Better store design can fix cash flow problems for newsagents.
I am currently working with eight newsagents on cash-flow challenges which mainly stem from magazines. In some cases the cash-flow problems have come about by poor management by the newsagent and in other cases magazine distributors are to blame. I’m not an expert, but I do have access to significant industry wide data through my software company and can apply that to gain an understanding of the problems.
In one newsagency, the overall sell through rate of all titles from each of two magazine distributors is 45%. That is, 55% of all magazine stock sent over the course of a year did not sell. The combined cash-flow position for the two distributors in the newsagency in question is in excess of $25,000. So, taking into account retail real-estate, labour to manage the titles and invoices and credits and the newsagent is $25,000 worse off for having this stock.
There is no excuse for this behaviour given that both companies have sales data which would tell them the negative financial impact they are having on the newsagent. They are ignoring their own data. Some reading this will say the newsagent can cut the title from what they receive. This is not how magazine distributors operate. Every newsagent has evidence of distributors agreeing to cut a title only to find it or a similar title added to supply in a few months.
This photo from my shop illustrates part of the problem newsagents face.
We have two big aisles of magazines. It takes up 40% of our shopping centre based floor space. This is how newsagencies have been laid out for years. Chunky magazine display space. We’re the magazine specialists, of course we will give plenty of real-estate to the department. Distributors know that and they scale out accordingly.
Our shops are designed to take a huge range without displaying it in the best possible light.
Newsagents need to reduce magazine shelf space by as much as 33%. Until this is done and suppliers formally notified in writing, the supply model will not alter. Magazine distributors have shown collectively that they are not capable of managing our real-estate so we must. Of course, we should have been doing this years ago. But we trusted our partners and we trusted our shop designers – these designers have a lot to answer for.
Most newsagents won’t reduce magazine space because they think they have nothing to replace the stock with and because, despite the issues, magazines are easy – no stocking, pricing or ranging decisions. So, laziness and lack of entrepreneurial spirit stops the problem most complained about being addressed across the channel.
The entrepreneurial newsagents will win. Some are active today and history will recognise them as visionary.
Too often we’re our own worst enemy.
I fully concur with with your statements re the cost of selling magazines. Imagine how magnified these cost/profit ratios are for a sub agent such as myself coping on half the normal profit margin.
Our range is as large as many small to average sized authorised news agents but we are in the process of reducing our magazine range to only those titles that produce a reasonable return for rent paid and replacing this stock with educational books and aids for pre and primary school aged children. I would love to hear from like minded agents, especially look alike subbies, who are interested in sharing ideas and buying power to evolve the products stocked in newsagents into a more profitable range.
masonbr@optusnet.com.au
Brendan,
You are right to identify buying as key to the problem. Newsagents historically have not bought well and the sooner we become commercial in this area the sooner we start to make more money.
mark