Coles is quietly playing with a newsagency model within its supermarkets as a visit to Coles Bayswater (VIC) last month showed. There, inside the supermarket and close to a newsagency, is a Paper shop – as the signs label the area.
While there is plenty to criticise about the model I saw, there is enough to it to raise concerns. This is Coles playing and I suspect that they have only just started. My understanding is that they have people with UK experience in this space working with them.
UK supermarkets ASDA and Tesco both successfully introduced newsagency like formats into their supermarkets years ago. There have been studies done on the considerable impact on high street shops in the UK, including newsagencies, of the march of supermarkets into the independent retail realm. High Street Britain 2015 is one such report. I first blogged about this in January 2006.
It is not only newsagents at risk if Coles and others get this model right. All publishers would suffer. The bigger publishers would give up more margin because of the higher cost of selling a copy of a magazine in a major supermarket compared to the cost of selling it in a newsagency. Independent publishers would suffer because they could not afford to be represented in supermarkets and there would be fewer newsagencies through which to sell their product.
While there is a risk in studying the competition in too much detail, newsagents ought to inform themselves about the work Coles is clearly undertaking. If they get the model right in terms of range, service and community connection, the impact on newsagents could be devastating. Especially considering the likely impact of disruption from devices such as the Kindle and similar technology when they get that right.
My visit to Coles Bayswater was a wake-up call, a call to action for newsagents to work on their businesses to meet this new challenge, to step up to the plate and be ready for Coles (and Woolworths) to get their paper shop model right.
Newsagents will ignore this at their peril.
I am working on what I saw at Coles on a number of fronts but I’ll save writing about that for another time.
I doubt we will ignore it but the question is what can and will we do about it? We have evidence that the Government is happy with the Duopoly we have now and we cannot stop them marketing.
When I was last in the UK the expression being used was that there will be a ‘Tescos at one end of town and a Safeways at the other and everything in between will be closed’. That scares me and I saw enough evidence that it was becoming true.
It is time that the creeping aquisition rules be re addressed in order to protect the edges of this market so that mum and dad can still run a shop without the duopoly driving them into ruin.
Unfortunately, it’s going to be a very difficult thing to get govt. on side. Considering their highly questionable stance re Australia Post, FWIW, I think the rep bodies should have been lobbying like crazy about this some 10 years ago.
AP, 711s, servos and supermarkets have too good a hold on our markets for this to be addressed meaningfully on any level now.
Pessimistic, but motivating re our own stores, I guess. At least we can compete with most of them for our confectionery and drinks. Sometimes, even with the supermarkets!
Not happy that they are using my name!
cant wait for the day when woolies and coles have driven all small businesses to the wall and all the owners and staff are unemployed so nobody has any money to spend in their supermarkets
When they have it all, there is one consolation. Our partners will be told what the terms will be…along way from what it is now…they should be scared…very scared
Baz
I think you will find that publishers and some other suppliers are not happy about these developments.
Publishers have the right not to supply, it’s in the TPA.
They had reading centres about 20 years a go .Did not work ,and now when mags are well on there way down why would you .Wal Mart are moveing out of some titles What works in the U K ,may not work here Looks to me like a lot of floor space for a very small return in the the Mag
Brett, some will feel they have no choice.
D R, Coles does not go into new areas expecting them to fail.
Mark,
I agree, Coles and Woolies do nothing without an expected return. If you have an evil mind, you might surmise that Coles would do this for the ‘deep battle’; run this for 5-10 years, drive newsagents to the point of irrelevancy and then take the prize, Lotto.
Have not done to well against Woolworths Butchers Fruit Shops still here. Range is what we need.K Mart has tried ,not much luck there,Part Works in K Mart gone
We can compete against this on our own terms, by playing to our strength. This means making our businesses important to landlords and to core traffic generating suppliers.
Mark you are right on.I see coles K mart as where to take trade from .Love back to school with my out post right out side their door,as they do their price checks
just buy their shares.
Got some
I’ve never been worried by the big stores’ card offers but this looks impressive – it’s like a built-in newsagency. We can re-invent ouselves too and focus on service, atmosphere and new product lines.
Doesn’t Big W do something similar with Books also?
Not to the same level of discount.
all the bookshops in my area all gone.
in the future i will intergrate cafe and cake shop in my newsagency.
Coles and Woolies have a problem emulating newsagencies.
The shelf life newspapers and magazines do not suit the core products sales-“best DAY’s Sales” Same with Lotto.
The top selling mags come out early in the week and most high draw lotto is Mon to Thurs. Traffic flow as indicated by newspaper sales is very low Mon to Wed.
I have just completed a business performance analysis of anewsagency that has been relocated to outside of a major supermarket (Coles of Woolworths) frm a high pedestrian location.
Using space and profit per sq meter per annum to calculet the return and rent percentages compared with the same departments a year ago in the “old” shop are some startling results.
Turnover dropped in Newspapers, Lotto, phone cards, confectionery, and cigarettes in fact ALL front Counter Sales-however mags dropped as well. (could be in sympathy – associated product- or just the general decline of the product-
Cards, Gifts and Stationery went UP The unit sale went up.
Result: Profit down why? because of loss foot traffic was greater than the upturn in the destination purchase. Makes me do some more analysis on “destination” versus impulse through convenience and whether the extra rent is wortwile.
I know go back over my records and do the calcs on those outside of supermarkets in centres and those closer to cafes and food halls.
It is coming out tha Woolies and Coles are not our product producers in sales.
They are not daily providers (thank goodness) and they can’t create a more even cash flow even though they have tried. It causes me every time (once per week) that I go into a supermarket to count the number of categoried items that are consumed on a daily basis and especially those that are consumed on what particular days. Iwill provide some of these stats to NANA and discuss their relevance.
At the moment the front counter space allocation contributes 36% of the total gross profit generated by stores. Different fitouts can change this dramatically thus spreading the G.P. more evenly. It make retail fascinating and fun I spend most of my spare time breaking uop what part of this contributes to what part of that- i.e Sub agents and Home Del = income from outside the store. take those figures away from the sales and G.P. and you find how your store is travelling-versus your rent and space etc. All good stuff.
Graeme, It would be a mistake to discount Coles and Woolworths on this. Many independents who discounted ASDA and tesco in the UK have since closed.
Mark I agree I am not discounting Coles or Woolworths just putting their competition base in relationship to newsagencies into perspective instead of fear.
We have the tools to compete but not the knowledge.
Graeme you should have been at the newsXpress conference a week ago in Melbourne. Great tools backed by tremendous energy.
Mark,
As you know I couldn’t I was housebound, however fully recovered (health that is)except for work load. Thanks again though for the invitation to attend.
Glad to hear it was good Could we add to Great Tools backed by tremendous energy plus “knowledge” for without knowledge,skills etc we are not tradespeople and therefore energy and tools are a waste of space however socially enjoyable