Month: November 2005

Maybe it’s just my shop but the number of blokes browsing the range of soccer magazines has grown considerably since Australia won its match against Uruguay last week. I’m pleased because with computer magazine sales in the toilet I wanted a growth category I could position into recently reclaimed display space.

We carry between 15 and 20 soccer titles, depending on the time of year. Now is a great opportunity for newsagents to strut their stuff as they are the only retailers who will have range.

I read issue 2 of Explode magazine this morning. It’s part trash, part froth and a bit of substance. Okay I’m not in their demographic and am therefore unable to reasonably assess the product. As on selling the magazine, however, my assessment is that it’s not a good product. I guess time will tell. At $5.95 it’s a fair price and that seems to be appealing to some I have spoken to. In its present form though it’s a bit all over the place. Boys who want to see girl pics will get a mate to buy them Picture, People, FHM or Ralph. They’d see Explode as tame. Younger kids, early teens, may buy but parents will freak when they look under the covers.

Explode bothers me on another front. The cover price is $5.95. This means I, as a newsagent, make $1.48 from each copy sold. To promote the title I’m providing four display pockets which cost me $9.95 a month in rent. I also have a live six cardboard cit out in store promoting the magazines – taking up $100 worth of real-estate. I’d doing this to promote the new title.

The publishers of Explode are respecting my effort and the effort of 4,600 other newsagents by actively seeking direct subscriptions on page 83. They spruik a 30% discount off cover price if you subscribe. I make 25% and do the work to launch the title in store to existing traffic. They then say to those customers, hey forget the newsagent where you found us and go direct and save 30%.

I appreciate that magazines need subscriptions as part of their reader mix. To offer subscriptions at a 30% off cover price and to absorb considerable shipping costs while giving newsagents just 25% to launch a title is poor form.

Based on just the three display pockets in my store I would need to sell 18 copies of the magazine to cover the real-estate costs. I’ve been given 20. I expect to sell under 10. Explode will be a loss situation for me.

The model of newsagents and other retailers receiving 25% for new titles with a heavily discounted subscription offer is discouraging. Publishers need to be more respectful in their financial arrangements with newsagents. Either that or newsagents should be more demanding of better financial terms from publishers.

The success of any magazine is due, in part, to in store display by newsagents. This space allocation and time commitment needs to be on economically viable terms, title by title.

Supplier contracts and rules control more than 80% of what is sold in Australia’s 4,600 independently owned small business newsagencies. While these rules may have been appropriate in a regulated marketplace, they are grossly inappropriate in today’s more competitive marketplace. Indeed many rules place uneconomic terms on newsagents and diminish their competitive ability.

To me it all comes down to real-estate, inventory and labour. These are my investments in the business and I need to be free, as the business owner, to manage these resources as I see fit for the best return for my business and my colleague co-workers in the business.

Newsagents need to be freed from what many see as demotivating, uneconomic and stifling contract terms which too often control stock quantities, stock location and the work processes involved in handling the stock in store – because of accounting systems and practices (from the supplier side) from decades ago.

A co-operative relationship with publishers, magazine distributors, lottery companies and greeting card companies can result in am economic revival of the newsagent channel. In my own case I have four good card company relationships and will launch in December significant in store changes to refocus the business on this growth category. The result will be more efficient use of stationery space and trimming of magazine space. I know that I can cut 20% of my magazine range and increase sales as a result of being better able to display the better selling titles.

Back when newsagents were authorised and had control over the distribution of newspapers and magazines in their territory rules were appropriate. Today they are not.

I am certain that freeing newsagents of some of these rules and updating accounting processes and practices would improve sales as the result would be more business focused newsagents.

From my newsagency I look across at the Australia Post PostShop with envy. This government owned shop has a monopoly on stamps, an exceptional government protected brand behind which their retail business trades and the ability to cut deals like a retail giant. I lost all of that when the government facilitated the loss of regulation in the newsagency marketplace.

As Barnaby Joyce said on October 11 in the Senate:

Newsagents, some of the horticultural producers, pharmacies and a lot of small retail shops in regional towns or in suburbs feel that they are over a barrel. They feel threatened and do not feel that they have the ability to go on in the manner in which their parents or grandparents probably went on before them. Our job in this parliament is not only to say we support that but also to publicly show we support that and to do it in such a forum as this, the elected body in this Senate chamber they have sent us to. Why do we believe in this freedom to go into business? The freedom to go into business is a mechanism that gives us our own personal freedom.

Anyone looking at greeting card sales will see healthy growth in newsagencies. In that category we have as many and maybe more than in the magazine, newspaper and lottery categories. Yet year on year growth is good. I’d say this is because of healthier supplier relationships and fewer rules. The result is a more businesslike workplace. The newsagent feels like he is working for himself rather than a school principal.

I visited the PostShop yesterday at the Westfield Bondi Junction centre in Sydney. This is another of the government owned Australia Post retail outlets. In fact, it’s their showcase store. This is where our postal service struts its stuff and demonstrates its commitment to the provisions of the Australian Postal Corporation Act 1989.

At this PostShop one can purchase, exclusively to Australia Post: the Harry Potter Carry Case and Pencil case; Deadly – a book pack by Paul Jennings and Morris Gleitzman; Wicked – a book pack by Paul Jennings and Morris Gleitzman; Bill Grainger book pack; Ricoh Capilo digital camera; Faber Castel Connector Express marker set. And that is just the first page.

Please, can someone explain to me the justification for the government owned postal service selling these products which many small businesses would love to have access to.

Australia Post is using the mail delivery brand it has established over years of excellent service to take retail sales out of small business. It is leveraging its exclusive postal service traffic into sales of these other items. Thanks to its exclusive postal service traffic the cost of acquiring each visitor to a Post Shop is far lower than the cost for, say, a newsagent.

When newsagents close due to the competition from these government owned PostShops maybe then the mainstream press or a politician may take notice and wonder whether the policy of leaving the Australia Post executives alone all those years without socially responsible policy direction was the best move.

Australia Post ought to be the post office and not some chain of mid size department stores taking revenue from small business and putting people out of work. They do so using an unfair playing field and with the blessing of the government.

The thing about Google Base is the ease with which one can list an item. The impact will not only be felt in newspapers, where the process is time consuming, but also with eBay. Some analysts are already predicting a negative impact as this Internet Retailer story reports.

Thousands of stories and blog entries have been published overnight ranging from the expected Google bashing to those offering fulsome support. Regardless of your view, the arrival of Google Base is a landmark which will bring more people online and that has a knock on effect in many places.

Newsagents calling the Network Services call centre are waiting anything from twenty minutes to over an hour to speak with an operator about magazine distribution issues and or problems. Network distributes all ACP product and many other titles. The long wait on hold is making newsagents angry and encouraging some to turn their back on dealing with Network. Many calls are from newsagents chasing stock to sell and even once they get through many hear back news that replacement stock is not available.

Some newsagents talk about the problem as part of a strategy to shut the newsagent channel down. I don’t accept that. My view is that bean counters have set a budget for the call centre and this has resulted in a poorly trained casual workforce using a less than adequate computer system./ Newsagents and consumers are the loser.

Despite promises this year to fix the inordinate delays and poor quality service newsagents are yet to experience any improvement.

I understand the risk of early predictions and the danger of talking something down but here are my predictions for Christmas 2005 in newsagencies in three core categories and based on early sales data from a small but active selection of newsagencies:

Card sales – up 10% to 15% on last year

Diaries – up 10+% on last year

Calendars – down 25% on last year

The concern is calendars. This category used to be truly valuable for the newsagency channel and now it is patchy at best. While there are some stores where there will be sales growth, for most they will be flat at best or, as I predict, down 15%. With slim margins, high real-estate and labour costs and no real point of difference newsagents will need to consider if this category is appropriate moving forward.

There is no single thing hurting newsagents but when you combine calendar discounting, slashing of phone recharge commissions, newspapers being sold everywhere and lotteries moving more online the challenges of traffic attraction for the channel become clearer.

I received a response yesterday to my letter to the Chairman of Australia Post criticising their franchising moves. The response, from their Corporate Services Group, rejects “any suggestion of unfair competition”. That’s not a surprise. It then covers their obligations under the Act and suggests that their move into franchising delivers on their obligations. It rightly acknowledges their monopoly on the issuing of postage stamps. etc. etc.

The letter neglects to acknowledge that the success of the Australia Post retail network has been built on the postage brand. Without that brand they could not have built the network. This is the unfair competition to which my letter to Australia Post refers. Australians love Australia Post and the Post retail managers have leveraged that love for the postal service into a retail network generating hundreds of millions of dollars in profit for the government.

The letter also says that “in order to meet our community service and commercial obligations, we must protect the integrity and viability of our retail outlets…” Much of what Australia Post sells in its 863 PostShops was not sold in these stores ten or fifteen years ago. Australia Post has entered this space in that time at the expense of independent small businesses. It is flawed government policy which allows this to happen.

The letter discloses that Australia Post, as part of its franchising strategy, will open new PostShop locations. Given that less than 20% of the space in these shops is for postal related product my concerns about unfair competition remain.

While I appreciate a response from Australia Post, this letter does not address the concerns I raised. It’s corporate doublespeak which ignores the damage they are inflicting on independent small business.

Here’s what I wrote to Australia Post on October 25:

Ms L Nicholls
Chairman
Australia Post
321 Exhibition Street
MELBOURNE VIC 3000
Facsimile 03 9663 1160

Dear Ms Nicholls

Australia Post franchise offering

I noted with interest in The Age on the weekend that Australia Post is franchising some of its PostShop retail outlets.

My newsagency at Forest Hill Chase Shopping centre is situated directly opposite an Australia Post owned PostShop.

It has been disappointing to see the PostShop model evolve so considerably over recent years to embrace more products offered by small businesses like mine. You compete with me in the stationery, greeting card, money transfer and phone recharge categories and you do this, in my view, on an unfair basis.

Your PostShop businesses have the benefit of exclusive traffic. My newsagency does not have any categories exclusive to my business or to newsagencies.

Your PostShops receive favourable treatment from the landlord in terms of opening hours, parking and signage. These are evident. I suspect you also receive favourable treatment in terms of rent.

My view is that the government has no business owning a retail network which competes with small businesses like mine. While I am all for competition, I want this to be on a level playing field. The exclusive traffic drawn by your postage products provides an unfair advantage. It means you can enter new categories without the cost of a business like mine. You use the “Post” brand, loved by consumers for an excellent mail delivery service, to leverage stationery and other sales to the detriment of independent small businesses.

I would have preferred that Australia Post offer the PostShop businesses to nearby small businesses like mine to purchase. I could integrate the PostShop operation and my business and create a good small business success story for Australia Post and the government. Instead, we face a franchisee taking on a business and continuing to benefit from government protected monopoly traffic to the detriment of my small business and those who work for me.

I write urging you to reconsider your position on franchising PostShop businesses and engage in direct dialogue with people like myself who face unfair competition from your retail network daily.
Sincerely,

Mark Fletcher
Director

No. Not that I can see. In just five years opportunistic retailers like Calendar Club have ruined calendar margins. This category used to be full price through to Christmas then discount heavily. On that basis it was viable. Now with discounting starting from early November it is not viable for the small businesses like newsagents. We cannot buy at the same price as the majors and so will quit the category altogether. Other newsagents will quit calendar sales as well. It’s no longer worth it.

Speaking last week at a World Association of Newspapers meeting in Madrid was, among others Simon Waldman of digital publishing at Guardian Newspapers. According to this Yahoo News report, Waldman told the conference that within “six to seven years”, the group planned to dedicate 80 percent of its time to digital activities, compared to 20 percent at present.

Australia’s small business newsagents aren’t dedicating anything today to digital activities. We should be. We should be as engaged in a pursuing a digital future as newspaper publishers and we should be doing this from within and not with a supplier.

Tim Porter provides an excellent analysis of the circulation figures released a few days ago in the US. He is predicting that a tipping point t is close to being reached where circulation falls will measurably impact on advertising revenue. His comments about publisher investment in the news room are particularly relevant in relation to the cost cutting at Fairfax.

This post by Tim yesterday referring to a summary at poynter.org on how newspapers are reporting this news is also a must read. The .3% fall for the Minneapolis Star Tribune is interesting as it is smaller than the others and given the considerably work they have done on the content and design of the newspaper.

We hopped into this pot of water when it was cold and too many of us have not noticed that there is a small flame warming the water. The water is already dangerously hot.