Australian Newsagency Blog

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

The back to school price challenge of the 5 cent 48 page exercise book

Mark Fletcher
January 9th, 2017 · 5 Comments

I got out of doing back to school around ten years ago, because there was no evidence of it being profitable for my suburban Melbourne newsagency.

Sure, revenue was good. Margin was trimmed to the bone. People bought on price. They were not loyal through the year. So I got out of it.

I talked to people at GNS at the time and disagreed with them on the value of the season, that the traffic generated returns through the year. It’s like the theory of trickle down economics – nice to hear but not reflective of what really happens.

Screen Shot 2017-01-08 at 9.33.19 PMThe current Officeworks catalogue is reminder of the challenge of back to school in the open buy space – where you chase business from walk-in shoppers without a specific school endorsement. The page 1 hero product is the 48 page exercise book, priced at 5 cents. This is the cheapest price I can find by far for this. Further in the catalogue are more compelling deals newsagents in this space will be frustrated with.

I can understand parents being price conscious, especially when a comparable product from a local small business retailer is as much as five or ten times the price. The Officeworks advertising on price pays off especially at this time of the year.

But back to school is not lost for the newsagency channel.

I know of many newsagents who do well from back to school. They either have strong local school support, contracts with local schools based on booklists or are located in regional situations.

In capital city suburban situations, newsagents doing well from walk-in (as opposed to the more structured booklist) back to school business is rarer today than a few years ago – thanks to the loss leader pricing of Officeworks and the tremendous competition from K-Mart and similar.

In my own shopping centre based businesses this time of the year while we have stationery, we prefer to focus on other seasonal opportunities.  Calendars remain strong as are diaries.  Plus, we have another non-traditional season built around full margin product that works a treat in January.

GP is the key for me. We must maintain above a percentage goal for the numbers of the business to work. Gone are the days of years ago of thinking that selling cheap today will drive loyalty and pay for the discount with revenue volume over time.

30 likes

Category: Competition · Newsagency challenges · Stationery

5 responses so far ↓

  • 1 Brendan Mason // Jan 9, 2017 at 2:56 PM

    We bailed from back to school last year and the result was less sales but greater gross profit banked for a lower labour cost. We’ll leave it for the discounters now and concentrate on getting more value (profit) for our time and effort.

    4 likes

  • 2 Russell McDonnell // Jan 9, 2017 at 7:32 PM

    As they say nothing good happens after midnight – nothing really profitable happens outside the newsagency.

    0 likes

  • 3 sharyn // Jan 9, 2017 at 8:46 PM

    Hi mark
    what do you do to take the place of back to school sales?
    You seem to be all over most sales but not back to school or lotto sales ?
    any sales better than nothing dont you think ?
    your thoughts would be appreciated i am trying to improve sales and gp at the same time
    cheers

    0 likes

  • 4 Mark Fletcher // Jan 9, 2017 at 9:09 PM

    Hi Sharyn, for me, the process started with understanding the season. Typically, I was doing $25,000 in sales for a GP of 30%. This put a value of $7,500 on the season. This gave me a target.

    Next, I looked at the timing of the season. For us back then we came out of Christmas, had a soft couple of weeks and BTS then kicked in.

    We decided to push hard with a Boxing Day Sale. In a couple of hears this event passed BTS in terms of GP.

    A few years on I sold that business.

    From 2009, in a new location we have never done BTS. However, our Boxing Day Sale has continued to grow. It is a major annual event for us. We have now added to that a major jigsaw promotion from which our GP is 62.5% thanks to time specific buying.

    There are other engagements we are pursuing too. For example, right now we are focussed on a range supporting optimism. And this is working.

    Plus there is online which is a growing and valuable part of the business as we sell to people who will never visit our shop.

    So if we look at Christmas 2016 through to today we have had a terrific Boxing Day Sale, terrific jigsaw sales and good results from optimism focussed products.

    Newsagents have to migrate fro the traditional seasons like BTS as they are over.

    Each business has its own challenges and opportunities. We all have to explore outside what has been traditional to find what works for us.

    I hope this helps.

    5 likes

  • 5 Peter B // Jan 10, 2017 at 8:32 PM

    Seems the newsagency chanel doesn’t exist in BTS.

    Chanel 9 and A Current Affair have done 3 segments already this year on price comparisons between Target, Kmart, Aldi, officeworks, coles and woollies.

    Where do newsagents sit in the scheme of things………they obviously don’t rate on chanel 9 and with a continuation of the segments promoting the big players the consumer will eventually not rate us as well.

    Mark, I’m beginning to warm to #notanewsagency.

    4 likes

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