Australian Newsagency Blog

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Unfair magazine distribution model makes newsagents less competitive

Mark Fletcher
July 21st, 2014 · 8 Comments

afr-june102014

The installation of ExchangeIT software at newsagencies enabled PBL to track real-time sales of all titles and thereby fine-tune its distribution and cut costs.  After that triumph, Alexander as also put in charge of the Nine Network, which has since improved its leadership of the television stations. SIC.

This is from a story by Trevor Sykes published in The Australian Financial Review on June 10, 2004.

It is July 2014. While the magazine distributors may have fine-tuned their distribution and cut costs, newsagents have not. Indeed, the magazine distribution model does not offer levels with which we can control this side of our business. The processes imposed by the magazine distributors hobble our businesses.

Too often today, ten years on, we receive magazines supplied at volumes that do not reflect sales data. Indeed, the experience today and in the last ten years makes a mockery of the story by Sykes.

A good journalist would have done their research rather than taking the PBL spin about XchangeIT. Sykes clearly did not. I wrote to Sykes at the AFR at the time and no correction was printed.

For the record, the problem is not XchangeIT, it is a model that sees distributors ship all stock they are provided. For the most part, that is how they are paid – as a freight company. If their compensation model was based solely on sales newsagents would start to see fairness.

Today newsagents are not treated the same as our competitors – the two big supermarket groups. Coles and Woolworths are supplied on a more equitable basis, giving them an unfair competitive advantage.

With more than 60% of all magazine titles supplied to newsagents loss-making, something has to give. I think we are reaching a tipping point where newsagents will exit the category. Several have done so already – they have stopped selling magazine altogether. I am not advocating this, just reporting that it has happened.

Magazine distributors have the capacity to supply on the basis of sales data and to a model with a goal of selling out close to the end of the on-sale period. It is time they started using their data to achieve this.

22 likes

Category: magazine distribution · magazines

8 responses so far ↓

  • 1 June // Jul 21, 2014 at 1:03 PM

    The most galling part of the distribution model is that newsagents have to PAY for the access to xchangeit which, is then, not utilized as it should be, by the companies to assess the sales data and send titles commensurate with those sales.

    The companies will say that we (newsagents) agreed to the trading terms but 40 years have passed since I agreed to the trading terms and things have changed (A LITTLE BIT) since then.

    Volumes of good selling titles like weekly women’s mags have gone. Magazines like the Bulletin have gone. The volume of product sales was much larger and the companies have not changed their trading terms to reflect that change.

    Women working has changed the demographic from 40 years ago when I was a young mum home with 6 kids and the weekly mags were my little indulgence. Today that is not reflective of society.

    I am very conscious of the fact that years ago my returns rate was 53% and today it is STILL THE SAME.

    That should not be the case if xchangeit was being used correctly by the companies. They have no excuse with the information provided by us, to overload us with mags that we don’t want and that cannot sell.

    Every newsagent should be allowed to have the mags that they KNOW will sell in their store and the only exceptions should be a new launch.

    Part series should be a REQUEST and overseas mags (including airfreight copies) should be able to be ordered by us. Surely, going forward, there should be some representation as to the effects of this trading position on our (collective) cash flows?

    Who, other than individuals, will take up this cudgel? It would appear to me that individually we carry no weight and yet we have NEVER been able to collectively negotiate with e.g. ACCC.

    It is interesting to note that Professor Fels is now raising the question of the effect that the duopoly is having on small
    businesses (like newsagencies).

    Will Network, GG and IPS change their trading terms with freight companies to give newsagents better than 25 days to meet an unknown summary invoice which would alleviate us having to pull future weeks of mags, prior to their recall, just to make the cashflow planning possible.

    Seeing that nothing has happened to change this for the last 10 years at least, with representation it begs the question
    WHERE TO FROM HERE?????

    TOM CARTER

    12 likes

  • 2 Mark Fletcher // Jul 21, 2014 at 1:20 PM

    Tom I think we will see some newsagents quit magazines as they see little other option given the continuing failure of many publishers and their distributors to genuinely respect the channel.

    2 likes

  • 3 Wally // Jul 22, 2014 at 8:58 AM

    As a relative newcomer I agree with all that is said and would add the publishers are shooting themselves in the foot by accepting the way distributors do business. Ultimately the publishers will have no where to sell their wares as we the newsagents continue to reduce magazine space for a better deal on something else. They will only have the duopolies to deal with. Delayed billing will not solve their problem in the long term but some publishers are using it very well whilst other just use it to dump product. Only fair distribution and fair margins will fix it. The distributors thru xchangeit have the mechanism they just dont use it.

    1 likes

  • 4 Jim // Jul 22, 2014 at 1:17 PM

    Fair point Wally – and the day newsagents start quitting magazines on a large scale will see 99% of magazine publishers out of business – they must know how unfair the current system is (to them as well as us) but have done zilch about it. Can you imagine the duopoly stocking anything other than the Top 10 let alone something that comes in after that – no way!

    2 likes

  • 5 Bill W // Jul 22, 2014 at 7:37 PM

    Anyone else experiencing the fact that changes to allocations made online are being completely ignored?

    0 likes

  • 6 Mark Fletcher // Jul 22, 2014 at 10:01 PM

    Bill yes and there’s nothing new in that unfortunately.

    0 likes

  • 7 subaru // Jul 23, 2014 at 7:26 AM

    And if any reductions are made to a magazine, they bump up the supply of another one in its place.
    If your monthly bill was $10000 before you did any reductions, it will still be $10000 afterwards as well.

    1 likes

  • 8 Brendan // Jul 23, 2014 at 9:00 AM

    Yeah, you delete a poor selling magazine and it is replaced with one that is even worse. I’m particularly over the $15-25 bookazines arriving at the END of the month, often the last delivery day when returns are already cut off. This is unconscionable, I would probably give them the full month display if they arrived in the first week or so of the month but now push back with early returns where I don’t think it will hurt sales.

    1 likes

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