in their brand is as a result of the postal service. More recently, Australia Post has successfully leveraged the postal service brand into bill payment, Post branded stationery products, general retail and other products and services. Without the postal service branding Australia Post could not have successfully entered these business areas.
The postal brand provides Australia Post with an unfair advantage and it is the leveraging of the postal service brand into general retail which the Australian Government Competitive Neutrality Complaints Office (AGCNCO) ought to be asked to investigate.
Thanks to its postal service monopoly Australia Post can land a customer in their retail space for a fraction of the cost to other businesses such as newsagencies. Their lower per customer cost is not as a result of commercial negotiation skills, it’s because Australia Post is a superbrand has successfully leveraged that brand way beyond what is outlined in the Act under which it operates. This is where government ownership of Australia Post is delivering an unfair advantage.
The 2004/05 Annual Report is full of data demonstrating the success of the postal service. While it considers retail a core business, the Annual Report discusses it in terms of strengthening their “position as a destination for agency services, philatelic products and packaging”. Talk about smoke and mirrors. There is no reference in the Annual Report to the non philatelic, packaging and agency services products they sell such as books, crosswords, greeting cards, picnic products, electrical cords, printers, cameras, double adapters, blank CDs, blank DVDs, paperclips … I could fill a page with a catalogue of the home office stationery and allied products these PostShops sell. They do this to the detriment of struggling small businesses.
The government as legislator and shareholder is conflicted yet no one in the government cares. The ministers responsible (Senators Coonan and Minchin) are not watching the corporation they are responsible for and the damage it is wreaking on small business, they seem to be ignorant of how far Australia Post has strayed from what is provided for in the Act.
The Government has no business owning a retail network. The Australia Post retail network should be sold to local small businesses so that they can benefit from the low cost traffic Australia Post attracts. Unfortunately, however, the government seems to be headed in the other direction by allowing Australia Post to morph way beyond its brief and into territories hitherto the domain of small businesses.
One day someone will realise the businesses closed and the jobs lost as a result of the actions of Australia Post.
This is unfair competition.
References: Superbrands; Lovemarks ; BRW
The Pew Internet & American Life Project has just published a report claiming that more than 26.3 million people visited one of the top 15 US classified sites in September. This is an 80 percent increase from the 14.6 million people in September of 2004, according to the report. The total Internet population grew by just 7 percent in that same period. Craigslist, which offers classifieds worldwide (including Australia), experienced the highest growth with around 8.8 million visitors in September – 156% higher than 3.4 million last year.
Given that newsagents rely on products which feed off classifieds the US trend needs to be understood and responded to.
Newsagents I talk with are bemoaning tough trading times in all major categories since September. Many tell me sales are down significantly in most categories compared to last year. In some instances I have been fortunate to look at their sales data and one product category is bucking the trend and delivering unit sales growth of often 50% or more – discount paperbacks. Most newsagents carry them as a side item – placed on a table close to the front of the shop. In some cases this table is the most profitable square metre of real-estate in the shop.
Mondays are a great day for comparison of magazine performance in newsagencies. We have new issues of Woman’s Day, New Idea, New Weekly and TV Week. In my newsagency we track sales closely and what happens on a Monday can set the tone for the week. We compare Monday sales with the average of the last 8 weeks. Today was especially interesting. All titles were up between 10% and 15% except for New Idea which was down 10%. Woman’s Day and New Idea have received the same promotional space and they are next to each other in two prime locations in store. So the only reason we can attribute to the fall is the cover and accompanying poster. I’ve checked our basket companion sales data and New Idea single copy sales are steady, it’s the companion sales which are down.
The risk in considering this is that the dataset is small. However, based on past experience, in our shop, Monday performance is usually a good predictor of the rest of the week. I’m tempted to do something to push New Idea but instead will let it sit and see if the ‘prediction’ is right. What’s odd is that New Idea has been a very strong performer all year.
More newsagents have come out of the woodwork over the last week reporting the collapse of calendar sales in their shops. Based on data from 30 newsagencies this year seems like it will be between 30% and 50% down on previous years if sales trends for November 2005 compared to 2004 play out through December. To counter the calendar red ink, sales for diaries are up, on average, 12%.
In another part of my life I work with newsagencies doing it tough. Today there are more newsagencies on this ‘wtach list’ than ever. They in difficulty because of a combination of poor decisions; rising costs; and over / under supply. Wereas in the 1990s and before newsagents had almost guaranteed traffic and therefore a capacity to weatrher speed bumps, today they have no such capacity. Even the slightest challenge can be too much. Tougher and unequal competition, out of date supply/accounting practices and consumer relevance are the the challenges to be addressed and while nature can be left to take its course, those who value the newsagent channel would do well to hold crisis talks to understand the scope of the problem and consider whether they could influence a brighter future.
At the Reader’s Digest website you can sign up for a year long subscription to their magazine for $39.99 for the year. Seems like a good deal at 30% off the cover price.
Some newsagents have been supplied subscription packs to sell. They have been sent stock for their shelves and an invoice which will have to be paid by the end of December. The stock is to remain on the shelf until the end of March when unsold stock is returned for a credit in April or May. This means newsagents will carry the price of the unordered stock for four or five months.
Given the size of the packaging, newsagents will need to allocate at least two and probably four pockets to display the product. This amount of space and the attendant labour will cost a shopping centre newsagent around $15.00 per month.
Some newsagents I have spoken with are angry as the subscription packs represent the sale of an item which guarantees the loss of repeat business. The publisher and distributor would comment that they see it as an opportunity for newsagents to get some revenue as opposed to none had they not used the newsagent channel to sell the subscription product. It’s a challenging issue but if I were to adjudicate I’d say don’t sell subscription product in newsagencies as they are retail specialists and they (we) need repeat business to ensure our survival/growth so why push an alternative channel?
The photo at the top of this entry is of a Reader’s Digest subscription pack which I bought while in the UK a few weeks ago. It seems that the UK has a retail subscription model which is fairer for the newsagent. There, stock is provided free of charge as it’s an empty packed effectively. At the sales counter an activation label is attacked and it is this which is sent off with the form in the pack to start the subscription. So, UK newsagents are ahead as they pay the distributor/publisher when they sell the product. Australian newsagents pre pay. This means they carry the cost of shrinkage, the cost of the cash for five months and the cost of returns.
It seems to me that aside from whether newsagents should sell subscriptions there is a more fundamental operational issue here which Reader’s Digest and their distributor, NDD, have not thought through from a newsagent perspective.
Newsagencies are small businesses. It is unfair to experiment with something like Reader’s Digest. I’ve seen one newsagency with an invoice for $550.00 in subscription pack stock. They’d be lucky to sell 20% of that and such a sales volume would not even cover their costs of having the product in store.
I’d like to see Reader’s Digest and NDD recast their subscription package strategy immediately and in a way which is respectful of the cash flow challenges in newsagencies.
This is a good example of the cost of deregulation on newsagencies. No other retail outlet now selling magazines in competition with newsagencies – supermarkets; convenience stores; petrol outlets – will take Reader’s Digest. Newsagents take it because it is sent to them. The trading terms for relatively low volume magazines like Reader’s Digest need to be reconsidered to take into account real-estate, labour, cash flow and opportunity cost.
Footnote: I’m curious about this text at the Reader’s Digest website, especially the sentence I have italicised: Send for a 12-month trial subscription for only $39.99, plus 83c copy postage & handling – saving you 30% off the regular cover price of $71.88. You’ll be under no obligation to continue your subscription. But just like a newsagent who receives an order, we guarantee to continue sending it until you tell us to stop which you can do any time. The comment about newsagents seems to be out of context.
An employee at my shop was confronted by a customer complaining about a problem with the newspaper delivery to their home. This customer, a teacher, was not happy with a straight up apology and rectification action. He made a threat of harm to the employee who was trying to assist him. I wonder how this bloke copes with stress in the classroom?
Australia Post has been blitzing the airwaves in Victoria (and I assume elsewhere) touting its Christmas gifts. So I reread sections 14 through 16 of the Australian Postal Corporation Act (1989) to remind myself of the functions Australia Post is charged by the Act with carrying on and went shopping in a Post Shop – a government owned outlet.
The range for Christmas is even broader than I had seen just over a week ago. Now I find I can buy cuddly dogs; teddy bears; carol bears; a thermos set; games; electronic things; radios; books; tool sets; maps; wine openers; blankets; key rings… the list goes on for 12 pages in their catalogue. No wonder they’re making a lot of noise in their radio campaign.
The reach of this government owned retail network grows by the week. With every sale of these items they, the government, are taking business from private enterprise and they are doing it with an unfair advantage – the ever present line of poor folks who have to line up in the middle of their stores, in the middle of the valley of impulse temptation, to do the postal things over which Australia Post has a monopoly.
Every day these PostShops trade with their vast and growing range of newsagent related and other merchandise is another day the government thumbs its nose at small business. Unfortunately, no one in the government is prepared to even discuss the situation.
I hate hearing the ads on radio because I know that Australia Post will have used the power of their postal brand to extract a better deal than small business could negotiate; because they are promoting products I sell in my independently owned store; because they use the might of their postal brand to buy better; and, because they have customers who are prisoners to the Australia Post monopoly.
At my gym they’re giving away current issues of New Idea and That’s Life. They’re sitting in a stack at the counter with a note saying “take one”. No story, no apparent reason for the give away and while the gym has a retail area, they do not sell magazines. I asked the counter staff about the offer and they said they didn’t know anything about it.
While I can understand the need for promotion of titles to attract new readers, this type of promotion does not make sense to me. It devalues the title and disconnects with the traditional retail outlet.
I would have thought that a promotion supported by retail outlets selling New Idea and That’s Life would have made sense. For example, If I received 100 copies of each I could sell them as part of a promotion over the weekend – at the end of their on sale period – and achieve a more commercially valuable outcome for Pacific Magazines. By provide the stock without cost to me I could afford to bundle an offer which I’d hire a spruiker to tout to people passing the store. It worked last month for two titles so I’m sure it would work for New Idea and That’s Life.
Message to magazine publishers: work with your established channel! Growth can be achieved through the existing channel – especially newsagents – with the right offering. Campaigns like that I saw at my gym will not work as well, if at all.
I’d be interested to know how they account for these give away copies in the audit.
What is it with the majors? Some are already promoting 25% off Christmas cards and wrap. It’s bad enough that they have trashed the calendar marketplace to a point where no one sells at full price. It’s not even December and they’re all over TV and in the press touting their 25% discounts. This is nuts.
While this story is from my shop I am sure that every one of Australia’s 4,600 retail newsagents would have similar stories.
Take 5 is a successful magazine. Sales in my shop are up year on year by 40% – mainly due to our aggressive magazine promotion strategies. Our sell through rate bounces between 70% and 90% with the average at 80%.
Take 5 customers tend to miss the magazine unless there is a reasonable display. My guess is that they know they’ll find it elsewhere.
This week my supply has been cut by 30%, probably because of the bouncing return rate, possibly because of out of date sales data at the publisher end. The cut, however, is so deep that it is lower than my lowest sell through rate for the last three months except for one week. This cut will mean less sales. I’ll still return one or two copies because many customers don’t like to buy when there are only one or two copies left. These returns will be a further cut thus making the 30% cut this week a self fulfilling prophecy – the returns will prove to the scale our ‘system’ that the cut it made was appropriate. Such a conclusion would be wrong!
I understand the need for publishers to scale out to maximise profit and minimise wastage. However, cuts like those inflicted on my business this week with Take 5 starve me of sales and customers and diminish the value of small business magazine specialists.
A more intelligent review of my Take 5 sales data and a review based on the notion of partnership between my business and the publisher would have led to a cut of 5% with a further review in four weeks. My sales data goes back daily so there is current data available for such an analysis and quick reaction. The scale out algorithm needs to use current sales data and to take into account overall growth/decline to determine a weighting for any proposed supply change.
In fact, better reaction from the publisher would have been an automatically generated email saying, “hey, we plan to cut you by 5% for these reasons please let us know if you can justify any change and we’ll listenâ€. Asking for too much? Not if my business and businesses like mine is worth anything.
I’d like publishers to review their scale out algorithms so that they can cope with bumpy sell through rates and consider the overall growth a business achieves. This will respect the effort my team invests in growing the magazine category. The current big stick approach does not respect my efforts and will only lead to sales falls elsewhere.
Having said all that about Take 5 , I’d note that we called for more stock and it arrived this morning. (To do that took too long on the phone and still left us short for a day.)
Take 5 is not the only title I and others experience such cuts for, I use it here as an example.
While 99% of the rumors I hear don’t get coverage hear I’ll make an exception this time because the impact of the rumor, if true, could be widespread. It’s been suggested to me that Australia Post is working on a new weekly consumer magazine to be launched exclusively through the Australia Post retail network.
Craigslist has wrecked havoc on newspaper classified business in the US over the last five years. What started as a small San Francisco email among friends has grown into a giant killer by making online classifieds free. (Craigslist is yet to make an impact in Australia even though it has coverage in the capital cities.) Now, this report from Editor & Publisher reports that Craigslist founder, Craig Newmark, is close to launching “a major online journalism project within the next few months that will copy the successful ‘wisdom of the masses’ approach to classified advertising and apply it to journalism”.
Citizen journalism is developing well in the US and Europe. Craig Newmark entering this and allied spaces would dramatically lift the profile and bring traffic.
In the E&P interview Newmark makes comments about journalists which the folks at Fairfax might find interesting given their editorial redundancies.
If you listen to the radio, the 50 plus market is hot in the real-estate sector. It seems that in every ad break we hear about retirement living or empty nester living. Insurance companies chase this group as do car makers, tourism businesses, vitamin makers and fashion outlets.
The 50 plus age group is important in newsagencies, particularly in the magazine, newspaper and greeting card categories, yet I feel we are missing the opportunity. In the magazine space, for example, we display by and that makes sense. I wonder if we could ‘help’ this age group find new titles by creating a separate area with a selection of titles for them. This approach could lead them into purchasing titles they have not shopped before. At the very least I’d expect it to increasing browsing beyond the weekly magazine pick up.
While supermarket, petrol and convenience outlets offer magazines to leech of other purpose traffic, newsagents could, with a 50 plus strategy, rebuild a top of mind position as a magazine destination. It’s an age group we have to get closer to.
Space would be a key challenge in creating a 50m plus area followed by selecting the right titles and creating an appealing and appropriate story.
I always like it when a new magazine launches so I’m happy to see Star arrive today. It will be interesting to see how it travels. There are several challenges: gaining retail space (existing high volume product already fights to get pockets in newsagencies, supermarkets, petrol and convenience); it’s Wednesday on sale date is contrary to consumer habits (Wednesday is hump day, it’s a light Lotto night etc etc); Wednesday is guilty pleasure magazine day (that’s what I call it at least) – That’s Life and Take 5; confusion about where to place it – I’d say next to NW but as I said that’s prime position and there are no spare pockets; what’s the value proposition – especially for the newsagency customer?
Star is a very different product to Real Living, Notebook, Madison and OK! – the recent major new releases I can recall. It looks and feels like a supermarket magazine from the US or the UK. Based on what I saw in the UK a few weeks ago I’d expect more magazines in the Star genre. This genre presents more of a challenge for newsagents than supermarkets. While celebrity is separate to the Woman’s Day / New Idea space, it’s close yet the product looks and feels very different. In fact so different that it may be appropriate to identify the celebrity category some way – away from the others. I could be completely wrong on this and my thoughts are only half baked at present.
I’m a but frustrated with supply quantity – it’s low for an established magazine in this category. When OK! launched we received plenty of stock and could create a good retail story. With Star we can fill a few pockets but that’s it.
All that said, it’s great to have a new title and the opportunity to work with the title to find sales.
The Digital Magazine Forum in New York, Dec. 1, is an event I’d like to attend. The growth of digital magazines has been considerable this year, especially in some niche areas. To me, the best way to develop a strategy to address a challenger is to fully understand the challenger. In some cases digital magazines grow readership. In other cases they reduce retail sales. My sense is that too many retailers will discover digital magazines when the impact is already being felt.
One point of difference between newsagencies and supermarkets (and other magazine/news outlets) is the range of new stock we receive every day. Beyond daily newspapers we receive hundreds of new issues a week and several new titles. As well as a poster or a music shop like list of new product we’re looking at a different colour T-Shirt for each day of the week for a month – to underscore the difference each day. Our Fresh Today campaign will be for a limited period and hopefully run with the support of some suppliers who benefit from consumers connect up to date product with newsagencies.
I was talking with a employee of a newsagency yesterday about newspapers and they said they didn’t read any in the shop, not even on a break. I was surprised. So I asked where they found out what was happening in the world and they said MX, TV news occasionally, radio news. MX is Melbourne’s free daily commuter newspaper. It’s a good product for what it is – and don’t take that as a put down. I’m not a free paper person, I prefer more analysis in my news.
My informer is 21. They like MX because it was more” their style”, it told them “what they wanted to know” and was “easier” than the bigger traditional newspapers. They said it was “fun”. Their daily MX read is more about passing time and relaxing. She said she’d pay for it if she had to, up to 50 cents and compared that to an Australian Idol vote.
My shop is 30 minutes from Melbourne and MX does not reach out that far. But I wonder, if I could get stock and the publisher agreed to a small cover price, whether it would sell to the demographic not buying newspapers in my area. Is there a retail market for a trimmed down newspaper, a product designed more for entertainment than reporting? I know there are products like this in Europe. If my informer is anything to go by it would be worth trying.
It’s something I’d like to trial if possible. Anything to build a newspaper connect with consumers not buying one today.
Last Sunday the Herald Sun came with a Kath and Kim DVD. If your purchase point had run out of stock or didn’t do such giveaways well (like supermarkets) the newspaper directed you to a newsagent. In my own store almost half our stock was given away to people who had purchased elsewhere. It seems to me that this traffic directed to newsagents was an opportunity for publishers to push the relationship further. Maybe they could have created an over the counter loyalty offer – i.e. coupons offering a discount if you buy a certain number of Herald Suns over consecutive days; or, an over the counter subscription offer; or, even, a home delivery offer.
As it was, these folks came in, gave us their coupon from the paper for the Kath and Kim DVD and left with it. The Herald Sun could have had a second crack at more business. It’s worth considering next time.
In a retail sense our learning is that we will try for the additional business ourselves. However, it would be more helpful if the publisher developed a strategy based around the traffic generating offer.
AFTERTHOUGHT: I have been reminded that the Herald Sun price rose recently and that this DVD promotion is a way of buffering for any impact from the price rise. To that end it’s a good strategy. And I like the price rise
Yesterday’s Mediaweek industry newsletter carried a story reporting comments of New Idea outselling Woman’s Day on several weeks recently. There is no doubt that New Idea is the big improved in circulation in 2005. This is based on the newsagent sales data I am privileged to see. It is also true that, for the stores I look at, on two weeks New Idea passed Woman’s Day – mainly due to it’s Princess Mary and earlier Bec Cartwright coverage. Looking at issues published over the last, say, six weeks, you can see Woman’s Day fighting back – better covers, more focus on celebrity. In newsagencies around 50% of the time both magazines are purchased together; between 60% and 85% of all sales are on a Monday – the day of issue.
The more active battle for circulation between the two this year is great. More please!
The October 2005 issue of Circulation Management, a US journal for Circulation Managers, carries a story about the battle for checkout space in US supermarkets. The article discusses three main trends: shrinking rack space, the rising cost of checkout fees and an influx of new titles and categories.
The most interesting point in the article is what publishers pay supermarkets per pocket for premium checkout space. Annual fees per pocket are made up of: $25 to rent the pocket, $50 per quarter Retail Display Allowance, $100 for a one time introductory placement offer (IPO) and 20 percent of the cover price – usually paid based on scanned sales (not supply and return as handled here in Australia). So, for one title in one pocket at a checkout, the retailer gets $325.00 plus 20% of the cover price for each copy sold.
Now, the IPO is an introductory fee so in year two the figure will drop to $225.00. However, supermarket leverage being what it is, only very successful titles will remain at the checkout unless additional fees are paid to maintain position.
Australian newsagents receive no fees beyond 25% off cover price for net sales. This is calculated as supply quantity less return quantity. Newsagents carry the cost of shrinkage which is, on average, 3% of supply quantity. They also pay for everything supplied and receive a credit for returns once processed by the distributor and this can be several months after supply. This is why we need a scanned based trading model in Australia – it is the only fair model for payment of magazines sold in newsagencies. SBT holds distributors accountable for their actions whereas the current model does not.
We can see from the data presented in Circulation Management the US numbers and can only assume that Australian supermarkets will have negotiated along similar lines.
The argument, of course, by supermarkets and publishers will be the higher volume of traffic in supermarkets, consistent compliance and negotiating power. I agree with these points. Many newsagents, however, deliver compliance, we have excellent traffic and we have the best depth of range in the magazine category. More important than anything else is that we have less capacity to carry the operational costs associated with magazines then supermarkets. Those least able to pay are the ones actually paying.
If newsagents received the US style fees it would add, on average and based on more reasonable charges, $100,000 a year to their bottom line. Such fees would put our stores on a more level playing field with supermarkets and others selling magazines.
Back when only newsagents sold magazines such fees were not appropriate. Now that almost 50% of all magazines are sold outside newsagencies it is appropriate and socially responsible for publishers to pay newsagents following a structure similar to that provided to supermarkets.
Publishers could argue that newsagents get 25% here compared to the 20% supermarkets receive in the US. However, the additional 5% accounts for considerably different accounting practices and a supply paradigm in less successful titles which means a loss situation for around 40% of magazines carried in any given newsagency.
With many new titles expected to be launched in 2006, newsagents could consider introducing fee structures along the lines of US supermarkets. This would value their real estate, their time and the traffic their store already pulls in supporting the entry of new product in an already well served marketplace.
One Australian company, InSite, compensates newsagents for space. However, their roster of titles is not high volume enough at this point in time to compensate for the additional real estate their promotions require. Further, their fee structure is nothing like the US fees paid to supermarkets.
Newsagents and publishers would do well to discuss these US figures and consider appropriate action on both side to arrest the falling net return from the total magazine category for newsagents.