I am questioned several times a week by potential newsagents and existing newsagents about the state of the retail channel and its future – at the individual business and channel-wide levels.
Last week I received an email I share here:
I got your contact details from the Australian Newsagency blog as I am looking at taking on a newsagency that recently closed and was wanting to get some information support to assist with my decision making process. I don’t have any previous newsagent experience but I have some retail experience and my background is accounting to a fairly senior level in corporates.
Everything I read indicates that newsagencies are a declining business but I was hoping to get access to information that would support my analysis and provide ideas to ensure that a business would have the best opportunity to be successful.
My correspondent asks common and good questions. Here is my response. I share it here to reflect publicly my thoughts on this.
Newsagency businesses can be excellent businesses or dogs of businesses. It all depends on what you make of it.
The traditional newsagency is dead there is no doubt about that. by traditional I mean a mix of low margin products, relying on others to drive traffic.
If you create a business that is fresh, offering what local shoppers want and with a retail feel that is relevant it will do well. The keys are to be in control and own the business as a retailer and not as an agent.
This is the future … newsagents stopping being agents and becoming retailers, best practice retailers in a tough, competitive but fascinating world of retail. These are our days to shine, to reinvent our businesses to become fresh and exciting, to the swatch of retail – they turned the dying watch business around and made it desirable and highly profitable.
So, are we dying? yes, the current old school model supported by some dinosaur operators. The new approach is thriving. I am seeing businesses with excellent growth. Those who complain the most about the current model and question the optimism of others will often be from the old school. Beware.
In taking on the new business, focus on traffic drivers, margin drivers and basket builders. These three combined are our future.
I’m happy to expand the discussion from here…
One of the challenges we have as a channel is how we talk about the channel – in our businesses, with family, with friends and to others we pass along the way. Too many talk the channel down. Too many who have exited or are about to exit complain.
The future of the channel is vital for those here today for the long haul and for those coming into it tomorrow. They (we) are the future. What we make of it is up to us.
In all of the challenges we face today are opportunities. I see many newsagencies doing very well. Yes, some are failing and doing poorly.
Overall, I’m optimistic.
All that you say I agree with. The most important thing is the structure and components of the business. Rent and wages and all those other expenses must be the start of a good business. Without profitabilty you struggle with all the other innovative things because you spend time trying to fix the basics. I have fought for 3 years to try and get a reasonable rent to the detriment of the other parts of the business. You end up exhausted because you cant afford staff (the second biggest expense) The business suffers with innovation and working in rather than on the business. Having said all of that i have just looked at the profitability of my sectors and it looks like this.
1. Lotto Commission (and no stock holding)
2. cards and wrap
3. Gifts
4. magazines (before you count cost of labour due to returns)
5. Stationery
6. Newspapers(virtually no stock holding and great stock turn)
7. Book Sales
I will be concentrating on my high margin sales.
The only thing I cant fix is the rent all the other areas have much room for improvement. just make sure you have the 2 basics right.
The business is good if you control staff costs.The big mistake we made (as a married couple) is having the both of us working in the business. We can’t take a holiday because that means two of us out at the same time. If we could find away to afford another staff member it would be perfect. We are a 3 in 1 (LPO, Tatts and NA) They are all profitable in their own right with a headcount allocation of 1 person per dept. The newsagency is without question the most labour intensive – it actually needs 2 FT people to run smoothly. We are looking for 1 or 2 new lines that could generate another $1K per week in GP, That would enable us to live well, save for the future… and take a bloody holiday.
Hi ricky, Good luck in finding one or two new lines that will generate 1k a week. in gp.Talk about the goose that lays the golden egg!
Such opportunities exist.
Bruce; the only way is up. You have to find relevance somehow, otherwise we’re all on a slow road to nowhere. All ideas are should at least be considered.
We conduct an average 500 transactions per day with the average basket size of $8.00 .
If we had a line with 50% margin that increased the basket size to $9.00 we’d be there. Do the math is the easy part . Finding the line is the challenge.
You are right of course Rick. Ink has been good to me and still increasing. 28% gp.
I like your basket $$$$. Mine is only 7.17!
Our average sale value over the last 12 months is $12.70 up 5% on the previous year.
It can be done, we are in a centre but I am sure same rules would apply to any newsagency business.
You have to continually work on your mix of product and we have really concentrated hard on our higher GP products over the last 3-4 years.
To Wally (1)
In addition to your comments I would add:
1. Managing your cashflow should be added to Rent and Wages as the 3 basics.
2. Work out your return on investment multple for each department, i.e (margin x stockturns) / (100-margin)
Even thoough you may not be able to change you mags margin, you can positively influence you stockturns by reducing you stock on hand. I would say the majority of newsagents would be able to do this without impacting negatively on sales if they use the information available to them.
My goal was to fix the amount of $ I wanted to invest in this department, ie S.O.H. Then ensure my cost of goods for each month from then on is equal to my cost of goods sold. (Adjusted for seasons)
Having reduced space and stock holding , the savings made have been reinvested into other areas.
In the past Qtr I made more profit $ from those new investments than I did on my magazines.