Australian Newsagency Blog

A blog on issues affecting Australia's newsagents, media and small business generally.

Tatts declares online and supermarket expansion key to growth

Mark Fletcher
January 29th, 2014 · 26 Comments

The Fairfax press yesterday ran an interview with Tatts CEO Robbie Cooke that all newsagents should read. In the interview to mark his first anniversary in the job, Cooke outlines what Tatts is focused on:

”In 12 months time the things I’d be looking for in the business would be a new lotteries website, new wagering website and the new brand rolled out,” he said. ”There will be marketing and investment put behind the brand and we are aiming for all those initiatives to drive online sales.”

Newsagents contemplating the required re-fit should seek clarification. There is no point spending any money today on fit-out changes that could be redundant in anything less than three years out.

Mr Cooke said he also intended to expand the distribution of Tatts’ products. The company is poised to begin selling scratch lottery tickets from supermarkets after a trial in Coles Express outlets. ”We’ve been testing to make sure that activity has actually increased sales rather than cannibalised sales from our traditional channels,” he said.

It’s not just scratch lottery tickets as I understand it. Coles Express has been selling quick picks. I’ve been told they plan to roll that model out to all Coles Express outlets – in Victoria to start and then nationally. This comment about scratchies in supermarkets is new.

I’m not a Tatts retailer but if I was I would be approaching  Tatts, the ACCC and other government entry points, all at once, to argue the significantly uneven playing field on which independent small business newsagents are forced to operate compared to our competitors such as 7-Eleven, Coles Express and, now, supermarkets. The capital cost that has been forced on newsagents for decades has assisted Tatts to have the recognition it has. Every newsagent who has spent money on Tatts mandated fit-outs has invested in the brand. Now, to find that competitors are given lower cost branding options requires consideration by appropriate authorities.

I understand that various associations are pursuing these matters – as they should. Individual newsagents who are Tatts agents should, in my view, make their own complaints. This will only add volume to what the associations do.

If I was facing a fit-out I would request of Tatts an immediate pause pending their review. If the fit-out requirements have me investing more capital than, say, a Coles Express then I would seek to have that matter arbitrated by an independent authority.

The challenge for newsagents comes back to the brand.  Coles is a strong brand as is 7-Eleven. Take the Tatts branding – Golden Casket, Tatts, SA Lotteries or NSW Lotteries – out of a newsagency and in many situations you are left with unrecognisable branding. I think this is why tatts has been so heavy-handed on branding for years – they knew that it was necessary given the weakness and confusion of newsagency brands.

It is good that Cooke has been open about his plans. Newsagents can either complain about what he has said or plan the future of their business on the basis of what he has said. The information can lead to action.

Footnote: the moves by tatts are not unexpected. I have foreshadowed them for some time for several years at the Newsagency of the Future workshops.

9 likes

Category: Lotteries · Newsagency challenges · Newsagency management · newsagency of the future

26 responses so far ↓

  • 1 James // Jan 29, 2014 at 8:15 AM

    Another clueless corporate executive who doesnt understand the market. The only way of increase sales by broadening distribution of the product, is if there are gaps in market coverage where customers cannot access the product. Its not as if any body in Victoria cannot find a Tatts outlet within 5 minutes of their home. In fact if anything, Tatts has saturated market coverage by putting too many outlets into into small unviable locations. So more outlets wont mean more sales. Everyone that wants a Tatts ticket, can easily get a Tatts ticket.

    Of course it will canablise existing outlet sales. I cant believe a senior executive could be so stupid (or deliberately deceptive) as to think otherwise. All it will do is “demystify” the magic of the Tatts brand and make it just another 7-11 convenience transaction. As I understand it the 7-11 quickpick trial in Victoria has not been successful – so lets just up the ante.

    Newspaper and Magazine executives thought that putting their product in supermarkets would grow their business. Again, access to product wasnt their issue. All they did was destroy the value of their mastheads, put them in a commercial relationship with the all predatory majors, and destroy the channel to market that they controlled and that loved and valued their product. The exact opposite of what every “branded” retail product is doing “Apple, Nike, Kikki K etc etc etc.

    I suppose he will still get his annual bonus from Tatts, thats all that matters to these people.

    Rant concluded.

    25 likes

  • 2 Gary // Jan 29, 2014 at 10:45 AM

    Good morning Mark,
    Yes, Mr Cooke does tend to lay his cards on the table. Nothing really new in this. The scratchie tickets in supermarkets raised my eyebrows a little.
    I an article in the Fin Rev towards the end of last year Mr Cooke (he was having a rant about this) said that one of the greatest problems he (and Tatts) had was the inconsistent laws (he was referring mainly to tax laws) across the states. This is a great hindrance to his plans. As the Federal Government knows, the states are very stubborn when it comes to borders. While he can rebrand all he likes, Mr Cooke will find it difficult to sort this out. Victoria seems to be the testing ground for most of his ideas. If the individual newsagency state groups do their job it may not go much further.
    Another point, and this is only hearsay, that can be made is that I was told by a Golden Casket person sometime ago that they love the newsagency model. It is a dream dealing with a large number of small businesses that they can control rather than one large organisation, such as Coles, that will dictate terms and conditions.
    Another consideration that will not come into play for some years is the cost of building and maintaining interactive websites. While nine percent to newsagents may seem costly to Tatts now, if Robbie Cooke stays on his path of expanding his online section, it may seem a cheaper option in a few years.

    2 likes

  • 3 Mark Fletcher // Jan 29, 2014 at 12:20 PM

    Newsagents need to consider this move by Tatts in their business plans. I have.

    2 likes

  • 4 DAVID // Jan 29, 2014 at 5:05 PM

    Was he not ceo of web jet

    0 likes

  • 5 DAVID // Jan 29, 2014 at 5:13 PM

    It is not going so well, flight centre beats all on line prices

    0 likes

  • 6 Gary // Jan 29, 2014 at 5:31 PM

    David,
    No Robbie Cooke was the CEO of Wotif. He originally came from Tatts, spent a few years at Wotif where he honed his skills in online development, and is now back at Tatts to develop their online presence.
    Interestingly Wotif has had a downgrade in earnings over the past twelve months. This is partly because of increasingly software development costs incurred to keep ahead of the competition. They also developed their phone apps in house which cost quite a bit.
    Have to wonder if Tatts bottom line will be affected as Mr Cooke is given plenty of latitude to develop his online applications. As with Wotif, Tatts are also under pressure from competition, both overseas and local.

    2 likes

  • 7 Bill // Jan 29, 2014 at 6:06 PM

    Hi have seen my tatts share price go backwoods .Another fly buy night, stuff it take the money and run

    0 likes

  • 8 Mark Fletcher // Jan 29, 2014 at 8:18 PM

    It kinda doesn’t matter what Cooke’s heritage is. What matters is the agenda set by the board of Tatts and being implemented by their management team including Cooke. Regulars here will know I’ve been writing about changes like the ones covered in the article for years.

    Smart newsagents are reinventing their businesses to have a purpose over which they have more control. This is vital to the future health of our businesses.

    2 likes

  • 9 h // Jan 30, 2014 at 8:29 AM

    I imagine the supermarkets only SELL lotto products and scratchies, they do NOT redeem them, is that correct?

    0 likes

  • 10 Amanda // Jan 30, 2014 at 10:22 PM

    Mark, it is also time Newsagents got a better deal.

    Newsagents sell more lotto than any other channel. The commission levels should reflect that.

    1 likes

  • 11 Clive // Jan 30, 2014 at 11:24 PM

    Amanda, stop whinging about commissions on mags and lotto. This is a free market economy. If the commission on mags is insufficient then suppliers (you) will opt out and not supply. If lotto commission is not enough for you then you should do the same and replace that income with something else. That is Milton Freedmon’s efficient market hypothesis. Mark nor whinging can ever change that.

    We live in an efficient economy. What that means is that whoever can supply that service for the least possible cost and still make money they will.

    So eventually we (newsagents) will get to a point where one, or some, or all will get to a point where we can no longer support the newspaper channel, the magazine channel, the lotto channel, and will have to diversify into another channel or fold or continue to provide a community service for free.

    At the end of day it’s your commercial choice.

    0 likes

  • 12 Mark Fletcher // Jan 31, 2014 at 6:21 AM

    Amanda, why do newsagents deserve a better deal? The amount of commission paid to the channel reflects volume. I don’t think overall commission volume is an argument for more commission percentage.

    Within the newsagency channel you have some newsagents growing sales by working hard and others at the other end seeing sales fall on the back of no promotion or marketing. The channel itself cannot be managed as a channel by suppliers like tatts because of the differences between great and lousy operators.

    The channel grew through years of entitlement because suppliers fostered this. Many newsagents missed that this age of entitlement ended more than ten years ago.

    What Tatts needs to do is to provide newsagents with a fair capex situation that matches that being offered to the more recent entrants: Coles and 7-Eleven. However, even this is challenging since they are driving traffic to their channels and the newsagency channel is not.

    2 likes

  • 13 Amanda // Jan 31, 2014 at 8:01 AM

    You are missing the point Clive.

    If you sell Coca Cola, you will know that you can purchase Coca Cola cheaper regularly from Woolworths than you can directly from Coca Cola Amitil. Big W sell back to school products cheaper than newsagents can buy from GNS.

    Why can they do it? Market share. They tell suppliers what they will pay.

    There are few things Newsagents have market share on. The sale of Lotteries products is one. Magazines are another.

    Why should newsagents not get a better commission? There are better deals out there.

    Why should I be satisfied with the current commission?

    As a retailer I should be trying to get greater commission / margin from every category in the store. Not sure why you are not Clive.

    As for whinging, the amount of articles blogged on this site about a sticker on the front page of a newspaper is outrageous. That is whinging. What has it achieved, absolutely nothing. What will it do to the income that goes into a newsagents pocket?Reality is it is a further advertising space for the newspaper. It will not change, so why focus on it?

    5 likes

  • 14 shauns // Jan 31, 2014 at 8:22 AM

    Well said Amanda

    1 likes

  • 15 Mark Fletcher // Jan 31, 2014 at 8:40 AM

    Amanda, I’m selfish in choose what to write about here just as people are selfish (not in a bad way) in their comments. I write what I want. You comment what you want.

    I document the stickers on newspapers because they reflect a change in how publishers view their product. There are others, journalism students for example, who appreciate them being documented.

    For newsagents have said they want more commission from magazines or newspapers. Just asking is not working. Making a business base is more appropriate. At it stands right now on lotteries, I see no business case. I also see no upside in lottery product sales.

    0 likes

  • 16 Clive // Jan 31, 2014 at 10:10 AM

    Amanda, yes we can buy cans of coke cheaper from Big W etc but other items we have to buy through coca cola as they supply the fridge for free and expect a certain amount of volume to go through them. It also gets delivered to us for free so I don’t have to get off my fat touché driving around picking up the best deals and costing me time.

    As for BTS, the GNS pricing is pretty good. There are not many items at Big W that are cheaper than what we were selling and the ones that were are loss leaders for them. The logistics of GNS for newsagents is far more economical and practical. Yes their pricing could be better by being more efficient with staffing etc but overall their effort particularly over the last 12 months or so has been excellent.

    We do not have market share on lotteries. We have a monopoly on lotteries (for now) as no one else can sell them (in Qld). But still, if we wanted more commission it would require all of us to demand it else we switch the machine off. Some newsagents would not do this as they would be happy with their commission due to their volumes.

    So I’m all for wanting better commissions on mags, lotto, newspapers, cards etc but not sure how we can all do this without being a united cohesive group like a Coles or Woolworths.

    It’s still a good debate to have.

    Now I will get off my fat xxxx and make a cuppa kwoffie.

    0 likes

  • 17 Gary // Jan 31, 2014 at 11:28 AM

    Amanda,
    You certainly draw more than your fair share of fire. The return fire is well directed. It fosters good debate.
    Mark and I, at times, don’t see eye to eye, this is the basis of good debate. He makes an excellent point in comment twelve. Newsagents are a mottled group with varying degrees of prowess. However the things that binds us are mags and lotto. As much as we would like a better deal, it is a brand that defines us as a group. Customers associate the lotto brand with newsagents.
    Keep up the good comments, and keep your head down.

    1 likes

  • 18 Amanda // Feb 3, 2014 at 4:07 PM

    Hi Gary, like you I don’t mind a good debate. As far as getting more than my fair share of attention, you probably have to take the good with the bad as my comments tend to get plenty of likes. Whether that be girl power or other people agreeing with some or all of my comments???? Who knows?

    Clive, you are totally wrong on Newsagents having a monopoly on lotteries products. I am not sure what the case is in QLD, (I have only been to the Gold Coast and Brisbane) but in NSW you can purchase lotteries products from chemists, book stores, mini marts/ corner stores, independent petrol stations, 7eleven, Coles Express, BP petrol stations. Gift stores, liquor stores/ bottle’s, general stores, tobacconist’s. Hell, two suburbs from us lotteries products are sold at a Home Timber and Hardware store. Add to that Online retailers with No retail shop front. The market is flooded with outlets. Therefore there is NO MONOPOLY by Newsagents on the sales of lotteries products.

    If you utilise the “outlet performance by ranking” reports on the Tatts retailers website you will see the majority of the top 500 outlets are Newsagents. The bottom 100 are generally service station and other non-newsagent retailers. That certainly DOES mean NEWSAGENTS HAVE MARKET SHARE of sales as I previously said.

    Interestingly QLD sell more lotteries $$/head of population than any other state. Perhaps this is because of the strength of QLD Newsagents or as you claim Clive, the monopoly of the brand in QLD Newsagents.?

    4 likes

  • 19 Jenny // Feb 3, 2014 at 8:13 PM

    Wow Amanda I too am in NSW and was unaware of lotteries being in all these other outlets, apart from some Petrol stations and 7 elevens.
    I would think this is because we don’t have a newsagent in every town/suburb like we once did.

    0 likes

  • 20 Clive // Feb 4, 2014 at 12:09 AM

    Amanda, didn’t know that we sold more $$/head of population. I can only put that down to more grey’s retiring in our sunshine (young people tend not too purchase lotto tickets but I’m sure that is another debate to have).

    I do think NSW, VIC and WA have more winners and are more luckier.

    So the $64k question is what do you propose to do to get the higher commission from Tatts, Network and Gotch if we have this MARKET SHARE?

    0 likes

  • 21 CraigL // Feb 4, 2014 at 6:39 AM

    Probably the greatest threat to retail sales of Lotto is Lotto on-Line. Tattersalls in Vic have just produced a new brochure “The safest way to play”. The brochure explains how to link the retail Tatts card to an On-line account and receive automatic payments into the customers on-line account the next day.

    1 likes

  • 22 Mark Fletcher // Feb 4, 2014 at 7:17 AM

    Craig I have been writing about the online threat for eight years. each year, online lottery business grows and each year newsagents over-capitalise in Tatts mandated refits.

    Just as newsagents are walking from uneconomic retail tenancy situations I expect some to walk away from uneconomic Tatts agency relationships.

    0 likes

  • 23 shauns // Feb 4, 2014 at 7:29 AM

    And the bulk of these online players we signed them up to do it

    0 likes

  • 24 Mark Fletcher // Feb 4, 2014 at 7:36 AM

    Not so much Shaun. The OzLotteries and and Netlotto customers were not signed up by newsagents and they are achieving extraordinary growth.

    0 likes

  • 25 Amanda // Feb 4, 2014 at 4:01 PM

    How do we get to the greater levels of commission?? By demanding more and not being complacent with what we currently get.

    Your rent is going to continue to increase, as will wages, electricity, superannuation, insurance, distribution costs (if you Home Deliver). Why should you be stuck on the same income level from those suppliers?

    In all likelihood, it is going to come down to either the newsagents associations growing sum balls and representing all newsagencies, or newsagency marketing groups who tend to have the top agents as members forming an alliance like the Pharmacy Guild.

    It could be that member newsagencies receive a higher commission let’s say 15%, independent newsagencies receive a slightly lower commission let’s say 10% and other retail groups selling Tatts Lotto fight over whatever commission remains. If that means Coles Express sites and 7eleven sites get 3% for being at the bottom of the tree, than this is what they deserve.

    In the end, the outlets selling market share should be getting better wholesale prices or commission structures. Not subsidising the supply of the product to other forms of retail outlets who are not economically viable.

    If you think that sounds unfair, check how much commission you are now getting paid by Optus to sell recharge vouchers, compared to 10years ago.

    2 likes

  • 26 Mark Fletcher // Feb 5, 2014 at 3:44 AM

    Amanda, your income is determined by sales volume and commission. I’d expect Tatts to say – increase sales and earn more commission.

    Any argument for more commission must be business based and it must be made by a party that can guarantee through contractual arrangements the performance of the retailers it represents.

    I think the more immediate focus ought to be on capex related to offering lottery product. What we have in Australia right now is a considerably uneven playing field that disadvantages small business retailers like newsagents.

    This whole discussion needs to be considered through the framework of the question of being an agent versus being a retailer.

    0 likes

Leave a Comment

Powered by sweet Captcha