Australian Newsagency Blog

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News Limited hurts newsagent sales with free newspapers

Mark Fletcher
January 29th, 2012 · 33 Comments

Shoppers yesterday at Bunnings in NSW were offered a free Daily Telegraph newspaper.  While I cannot be sure, based on the nature of the promotion and the photo I was sent I’d expect it was run widely in the state.

Every time someone sees the Daily Telegraph available for free it dilutes the value of the product and educates them to expect to not have to pay for the newspaper in the future.

While giving away newspapers usually paid for may make sense to the short and long term business goals of News Limited, free newspapers are nothing but trouble for newsagents. They harm a product which still is core to our identity.

Why News Limited?  What’s the plan?  While I think I know, it would be good for the company to share with newsagents their plan so that newsagents can plan themselves.

While even the paid for Daily Telegraph is only a dollar and has been for 14 years or more, is is still something people pay to access. Every time it is available free is a step closer to a purely free model.

News will have the excuse that this is a campaign paid for by Bunnings. While that may be so, there appear to be more free campaigns paid for by one party or another: gyms, sporting events, the races, music events and retailer situations.

If it were me I’d respect my product more.

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Category: Newsagency challenges · Newspapers · Ugh!

33 responses so far ↓

  • 1 Lance // Jan 29, 2012 at 12:29 PM

    My wife works at a large council run swimming pool in the eastern suburbs of Melb. and for the last 3 weeks they have been receiving 3 bundles of the HS to distribute freely to patrons.
    I must ask her what happens with returns.

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  • 2 BruceH // Jan 29, 2012 at 12:50 PM

    I suspect News Ltd isn’t run by Newspaper people – it’s run by the Advertising/Marketing Division. Their goals are purely short term – bigger bonuses.

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  • 3 Kent // Jan 29, 2012 at 2:50 PM

    Hi Mark,thanks for the info. I’ve found your blog is very helpful,lots of valuable infomation as i’m planning to buy a newsagency and have an appointment to meet the owner next month but with your recent posts regarding to newspaper & magazines have made me a bit nervous and not sure if it’s the right business that I’m about to enter,pls suggest.

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  • 4 Mark // Jan 29, 2012 at 2:58 PM

    Kent, if you purchase a business for a fair price based on accurate financials and are prepared to work hard and smart then don;t be worried. The news about newspapers and magazines is not new. We can approach them as challenges or opportunities. This is where fresh eyes and energy could work in favour of a new owner.

    I consider investing in a newsagency to be a good investment as long as the price is right and the data on which you make the decision is accurate.

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  • 5 Jon // Jan 29, 2012 at 4:47 PM

    Our nationwide driver informed me that Bunnings were receiving 50 bulk (18’s) per store of Sunday Telegraph. Add to this the free papers to all surf clubs ( we have to supply 2 clubs a total of 260 papers – returns not required ) and News Limited are looking at a very exaggerated sales figures.

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  • 6 Brendan // Jan 30, 2012 at 9:27 AM

    I suspect you’ve hit the nail on the head Jon.
    It’s all about circulation figures and this goes hand in hand with Bruce’s comments as higher circulation would make this advertising easier to sell and justify the cost of placing advertisements in the paper.
    Am I being too cynical or just realistic?

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  • 7 Former Newsagenct // Jan 30, 2012 at 9:48 AM

    Kent,

    Do your research and then do it again. I owned a newsagency for five years 2004-2009 and it was a daily grind from day 1 (financially). I immersed myself in the business, had great tools (including Tower Software) and implemeted all the “best practices” and it was break even at best.

    I now beleive I paid over the odds for the business but not by a lot. I also tried to buy the building but was knocked back by the owner. I think this would have changed the result as well as I would have made a capital gain on the real estate.

    In my opinion it’s all about traffic. Volume is the key. Generally speaking, the best newsagecies are the ones with the highest turnover. Unfortunately they also cost more! I’m not sure of your location or your stage in life but I almost ruined a great career by ‘taking five years out’ in my late 30’s. If you are in a great paying job with great prospects for advancment I’d seriously reconsider buying any small business. I thought owning my own business would be great reward for the risk and I seriously thought I’d do until I rertired. It’s tough. If small business was easy, everyone would be doing it.

    Knowing what I know now (and with the death of the newspaper in the next 10-15 years highly likely), I would have boughgt a Gloria Jeans or Subway franchise for around the same $. Different challenges but, from everything I hear, pretty constant income and hard to mismanage if you are even remotely switched on.

    If you are in a regional or rural location and are set on a newsagency make sure you buy freehold so the real estate is an investment as well. If all else fails, you’ll still own the commercial property.

    Good luck in your journey.

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  • 8 Mark // Jan 30, 2012 at 9:56 AM

    Former, while traffic is important, there are some very profitable smaller newsagencies. It all comes down to management matching expenses to income and leveraging traffic to the max.

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  • 9 Derek // Jan 30, 2012 at 10:20 AM

    Nationwide News is the most frustrating of companies. I am of the view it does not see the wider Newsagency / Retailers as customers, I am sure this has been the case for many a decade. The company culture knows in past years/decades that small business like Newsagents & Retailers were reliant on their product. I am continuing to work towards being non reliant on them.

    They have implemented a terrible interfaced website which has stuffed up many a business since its inception, it is no wonder that they have had to boost its circulation by these ridiculous initiatives that they knowingly will affect their long time customers.

    In NSW it seems we will be having one of the 3 week promotions where it appears this one is very informative for our customers. Correct me if I am wrong we get 15% of $2.00 for each item we sell.

    When we return our unsolds how is it realistic or possible to be able to ask the customer for the token? On Many occassions it is just not practical.

    The treatment of the Newsagency Channel can be summed up in one word. Contempt.

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  • 10 h // Jan 30, 2012 at 12:39 PM

    Our local Bunnings gets H/S from melb, ten per day that’s 70 papers a week, and we handle the returns, they sell between 2 and 10 papers a week, not a day, a week. Such a wasted affort.
    Re the Tele promo, in NSW it starts one day later than with the H/Sun in Melb, we have to handle both “because we have a contract” so the Tele stuff just sits in the store-roon until we can send it all back unsold, does our heads in doing both promos and I need my staff to actully be productive these days. Marketing DEFINATELY rules the roost, Circulation can’t change a thing.

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  • 11 Mal // Jan 30, 2012 at 1:12 PM

    Kent, get a variety of perspectives before purchasing a newsagency, and critically think about the advice other people give and one persons opinion may not reveal the true colours as to what running your own business is like.

    Take for example:

    1. Yes, in some cases, large revenues may indicate a better business, but that’s true only when comparing similar overheads. If your rent and wages are inappropriately high,then you could be doing 900k in sales without making a single cent of profit. Like Mark said, there are some very successful and small newsagencies that are quite profitable as their expenses are low.

    2. If you’re purchasing the business using a bank loan, then you will need to be vigilant about cash flow.This is important as business loans tend to be for shorter periods and for higher interest than residential mortgages. This may mean for the first couple of years, you may find financial hardship. Take for example a friend of mine who owns a New World supermarket in Hamilton. Their revenue is about 700k per week and have over 126 staff. To this date, after 4 years in business, their cash flow has always been negative and aren’t expecting to be in the black until another 5 years.

    3. On this blog, you will see a recurring theme about Australia Post hurting small businesses. In NZ, our national post also operates with a similar strategy. But it’s not always true that NZ Post hurts our business. In fact were are very happy to have NZ post near by, as when our product offers don’t overlap, the services and product we offer, complement each other well enough to drive greater sales.

    4. In regards to the newspapers dying in 10-15 years…. In Australia, your newsagents drive amazing paper sales. I envy that. Over here, Newspaper sales are highly controlled by the publisher and we have a much smaller population (the whole of NZ has about the same size as Melbourne). That means I should consider yourself luck if I sell 30 newspapers in a day. And when I’m making only 5c per newspaper, there is literally no profit. Hence, there are very few true newsagents in NZ, rather a mixture of bookshop that sell a diversified range of products. Low newspaper and magazine sales haven’t caused us to die out, rather to change. I’m sure Mark would agree, considering he is well informed about Paper Plus in Whitcoulls in NZ.

    Kent, have a good think and do your research about the particular business before jumping in. You might be very well off in a few years if you’ve purchased the right business at the right price.

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  • 12 ebo // Jan 30, 2012 at 4:53 PM

    In The Sydney Morning Herald today (page 11), there is an offer: subscribe to the digital edition for “just $3.42 a week” and get the hard copy Saturday and Sunday Heralds “delivered to your doorstep” as a bonus.
    I am intrigued by this offer, why bother giving digital subscribers real newspapers when they have got the digital edition “laid out exactly like the newspaper”?
    To deliver the inserts and ads using the newspapers as wrappers? and using unsuspecting distribution newsagents as super-cheap couriers?

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  • 13 Rocky Road // Jan 31, 2012 at 6:10 AM

    Bottom line is newspaper sales are increasing. In our store we’re selling (or delivering) around 7% more newspapers than we were last year. The Tower quarterly study confirms the trend. We know that sales and circulation aren’t directly related because of the past dodgy practices of the publishers. Hence a drop in circulation could just be a drop in dodgy practices. In other words they are moving to clean up the data upon which they base their advertising rates.
    Fact is if the trend is to be determined by consumers newspaper sales will remain viable. That’s not to say digital sales will not also be significant. There is a long term future for both.
    It is interesting that the 2 major publishers are planning to build a huge new printing works in Melbourne. This will bring about not only cost savings but a capital commitment which will take a lot longer than 15 years to amortize.
    It is also interesting that News have recently restructured their Advertising Sales dept. All platforms will now be promoted by the same people. Customers will be offered convergent media plans, rather than separated costs. This is also a positive sign.
    Finally 2 questions:
    Did Video kill the radio star ?
    Did instant coffee replace the coffee shop?

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  • 14 Mark // Jan 31, 2012 at 6:27 AM

    Rocky, the more appropriate analogies would be music and books retail but even they do not fit ideally with magazines at least.

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  • 15 Rocky Road // Jan 31, 2012 at 11:44 AM

    I agree with you Mark, however the analogies I used also portended disaster for the encumbent technology. But we ended up with choice and diversity. Radio is no longer the same, and coffee shops certainly aren’t. I would suggest that books and music didn’t adapt while radio and coffee did.

    The key point is: all is not as bleak as some readers seem to think. The publishers are huge businesses and their shareholders have a lot riding on the future direction. As the principal distribution channel we hold some of the cards If we work smart, adapt and innovate and above all serve customers well we can have a good and enjoyable business.

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  • 16 Mark // Jan 31, 2012 at 11:56 AM

    Rocky, newsagencies don’t have the benefit of scale. This is why we need to understand and embrace change.

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  • 17 Rocky Road // Jan 31, 2012 at 12:11 PM

    Part of adapting is working together to create scale. Marketing groups like NewsXpress and the trend towards distribution hubs are just early examples.

    We have been too content (complacent) and waited for the industry to find our solutions for us.

    The associations (VANA etc) have been completely MIA on this issue. In fact if they are our face into the publishers then it’s no wonder the relationship is so fractious.

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  • 18 Jarryd Moore // Jan 31, 2012 at 12:29 PM

    Rocky,

    The Tower benchmark study shows the following.

    “40% of newsagents reported an increase in newspaper sales. The average increase was 2%. Of those reporting a decline, the average decline was 8%.”

    That would indicate that 60% (the majority) of newsagents achieved either stagnant or declining sales. The difference in the rate of growth and decline is also important. An average of 8% decline compared to only 2% growth clearly indicates an overall downward trend.

    The video/radio star analogy has been used to death and as it has been explained here many times – raido and video are two completely different mediums in which both the content and the physical manner in which it is consumed differ greatly. The same can not be said for the print/digital scenario.

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  • 19 Chris // Jan 31, 2012 at 2:25 PM

    Our local Bunnings on sunday had a whole pallet!! One of the staff members said’oh, this must be bad for your business”. My reply was “No, i dont really care what the newspaper publishers do anymore, it is not a major factor in my business anymore”. She was surprised so i explained to her that right now i am focusing on BTS and niche magazine sales and being the premier local outlet for these areas. the sooner we all forget about what these publishers are doing and focus on the areas that are growing we will become better newsagents and these publishers will be the ones left out in the cold. they don’t reward our loyalty anymore so why should we be loyal to them!

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  • 20 Former Newsagenct // Jan 31, 2012 at 5:47 PM

    Rocky/Mark,

    Kodak filed for bankruptcy last week. They failed to adapt.

    I agree with what Mark says about diversifying however, not all newsagencies can sell ink, gift lines, mobile phone accessories etc as they don’t have the space, credit facilitiesm, cash flow etc or have strong local competitors or a market that doesn’t really demand it.

    All my customers called our business “the paper shop” for a reason. I was just trying to tell Kent that IF the newsagencies he is looking at are traditional newsagencies and/or don’t have the capacity to accommodate changes to stock or systems then he should reconsider as the old school newsagency is dead or dying.

    Margins are thinning, costs are increasing and printed media sales worldwide are declining …. no matter how News Ltd and Fairfax try and Tower Systems try and spin it.

    I wouldn’t buy a ‘normal’ newsagency with your money let alone mine!

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  • 21 SHAUN S // Jan 31, 2012 at 6:28 PM

    Former by “normal” whaT do you mean ,newspapers mags and lotto only stores ? I can’t even remember the last time i have seen a normal newsagency . Most have addapted into something else that can grow off the traffic generated from thgose other sales .For me it is the copy shop side of things ,the traffic that the normal newsagency lines bring in i have helped grow my copy shop side .Without one the other would not have worked out .

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  • 22 Mark // Jan 31, 2012 at 6:39 PM

    Former,

    Newsagents are diversifying into more areas than you mention.

    Every newsagent can find the space, time and capital if they realise they have the need are accept accountability for their situation.

    Margins are not thinning except for transport tickets. Okay, newspapers given that cover prices are not keeping up. but magazines and cards are increasing and margin dollars are the same.

    No spin here.

    You need to accept that some of are making a go of being newsagents and growing profits as a result.

    By the way, this is not a Tower Systems blog.

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  • 23 Rocky Road // Jan 31, 2012 at 6:55 PM

    Jarryd, Your point is unnecessarily argumentative. The trend I refer to is that progressive, constructive newsagents can still grow a business. Newspaper and Magazines can still be part of individual newsagency growth. Yes, ultimately print is threatened by digital, but it’s not a doomsday scenario.
    Well might the Video /radio scenario have been done to death but it is still a plausible analogy, if not only for what radio has done to change its model and meet its various challenges in the last 15 years.

    Former, You’re right there will be no such thing as “normal” (or classic, or traditional) in the future. Adaption means that there will be great diversity in how we go about surviving and thriving.

    We continually analyse our business and in fact although we have healthy news paper sales (with growth) across the counter it is in fact less than 10% of our total retail.

    As a community hub we consistently serve between 7-800 people per day. Our goal is to separate everyone of them from $10.00. News papers and magazines are a core part of it but that core is less than 40% of the whole. Our challenge is to attain the $10 basket and then build on it. Currently we have chosen a seasonal strategy that is working well for us. We focus on different retail product ranges depending on the time of the year. This gives flexibility, opportunity and range and a lot of fun. Not earth shatteringly innovative but still quite effective.
    We are certainly not unhappy to have invested our life savings into this business.

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  • 24 Jarryd Moore // Jan 31, 2012 at 9:56 PM

    Rocky,

    My point was that the Tower study did not confirm that your trend in newspaper sales was typical.

    When making the radio/video analogy we have to look at the specifics of the comparison.

    Radio and video are two different mediums – as are print and digital. Radio and video contain two different types of content which are physically consumed in different ways – print and digital contain the same type of content that is physically consumed in the same way. Radio and video only compete against each other in some market segments (eg they don’t compete for the attention of consumers driving to/from work) – print and digital compete against one another in almost all market segments. Other that adding a visual aspect, video offered little advantage to the consumer – digital offers vast and increasing range of advantages over print.

    The medium-long term fate of print is to become a niche product. Short term growth in newspapers for individual newsagencies can be achieved, but we must understand this is most likely only a transfer of sales from a competitor. When planning from an industry perspective we must look at the overall trends and plan for the long term demise of the mass market product we currently know.

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  • 25 SHAUN S // Feb 1, 2012 at 7:59 AM

    WAY OFF TOPIC BUT WHAT IS THE GO WITH ALL THE NEW CROSSWORD AND SUDUKU BOOKS COMEING FROM GG .There all getting sent back i have no more physical room to try any more new crossword tittles it just cannot happen

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  • 26 Garry // Feb 1, 2012 at 8:47 AM

    SHAUN S

    Was wondering the same thing.

    If it was 1 or 2 new titles a week I would try to give them a go but 5 or more titles (20 mags or more) is just plain stupid and a money grab by GG

    Have 2 choices

    Early return the new titles or
    return titles that sell.

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  • 27 Y&G // Feb 1, 2012 at 10:33 AM

    Off topic again. Sorry.
    RIP Farifax. Gina’s gonna kill the last (print) bastion of what’s left of ‘journalism’
    🙁

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  • 28 Derek // Feb 1, 2012 at 4:53 PM

    Y&G – Do you know or have heard something? Maybe I have not heard some news today.

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  • 29 Max // Feb 1, 2012 at 4:56 PM

    I think that Y & G mean the “potential” acquisition of a larger stake, by Ms Rinehart, in Fairfax.

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  • 30 Derek // Feb 1, 2012 at 5:38 PM

    Thanks Max – This months Womens Weekly has a article about her, a brief mention regarding she had a stake in it. I did not put 2 & 2 together. She must know something we do not.

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  • 31 Max // Feb 1, 2012 at 5:38 PM

    A bit more….
    http://au.news.yahoo.com/latest/a/-/latest/12773943/rinehart-becomes-biggest-fairfax-holder/

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  • 32 Derek // Feb 1, 2012 at 5:56 PM

    I love the part where the secretary of the journalists’ union the MEAA, Chris Warren, said ” No individual shareholder or proprietor could seek to influence editorial decisions”

    If you read a book called Man bites Murdoch, you know this is untrue.

    I wonder what all this means for the future of Fairfax.

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  • 33 h // Feb 1, 2012 at 8:08 PM

    I gather she wants to influence all of us out east that up the north west is the economic powerhouse of the future of this great nation. So maybe she needs our taxes to subsidize her expansion?

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