I was interested to read that Australia Post could close 27 government owned retail outlets by the end of this year. If I owned a newsagency nearby one of the closing outlets I’d be quietly cheering.
Given the challenges facing Australia Post and the disruption occuring in our channel, dialogue between the two retail channels would make sense. There is an opportunity here.
Do newsagent really want to take on another low margin/high labour service?
At around 5% commission, would it be profitable for us to take on postal services given that Aust post will continue to invade our higher margin departments (stationery, greeting cards, gifts) no matter what the outcome of the current problems they face.
If Auspost is facing such a dismal future postal products wise, should we be prepared for an extra onslught into traditional stationery/gifts/cards segments to shore up their profits? I know with our local post office it has amalgamated a shopping strip front outlet (council car park to the rear and street parking) with a larger one in a major shopping centre (obviously plenty of parking and ready audience) and moved to an external position of a smaller shopping centre with limited street parking. No wonder they are going backwards.
If you were to take on the Post Office business on the basis I think Mark is suggesting, you would operate as an LPO earning around 13% on postage stamps that only need a drawer at the counter to stock them and would out sell newspapers hand over fist. Add to that the other Australia Post products and services that only they provide and you have a profitable business the drives traffic as strongly as tattslotto would. Not a bad source of income at all this adds great to your business when it is sold.
I would be glad to take this on in my business if the opportunity arose. I currently refuse to sell stamps at no profit just to get customers in the door but recognise the value to my business of doing so upon a commercial basis that is superior to being a sub agent for newspapers and magazines.
If the opportunity arises, look at it with a view to the future and the added security to your businesses survival and ability to flourish.
I say this having owned 2 LPO’s before becoming a sub newsagent.
yes, I see this as a medium term opportunity. We can provide easy access to stamps and postal services without the expensive government owned store footprint.
Brandon, there is a lot more labour involved in an LPO then just selling stamps out of a draw. If it was so profitable why are people closing down their LPO’s and why is Aust post so keen on other revenue.
Also the 13% commission you speak of will soon be lowered so Aust post can make more money just like the telcos are doing with recharge.
But if people want to go down that road so be it, but read your contracts before you get locked in.
That’s the way I see it, as well, Luke
Luke, like I said we operated LPO’s for a total of 18 years including establishing one from scratch after winning the tender for a new outlet. I am fully aware of the banking business, passport applications, insured mail, operation of POP Boxes etc, etc, etc, and LPO’s properly run are profitable. I’m not aware of many LPO’s closing, it is the offical offices they close as staff and union issues make them un profitable. Any well run newsagency would only be stronger with the addition of this type of business. As for why Australia Post is so keen on other revenue is the same as supermarkets etc are offering more diverse products and services…to win market share. We must ensure our future by applying the same practices and looking for opportunities to enhance our businesses and secure thier future. Those who don’t risk becoming irrelevent in the market place. This is one such opportunity that I would leap at if given the opportunity and I do know the industry very well.
As a combined News/Post Office I can heartily confirm what Brendan is saying. There is ALOT more to the post revenue than just stamps @ 13%. In fact there’s a hell of alot of the core business that makes a higher percentage than any of the newsagency core line percentages.
Quite the contrary to declining percentages Luke, some LPO percentages have increased recently and it’s also worth noting that the increase in general postage has also created a net revenue gain in some cases.
Interestingly we haven’t seen a decrease in postage volume this Christmas. We’ve actually sold as many stamps, stamp packs and packaging as the entirety of Christmas here last year as of Wednesday the week before last. On the rough figures I’ve been recording daily we’ve already doubled our turnover on these items from last year.
There is also a great deal of satisfaction at seeing a customer walk in, buy a pack of Xmas cards, some scratchies or a gift and then proceed to the Post Office counter via the packaging rack to post these same items. This is also something that isn’t just relegated to Xmas time.
With some of the new services coming next year from AusPost and the continuing promise of aggressive growth of non traditional revenue stream from the CEO the future certainly looks at least optimistic. I wouldn’t be saying that if I were many stand alone newsagencies.
It’s a bit like the old saying “Two heads are better than one”. Two businesses that can feed off of one another in a positive way is alot better than just the one. Marks right. There really are opportunities here if people want to take advantage of them.
Ok guys, you go ahead but to say postal services have a profitable future flies in the face of what Aust post is saying, they admit that email and other forms of mail have overtaken written mail and this revenue will not be returning so they are getting out, if small business want to take on another dying service then so be it. We should be looking at growing business not just taking over what others do not want.
Ink and computer supplies, ebooks and other new media is what we should be looking at not someone elses discards.
Just my view but I have been here for 22yrs and seen a lot of LPO come and go because the promised profits are just not there.
Luke, my last LPO was capable of making as much profit as my sub newsagency. My point is that combining the two within the current business would be a VERY profitable exercise as income would double and costs would only rise slightly. Long term this scenario may become less profitable but more likely as Post shore up thier business LPO’s will benefit and remaion viable as opposed to for example Tattslotto business which over the long term will most probably move more and more sales to online. You are correct that we need to bring in new business but unfortunately this industry is to fragmented at present to make it happen. Also experiences such as Bill Express show that the current structure for newsagents is fay inferior to Posts for establishing such business. I say again, I would have no hesitation taking up an opportunity to provide full retail postal services if it arose.
Luke,
I blogged previously about the opportunity for Newsagents to ‘pick-up’ and run with Aust Post opportunities…
This is probabaly the best opportunity that has presented itsself to the Newsganecy channel in many years…
Many stand alone LPO’s are struggling, and there are many more Govt owned ones that are not vaiable – a lot more than 27…
As an additional line to our offerings it makes sense – whilst we are only a post point we have sold $10,000 worth of stamps so far this Xmas – imagine if we had all the other offerings as well..
Ann (QNF) – you need to pounce on this, and I can get you into the highest levels of Aust Post to commence dialogue…
Cheers
Peter
Peter @ 5% you have made $500 profit for your investment. I can think of other things I can attract customers with that make me more money, but again good luck to those that go down that road.
I think you’ve missed the point Luke. It’s in addittion to other sales and if Peter is like myself in regard to turn over of stamps (I’m an LPO) then he’s probably done that in under 10 days. That in addittion to all my Newsagency sales is just the icing on the cake and for me it brings people in because they know they can do everything in the one spot rather than go to another newsagency and then have to go elsewhere to the PO.
BTW Xmas stamp margin is alot more than 5% and chances are he’s already sold alot of that stock before hes had to pay for it.
Pardon my ignorance, but where do LPO’s make their money? Is it a whole ot of different segments or is their one standout? Why can’t newsagents offer similar services like Pack and Send do? Would their be away to access billpay ourselves and charge a small fee for the swervice?
I haven’t missed the point Peter, you spent $9500 on stock to make $500 profit @ 5% which is what a lot of newsagencies are making from stamps. Even at 13% as LPO are on it is that is only $1300 profit for such a huge outlay
I’m not sure what your terms are for stamps but even at 30 days that is a lot to outlay for so little a return. An example of new money is I have sold $15000 woth of ink over xmas at 25-30% profit, and a lot less hassle then 55c stamps.
It’s a range of services Rowan.
I’ve noticed so far that it seems to be cyclical. Every three months we have a very big billpay month (alot of elderly in our area). We also do alot of counter agency bank transactions as the area is poorly serviced with banks and the elderly often don’t want to travel a suburb or two across. Stamps & packaging are big at Xmas. Post Office box revenue is big in April. IT quite often seems to dovetail into quite periods in the newsagency often.
Some LPOS stock as much or more than corporate stores whereas I have a post counter with minimal floorspace allocated to the LPO side of things (95% of the floor space is newsagency though I’m slowly changing the mix). From that one counter (plus 500 odd post office boxes) I can generate 65%+ of the income as the entirety of the Newsagency space with alot less paperwork and hassle. The AP back office routine is so much more compact,less time consuming and simpler than that of the newsagency operation .
That was me Luke not Peter with that comment.
What if you could sell that much ink and then that much in stamps ? Why wouldn’t you make that money if you could ?
To put the profir question into perspective, during the year you would hold a stock float of perhaps $5,000. This would turn over about 4x per month so at 13% there is now a monthly return of around 50% on stock held. This becomes 600% over a year. The stock turn if managed properly is in excess of 50 per year. Does this still sound like an unprofitable stock line to carry? The stock turn is the attractive thing here as well as the stock being held in a drawer at the counter and rarely being a theft risk. Not many other products in a newsagency give this type of return as regular as clock work? No returns, theoretically no theft, labour intense? No.
Add the other products, post back purchased by the outer is high margin, banking and bill payments commision based and highly popular in comparison with the failed bill express I could go on and on.
The 500 boxes Paul mentions are worth a minimum $35k-$40k per year profit. Who wouldn’t want some of this while it lasts?
When I purchased my newsagency 2 years ago, there was an opportunity to buy the Post Office as well. Being new in the Newsagency business, I felt that taking on an LPO would be too much at once. 2 years on I would jump at the chance to buy it and incorporate it into my business. Being rural, we would have monopoly on all stationary products as well as cards, gifts, etc for a 15km radius. I am aware of the low margin/high admin products (like we need more) but I feel that the addition of the postal services would be an invaluable asset to the longevity of my business.
People talk about the low margin on stamps, but what about all the crap the Herald Sun forces us to sell with the paper? All the cookbooks, dvd’s, cd’s, etc. How much time is spent invoicing these things to subagents, all for a few cents?
Should we compare stamps to cigarettes?
thousands of dollars sitting in a (now closed) cupboard with a very low margin. One pack gets lost or more likely, stolen, and you have to sell 6 more to make that money back.
An opportunity like this would benefit many newsagents. Increase in foot traffic, increase in regular customer base, and best of all, elimination of the competition.
Luke,
Have not commented since my originak post… That was Paul…
We take income where can – you are lucky if you can do $15K in a month in Ink – we have the oldest population in Aust so not much use for Ink – Good luck to you – we are happy with the 15K in gifts we will do this December.
It is not the stamps I am referring to – its the bill payments, the post boxes and other areas of the postal services that our customers want – this is what drives traffic into their outlets..
If you have increased foot traffic, you have potential for addditional sales… I have said that the postal services would be a product compilment to our offerings.
And your math – I have the 10K income, and wont be paying the account until Jan – so I am happy with that…
Cheers
Peter
Steven, Yes, high traffic business like for postal products and services would be an excellent fit for any newsagency. If I could get this for any of my stores, as an LPO, I would.
Just re-thinking the idea, and I have to say I cannot see why someone would not want to do this as a newsagent.
Postage stamps and mailing services are ESSENTIAL, 100 times more so than newspapers. It’s the next best thing to physically pushing people into the store.
Sorry Peter, I did mean Paul, but the argument is the same. Have we forgotten so quickly the billexpress mess. I do not refer to the closing of billexpress I am talking about the lack of billers and the waste of time it took to do the transaction for so little a return.
I class Western union in the same boat it is just a waste of time for so little a return and that is why a lot of newsagents no longer offer it.
I see I have upset the LPO’s so I wont comment about stamps again only to say if you want to chase a dying product so be it I won’t be.
Luke, unless you have first hand experience in operating an LPO, I would suggest that you are being negative without real knowledge or experience and should at least consider that what those who have such experience may have merit.
No , you haven’t upset anyone Luke.
You seem to just be coming back to stamps but you’re missing all the other sides of the Post Office business arguement and how well they dovetail with many newsagency lines and transactions and provide a symbiotic benefit to one another. I get to see both sides of the coin so I guess I can appreciate what others don’t see. Anything that brings people through that front door regularly and generates positive cash flow has to be a good thing.
I would assume you still sell papers which are a dying product ? Stamps are in a similar decline (though at a lower rate than newspapers) but packaging and parcel transactions have been on the rise due to the increase in online web based business .
AP provides free marketing (all of the sales and brochures during the year we don’t have to pay a cent for) and is still recognised by the public as one of the most trusted businesses in Australia.
Just another couple oof pluses to leverage onto an existing newsagency.
Western Union, even with the recent streamlining of the online transaction, is still a little time consuming (average transaction time about 3 minutes) but the billpay transactions are lightning fast and represent often a great return for less than 60 seconds work. It’s not unusual where I am to have someone present 3+ billpay transactions in one hit. It takes often less than 60 seconds to process and will result in more money on the bottom line than a lotto transaction that takes similar time.
I can safely say that if I were to buy another business from either the news or post stream it certainly wouldn’t be into the news stream that I would be buying again whereas I would have alot less hesitation at looking at a stand alone PO in the right area.
It’s all about opportunity and which business looks to have a more certain mid time frame future.
you guys should be happy for anything sell for 5% margin. how bout selling bus ticekts which is taking about half your total turnover and the margin merely 2.5% gross and you got so much explaination to do to tourists.