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

How sub agents are treated

Newsagency B is a sub agent of newsagency A because the previous owner of newsagency B sold the distribution business to newsagency A before selling the retail business a year or so later. Today, a couple of years on, the relationship between the two businesses is seriously challenged. Newsagency A supplies newspapers to newsagency B and engages in some odd behavior. For example, when they close at lunchtime on a Saturday, they will not release all remaining newspapers to newsagency B Newsagency B consistently sells out and newsagency A has returns which could have been sold.

With more newsagents selling their runs and therefore more ‘sub agents’ being created, newspaper publishers will watch this behavior and, I hope, act in the interests of consumers and their product. An old school lording over his territory as may have happened thirty years ago is not good business for anyone other than this newsagent’s bitterness.

If it looks to a customer like a newsagent it is a newsagent in my view.  Some old-school newsagents will claim that a retail outlet which does not have a direct newspaper accou t is a sub agent.  Some will think they can treat the ‘sub agent’ as a second class citizen.  Shame on them.

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  1. Andrew

    I have found with my 20 odd subagents that encouraging and supporting them has only increased my income but also their willingness to pay on time, but also to make my job easier, to punish a subagent seems to be a petty way to achieve goals when simple dialogue and discussion can often sort these problems out. This has been my short experience with subagents anyhow, and it seems to be paying dividends so far.

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  2. Steven Craig

    Mark,

    I agree that unreasonable behaviour (for the sake of being unreasonable) helps no-one however, I disgaree with your comments about territories. You often promote a ‘survival of the fittest’ line of thinking on this site and encourage newsagents to think about non-traditional lines such as giftware etc. On the other hand you complain Australia Post is allowed to sell newsagency style product. If we are to call ourselves newsagents and then we have to comply with the “rules” of being a newsagent. In my opinion, the territory agreement is the ONLY thing that gives our category any semblance of value or credibility and it must be maintained and respected. Newsagents who sell their run do this with their eyes wide open. Steve, Morpeth Newsagency

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  3. Luke

    Steven, If you want to slave away for the newspaper publishers and get up at 3am to be able to call yourself a newsagent then good for you, but for me after 19 yrs of 7 days a week and all the sh@#t I had to put up with with late delivery, invasion of subscriptions into our Territory and the poor treatment by the publishers we gave up our runs. To say you are a newsagent and I am not is what is going to kill our industry off because the publishers will soon kill off deliveries and leave you without any compensation at all. If you think it will not happen remember magazines. There is two kinds of newsagencies but one is not superior to the other only different

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  4. Steven Craig

    Luke,

    I never said that sub-agents were less than a full margin newsagent. You obviously sold your delivery run and that was a considered decision. This decision has changed the dynamics of your business. Some of these changes are poisitive whilst some are a challenge. I agree that the publishers are rogues. That’s why I’m in the final stages of selling my business after only four years. There are far easier ways to make a dollar that will allow me to epnd more time with my young family. The point I was trying to make is that the existence of territories is the only really remaining “sexy” selling point that newsagents have to work with. Many of the punters still beleive that there is a degree of ‘protection’ within our category. Having a large, profitable delivery run with three good subbies certainly helped me get my buyer over the line. Without territories, the appeal of buying a newsagency is diminished. I think most newsagents with a territory would agree with me. Steve, Morpeth Newsagency.

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  5. Dean

    I agree that newsagents should treat all subagents well. It is not whether they are the former newsagent who has sold their territory to you that is important, it is just common courteousy to treat all subagents well. You make money off each other, get valuable business advice, have the opportunity to do joint buying in stationery, make friendships, etc by treating them well.

    The problem I have with a small number of our subagents is that they treat us like S###. The smaller they are the bigger problem that they are.

    Treating subagents well goes both ways. Subagents have to treat newsagents well also. If the relationship has broken down, you need to examine whose fault it is. Maybe it is the newsagent, maybe it is the subagent.

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  6. Luke

    Steven,
    The problem with the industry is the delivery model not the retail model, that is why people are getting out, not because newsagencies are not profitable but the delivery runs and time factors make all but the larger newsagencies unprofitable. Like I stated before I have been in our current business for 19 years and see myself being a newsagent for another 19yrs now I do not have the delivery side of the business killing me. If buyers do their research they will see the delivery side of things going downhill and the associated goodwill with it, and the ones that do not only stay in the industry a short while before selling up because it isn’t what they thought.
    Your business should be a way to make a living not something that takes up 100% of your time and slowing kills you, that is the reason we no longer deliver, we asked the publishers for sundays without deliveries but it was a case of all or nothing with them, with the threat of losing our direct supply status.
    I chose the retail only/ subagent option and am still in business and want to stay in this business but also have a life outside work. Don’t get me wrong Steven I know you know how much work it takes to be a newsagent but maybe you didn’t need to get out after only 4 yrs.

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  7. sa_paperboy

    There are two issues here. Continual undersupply helps neither the agent or the sub-agent. The supply figures need to be bumped up.

    The second issue is this ‘releasing’ of papers. That releasing does not come for free. Everyone here knows what the margins are, work out how much you make on a possible sale of 10 extra papers or so and the cost to transfer those papers from site A to B. Unless they are next-door to each other most people can work out how many extra papers you will need to sell to make that transfer worthwhile. Its not disrespect its pure costs.

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  8. steven craig

    Luke,

    It will be interesting to see what plays out RE: home delivery in the coming few years. There may be further polarisation between metro and rural businesses. There is no way News Ltd or Fairfax would find a contractor – or pay for their own drivers – who would cover my run. There are already “holes” in Maitland (which must be noted is the fastest growing city in NSW) which no longer receive home delivery. There are simply not enough willing newsagents. Added to this the publishers are aiming to consolodate ‘drops’ not expand them. Are publishers prepared to lose home delivery all togther? I don’t think so. They will push for delivery contractors in the built up areas (which will see more newsagents sell their runs) and keep the status quo in regional and rural Australia. Either way, the territory must stay in place as you can’t have contractors racing all over the city, into and out off neighbouring areas. If the territories stay, then the sub-agents stay. To change this would change the entire landscape of the newsagent category in Australia. Newsagencies would have no point-of-difference to a convenience store … and there’s one of them on every corner! Steven Craig, Morpeth Newsagency

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  9. Jarryd Moore

    Stephen,

    Where you say “the territory agreement is the ONLY thing that gives our category any semblance of value or credibility”, I would think the exact opposite. Territory agreements are one of the things that contributes to this industry’s lack of value and credability.

    Territories are not a POD. Points of differences are perceptions by consumers and consumers don’t understand the concept of territories, nor do they care.

    The concept of territories that currently stands is not only a near anomoly in the current market, it is a force that restricts this industry from reaching it’s full potential. Territory agreements are at odds with the concept of free-markets and, as you put it, “survival of the fittest”.

    Territories are only a ‘sexy’ selling point if they have long term potential and are sustainable. In the current market, that isn’t the case. I wouldn’t be caught dead purchasing a territory.

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  10. Derek

    Guys

    When getting a $ value on a Newsagency business say for a sale price, was it the “territory” (sub agents) that was a major factor in determining how much the business is worth?

    Was that the case in the “old” days?.

    Is it the case today?

    This is an interesting subject.

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  11. Luke

    It is my understanding that the “Territories” do not belong to the newsagent but to the publishers and this could change at any time at the publishers will as we were made aware when we tried to change the delivery model of our runs. We had no say in what we could and could not do, so much for it being my territory.

    At present you can still ask for goodwill for the delivery runs as part of your sale but again this could change at any time depending on what the publishers do. A newsagency business is not the long term nest egg it used to be that serves as a retirement fund so we need to make them as profitable as possible and to me that is to concentrate on the retail side more then the delivery side. The exception is to make your delivery area as large as possible while cutting away all the unneeded cost, this is hard if your territories are in older areas with limited development.

    Just my view

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  12. Michael

    In my case, I have not recieved Grazia this week although the supermarket in my complex got theirs yesterday from the same agent we’re under.

    I look foolish having Newsagency on a huge sign out the front of my shop and not having a popular magazine like Grazia on my shelves.

    I’m losing thousands of dollars because of this agent/sub agent structure.

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  13. Steven Craig

    Jarryd,

    I would never “buy” another delivery run either. I agree with you that the general consumer has no interest in territories. They make no difference in the level of service, depth of range etc. I disagree with you that territories are not a point of difference. The point I’m making is that many propsective buyers who have not done a great deal of research see the territory as having appeal. They like the fact that no other newsagency can start trading in their territory. Both you and I know that this is effectively nonsense but Joe Punter (prospective buyer) doesn’t. This was a major selling point when I was marketing my business for sale. As I said in a previous comment, if you are happy to give up your run, become a subbie and earn 12.5% margin on papers then you are effectively becomming a convenience store (becasue any corner shop or 7-Eleven can get access to this same deal). This is fine if you have the traffic to still generate significant sales. As newsagents we have very little control left in our supply chain, that’s why territories are important. I can’t see how you can argue against this. Steve

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  14. Luke

    steven,
    Your whole argument revolves around newspapers being the only thing that defines a newsagency, this is not the case, magazines, lottery products, stationery, cards even tobacco products are all core newsagency lines, yes convenience stores also stock these but that is irrelevent because they are what customers see as newsagency lines.
    We Have contracts with GNS and all magazine distributors and also with one newspaper publisher that allowed us to sell retail only ( god bless em), we only go subagent for fairfax and nationwide. So are these two publishers the be all and end all of suppliers to newsagencies because they direct supply service stations now, are these servos now newsagencies because they have direct supply?
    It is the closed off view that to be a newsagent you need to deliver that will see a lot more people leave the industry as margins shrink and costs increase. For my 12.5% we do not have the hassle of over/under supply and also late credits we are not at the mercy of having to deliver late supplies and also deal with subscription customers complaints. Newspaper sales make up only 5% of my overall business, so to say they are the key indicator of what is and isn’t a newsagency is wrong and to think that you need to deliver papers to be a newsagency is also wrong.
    Deliveries will not exist as they are now in the near future, they will evolve into larger but fewer delivery only newsagencies that can lower costs.
    Again this is only my view, that there is two kinds of newsagecies retail and delivery/retail and both are newsagencies.

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  15. Steven Craig

    Luke,

    I must stress again that the core point I’m trying to make is that having a defined ‘territory’ was a key selling point when I was selling my business.

    It has MASSIVE appeal to potential buyers. I know because I’ve spent the past year talking to them.

    If I could survive without a run (mine is profitable, unlike many, plus I need the full 25% margin on papers as I’m in a village enviornment and need all the margin I can get) then I would defintely get rid on it. The drama I’ve had with vehicles, wrapping machines and staff over the past 12 months alone has taken a few years off my life!

    At risk of getting off topic a little, my belief is that unless you have little or no debt, own your own premisies (obviously not possible in a centre environment) and have solid and/or growing foot traffic then your newsagency will be under more and more pressure over the coming years as our ‘partners’ dilute our relevance and our margins.

    This is why I’m getting out. We pay rent, interest and having a soft local market. In truth, it’s a death of a thousand cuts. There are easire ways for me to ‘invest’ $500k and have (i) a better return with far less drama (ii) more quality time with my wife and three young children.

    I might just add in finishing that MANY, MANY customers still refer to our businesses as ‘the paper shop’. Papers are crucial to our category. That’s why this ‘thread’ about subbies and territories and margins is very important.

    Regards,

    Steve

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  16. Derek

    Guys- It is interesting, points of view, points of difference are all relevant.

    The one thing I have noticed is their maybe no certainty that a territory will be “yours” in the future. That is only my point of view, however that is worth a lot of money to the business owner and I hope it does not devalue anyone’s business.

    With Territory owners releasing their delivery runs opens the door for this to happen down the track. Having a delivery run, subscription services, contract adds value to a business according to an experienced Newsagency guru, I tend to agree on face value, however like Steven indicated it takes “years” of your life.

    He can sell more, the Newsagent will not let him sell more (restricting supply) so he cannot get direct supply. Now that is unfair to put it mildly.

    Regarding Michaels dilema can anyone help him? has anyone got a conatct that has discretion and influence? People like Michael who cannot get direct print, he has to rely on a hard case Newsagent to sub to him, surely someone who has influence can help Michael in his situation, this is a typical territory matter,

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  17. Mark

    Nelson,

    Outing those involved is not key to airing the issue ofr debate. This is a challenging issue for newsagents of all sizes and histories and I wanted to open it for discussion. I saw no purpose in naming the newsagents involved.

    Mark

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  18. Mark

    Nelson,

    Your allegation is offensive. The software in use is irrelevant. If you don’t trust what I write then no one forces you to read posts at this place.

    For the record, I note that the blog post has opened the specific issue up and I am hopeful of reason prevailing. Isn’t that more important than me naming names?

    I would note that I did not have permission to name names.

    Mark

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  19. Mark

    Nelson,

    You infer that at least one newsagent involved is a Tower user and that this is be why I did not publish the details. That is offensive.

    There is a big difference between writing about a story I have been told and writing about something I have personally experienced or observed.

    Mark

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  20. Mark

    Nelson,

    Not heresay. I was given information which I verified for myself.

    Mark

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  21. Michael

    Thank you Derek for your concern.

    I can only do what I’m doing by getting good software that can produce detailed reports which can be used in my case.

    The territory ideal is not working in my area. The little supply I get is ruining my business. I’d sell out of a particular magazine by 8:30 then get people coming earlier and earlier until they are conditioned to thinking they can’t get their favorite magazines from me therefore don’t comeback- leaving me missing out on goodwill and extra sales associated with these purchases.

    When I’m sold out of weeklys I send customers to my closest newsagency which is not my agent but I’m in his territory.

    The extra dollars I lose every week because of the territory situation is really hurting my business and not helping anyone.

    I’d like to hear of anyone that’s been in my postion and got out of it.

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  22. Derek

    Michael

    Exactly it is ruinning your business, regulars do not know if you have already sold out of their magazine and it puts them in two minds.

    I really wish I had some type of influence to help you, I cant believe you stock that many mags and you are a Sub no matter how it came about.

    I would draft a detailed letter and send it off to MF asking for help and direction and possibly this might get to the right people and publishers who maybe able to cut the red tape.

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  23. Derek

    Michael found an old post you may want to read.

    http://www.newsagencyblog.com.au/2008/08/31/there-is-no-territory.html

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  24. Michael

    Derek, it is ruining it all because an agent is misbehaving like the original example above.

    I have seen some newsagents in Melbourne and Sydney that when you walk in you see the empty shelves. I should’ve asked but suspect the agent that has the territory does not supply them well enough.

    I’ll be in Melbourne soon and will check out an area where this was common, three retail newsagents within walking distance all with not a decent range of magazines at all.

    With the economy as it is, I fear some of these will unfortunately shut down, I blame it on the territory stucture.

    I was called a few months ago by a publisher changing it’s distribution company (to the one my agent’s distributes to me) They wanted to know if I would still would stock their range. I said yes, forwarded this to my agent.

    You guessed it, I’ve turned away a customer this morning who normally buys her puzzle magazines of me.

    I’ve missed a sale, the customer has lost her convience, my agent missed out on his 12.5% and the publisher has missed out on a sale.

    This hurts everyone in our industry.

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  25. Derek

    Michael

    What you have shared is laughable, so much you want to pull your hair out.

    You cannot give up, I urge you to make constructive noise, write to the publishers sharing what is happenning, you are not alone, this is an untapped growth area for publishers, they are missing sales because of unethical practices by agents.

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  26. Michael

    Derek, that is what I’m thinking.

    We cry for being oversupplied with some magazines, yet there are stores like mine that would be happy to have half – which I could sell.

    With my personal sitation I should be alright Derek, but there are still magazines specialists out there with empty shelves – a HUGE growth area, which could start a few more livelyhoods or kickstart a few businesses.

    Maybe the publishers should put reps out there looking for opportunities?

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  27. Derek

    Michael

    Glad to read some positive words regarding your situation. Your idea regarding reps is on the right track. Publishers and Distributors from what I have read do not really want to close the gap between themselves and us. Personally I believe it would revitalise the channel if done correctly. We need a closer relationship with our partners!

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  28. Mark

    What publishers need to understand is that retail newsagents can influence sales. The closer proactive newsagents are to publisher the greater the mutual benefits.

    The big challenge, however, is finding the proactive newsagents. There are plenty of them but they are challenging to identify and get to cost effectively.

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  29. Michael

    Everyone needs better communication. Publisher, Distributer, Newsagent/Magazine specialist.

    As I said a publisher called me for the first time trying to secure their range in my store while they change distributer. That was great and I was happy to oblige, but my supplier has other ideas and has sent a different brand.

    Derek I’ve sent Mark some photos of this if you want a bigger laugh, he might email them to you.

    I think it would revitalise the channel too, a customer walking in to a newsagent, sub or not, and not being able to purchase a general magazine hurts everyone.

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  30. danni

    i have another poblem all together i just opened up a new tatts shop in a town where the newsagent has had monoply for many years now i would like to put papers in my shop and he wont give me a sub agent. I have proven to him by buying them and selling them at full cost makeing no money for myself. Now he wont even sell them to me at full price and has thretened if i continue that he will take away my sub agent supplie in another town which he has no part in. Has anyone got any idears?. i thought taken him to VCAT for restrict of trading.

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