Gordon and Gotch has surprised many newsagents with a letter this week advising that they need to pay Gotch by the 20th of the month.
Historically, Gotch has been flexible when it comes to payment, acknowledging the challenges of cash flow for newsagents who have to pay for all stock received even though often half or more received and paid for by newsagents does not sell and is sent back the next month for a credit. Newsagents have been grateful for this consideration.
The letter from Gotch this week represents a change to the terms implied by Gotch’s own trading practices. Many newsagents will see this as an attempt to alter accepted business terms.
When you remove the popular Pacific Magazine titles (New Idea, That’s Life, Famous and Better Homes and Gardens) delivered by Gotch, the Gotch returns rate jumps to above 60%. We know from the magazine cash flow research that Gotch supplied (non Pacific Magazines) product is cash flow negative in 50% of newsagencies. Given this, it is unreasonable that Gotch takes away payment flexibility it has offered newsagents for years since it would force newsagents to pay for product they will loose money on.
At least Gotch ought to have approached the change to terms with greater sensitivity and at best they should not change their practices.
Newsagents make 25% from magazines. They lose around 3% in theft, 11% in wages and between 8% and 11% in rent. The numbers do not add up. This is why the pain of any change in trading terms will be significant.