The announcement from Fairfax yesterday outlining the most comprehensive restructure in the history of newspapers in Australia was not a surprise. Not to me and many others. But plenty were surprised.
Fairfax CEO Greg Hywood had told us major changes were coming. News Limited CEO Kim Williams has told us that News, too, was preparing a major announcement on its plans for the future. While we should not be surprised by what Kim Williams announces shortly, some will be.
I have written here for almost eight years about media disruption – 985 posts in all and I’ve barely covered what has been happening around the world.
If we look at music and books we have guidance on how a major shift in how the audience engages with content can play out for the distribution channel. How many music stores are left? What are print book sales versus digital downloads? You know the answers.
But newspapers were different. We love them. We feel like we own them. John Howard, as Prime Minister, commented several times about the warm feeling of hearing the newspaper land on the front lawn. We have had a long love affair with getting our news by engaging with ink on the page. But newspaper are businesses. They live or die based on profitability.
The end of newspapers began when classified advertising moved online and while plenty in newspaper publishing businesses said it was business as usual and that print would be here for the long term, they know otherwise when advertising revenue started to decline and then fell off a cliff.
I don’t want newspapers to shrink and close. I like the medium. But times change, people change. Paper is being replaced at work and in the home. And we are experiencing just the beginning of this change.
Newspaper publishers told newsagents that the paper product will remain because they needed newsagents to be their partners to the end. Newsagents provide the cheapest newspaper delivery option available. Newsagents are part of their decay play, they give the home delivery of newspapers a longer life. I don’t begrudge newspaper publishers their view, it’s practical for them and their shareholders. Newsagents should have known better, they were warned.
What I wrote wrote in February about News Limited being in crisis in terms of newspaper home delivery was true. The crisis was in part brought on by newsagents walking away from their home delivery businesses, in numbers which alarmed News. The announcement coming soon from News was expected to speak to the extent of the crisis (or whatever you want to call it). The Fairfax announcement could mean that News pulls back somewhat from or delays the full implementation of its plans to see how the Fairfax move plays out.
I have no doubt we will see the closure of some daily newspapers in Australia. This has been my view of some time and I’ve stated it here before and in other public forums. It’s one of several reasons why I have been calling for newsagents to reinvent their businesses, to seek out new traffic drivers for retail, to source new uses for distribution infrastructure.
I also have no doubt that we will see sales of some newspapers grow … when engaged publishers realise what people will pay for in this marketplace.
Fairfax owes newsagents nothing. The challenge is that many newsagents disagree. You can’t force a business to operate an unprofitable operation. Yet that is what many newsagents have done for many years. Maybe the Fairfax announcement yesterday will shake these newsagents to take charge of their own situation.
I am not changing my business plan in the wake of yesterday’s announcement. I will continue to focus on broadening sources of traffic for my newsagencies. I’ll continue to adjust the product mix and placement to increase the basket size. I will drive margin when I see an opportunity to make a product more valuable to the business. I will do all this without disrespecting traffic I get today from core newsagency lines like magazines, greeting cards, stationery and, yes, newspapers.
Here is what has changed in case newsagents missed it – just a few years ago we could rely on newspapers to deliver 50% or more of our foot traffic every day. 80% or more newspaper sales were for a paper and nothing else – most likely from people who would come back in another visit for other purchases. As they purchased fewer newspapers they thought less of the newsagency for the other items. If we did not maintain our relevance outside newspapers we lost some of these previously welded-on shoppers.
Newsagents who have not replaced newspaper traffic and have been surprised by the Fairfax announcement need to move quickly to rebuild relevance and to bring in new traffic.
I’ll gladly help any newsagent feeling challenged by what is happening.
Good points, Mark.
The most important is that “Fairfax owes newsagents nothing”.
For those newsagents still wedded to the printed newspaper, they have to understand that even if the print model still works for Fairfax they are going to look at stripping costs out and – as you’ve documented on this blog – media executives see newsagents as an easy cost to cut.
At least Fairfax have made their plans public, we can be sure similar presentations are going around internally at News Limited.
For Fairfax, like the local newsagent, the key to survival is relevance; if readers and advertisers don’t see the SMH and Age as relevant then they are gone as is the newsagent if shoppers don’t have a reason to go there.
You’re right Paul. I just did an interview with Matt Parkinson on 774 Melbourne local ABC radio and covered similar points … we have to nurture our own relevance. Nothing new there, especially since deregulation in 1999.
Once again it makes me wonder if the term ‘newsagency’ is still relevant?? Do we stay true to the end and continue with the term?? Certainly the brand ‘newsagency’ is fundamentally good but my question is is it really relevant going into the future. Do we really want our businesses tagged with the term ‘news’ considering it makes up such a small percentage of what we have on offer..so what do we have on offer..cards, gifts, stationery, agency product and here we stop..in the economic climate it is difficult to recapitalise to grow businesses and integrate new areas…where do we go, music and books are no longer viable..we need to understand the needs of the greater market..how are people shopping..are others at home on a friday night..meeting up with the girls to shop online in the confines of our own homes..not getting out and into shopping malls..do we as consumers still enjoy the shopping mall experience?? These are my questions without people past our doorways..retail as we know it has changed..I dont need to bring up rent issues, we all have them. I seriously need to consider why as a consumer I would go into a newsagency?? First and foremost I need to be out shopping as opposed to being curled up inside comfortable, glass of wine in hand and trolling fashion labels, jewellery, music and the like..so I ask myself why do i go to the local newsagency, to buy a lotto ticket (only when i remember) or to purchase a bus ticket for kids. I sincerely believe in the use of agency products particularly the gift card zone…it wont pay the rent but it will get people through the door, people are time poor, economically struggling and if the media is correct we will be struggling further on the back of the carbon tax. So ‘agency’ is a good term perhaps but what term really defines us going into the future??
A good question. Although I think consumers still identify at the moment a place to buy, Newspapers, Magazines, Stationary, Lotto, cards etc under the general banner “Newsagency”, Marketing groups have defined themselves with their names such as NewsXpress, is that still relevant, probably.
An example to consider is Post Office / Australia Post- They sell everything but the kitchen sink but people generally go their primarily for Postal transactions and impulse buy.
I truly do not know other than Marketing groups are forging their own future directions under their Brand name, but a good question it is.
I think TLC The Lucky Charm may be on the right track. Their name is suggestive of Lotto, but also maybe gifts and other nice stuff. TLC – nice initials. I can see the advertising campaign – come and get some TLC we give you more!
I just don’t see people turning up like clockwork at Australia Post like they do in my store. Some come every day for a newspaper. Some come every week for their lotto. Some come every month to pay their bills. All the “some’s” add up.
The bit we work on is routine – keeping things regular with add-ons for special occasions like the Jubilee, the Olympics, the Tour de France.
Black Caviar is racing at Ascot this weekend – we’re talking it up at the front counter, I may sell four or five extra racing papers but the customers LOVE the chat at the front counter, the engagement with something that isn’t Doom and Gloom, life as it is going on –
– that’s a Newsagent for you,
they don’t get that at Australia Post !!!
Mark, While it is hard to judge from a distance, I think eastern state distribution newagent’s need to have a long hard look at their business model – just as News/Fairfax are doing, if you’re not making a profit (there’s that word) in distribution – Ask yourself the question – why am I doing it? This is the question News and Fairfax are asking in all operational area’s of their business’s. Newsagents need to re look at their distribution model … lets say a newsagent has a proven history of the following delivery times ….receives the Herald Sun at say 2.30am but no Age until say 5am, why not deliver just the Herald? This example could be easily be reversed. Look at the costs associated with the later delivery is it really worth it? Even if you delivered say 800 per day but need extra staff – whats the profit in this cost centre? Whilst a radical view, I can see no problem with a newsagent being say a News Ltd only or a Fairfax only distributor – the only point that matters is – the delivery cost centre makes a profit. Finally, the daily publishers are all about cutting costs and streamlining systems as they should be, they need to make a profit – newsagents need to be the same. It’s simply all about our costs.
John
Well said John.
Those who successfully distribute charge appropriately.
I am not in distribution. If I was I would not be delivering newspapers at a loss. Either charge for the service, sell if you can or close it. In fact why wouldnt it be cheaper to leave them at the “newsagent” to sell. I wont keep the local newspaper because no one wants to pay me. Why would I put it in the shop to be collected free when I am paying $700 per sqm. I have enough people coming into the shop for marginal products such as newspapers Lotto and phone top ups yet I am always been offered a new deal for a silly margin. Why would you sell a $2 sim card when it takes 5 minutes at least to assist in filling in the form and explaining how it all works so that you can then get 4% on the top up. It is nuts. let Coles sell it and we will do the top up. I only want products that I can sell for a decent margin. The lotto newspapers and phone topups bring in enough foot traffic. The challenge is increasing my basket and margin to them
I am a convenience shop
Wally: expound your range of products to leverage existing traffic and market externally at least once a month.
h
I was responding to a question “So ‘agency’ is a good term perhaps but what term really defines us going into the future”
You are right all the some’s add up. However some of the some’s will be less and some soon to be deregulated which may affect the sums. Sounds like you have a good customer base business.
Wally sell every thing ,let the buyer fill out the form .Buy selling starter kits u can get extra margin .a newsagent is a lot of little bits to make a big bit is how we run our store.We also have our lotto well in the store and we sell well of it
At a recent National Conference of Newsagents in Birmingham UK I was astounded by some of the Newsagents not willing to adapt according to Market trends!
Newsagents have got to change search the Market needs in order to survive.
Keep products and services that makes a profit and don’t be blinkered!
Nalin, we hear you! It’s been a mantra of this blog since it started in 2004. Those who wait to see the change before adapting will most likely have left it too late.