One service this blog has provided over the years is to make newsagent suppliers more aware of challenges newsagents face.
I urge newsagent suppliers to click here to read the latest margin notice change from Optus sent to newsagents. While our costs of vending recharge products to Optus customers have increased over the years, Optus has reduced our margin over the years – as have other telcos.
This post is not specifically about Optus. It is about the power of supermarkets and telcos and how they disadvantage small business newsagents to the detriment of local communities.
Back to the Optus margin notice. Optus makes out they are helping us by allowing us to double our margin. I guess they are – we all want to make more money. The challenge is that to achieve this we have to take on a product newsagencies are often not appropriately configured to handle. It takes a different skill set and time commitment to sell someone a handset compared to selling a $30 recharge. The former takes ten, fifteen minutes and the latter takes a minute or two. The former is vital to turn the $1.20 commission from the latter into $2.40.
To sell handsets I need prime retail space in addition to time. At the counter this is difficult.
Shop floor time for many of us is about moving gifts, cards and other high margin items, items where I make between 50% and 75%. I don’t see the value in taking some of this time and investing it in handsets that deliver considerably less value unless I can move volume to justify the investment.
It’s not enough to be best practice at vending recharge, doing telco brands proud at offering a convenient and respected service. No, I must take on this other product. If I am in a centre with four or more other Optus handset outlets including a world-class Optus shop what can I do. Well, I cop the third-world margin and hope that the shopper buying recharge purchases something else.
In 2005 I wrote about Vodafone margin. A newsagent in a country town was getting 5% for their Voda recharge compared to the local Coles on 16%. A check of the Coles invoice at the time showed that Coles was doing less than half the recharge of the newsagent.
I wonder if this is the case today – if major supermarkets are making more than even 8% (yes, they sell handsets). I suspect they do.
What I’d like is a relationship built on trust and respect with a telco for recharge product. Given the convenience and service we offer, I consider an everyday margin of 8% to be a reasonable base without the need to offer handsets. Companies like Optus should leave us to do what we do well – provide a convenient and fast service to customers. They should not force us to chase new business for them in order for us to be paid fairly for our recharge services.
I’d like to see newsagent associations pursue this issue, to find out what we are paid for recharge compared to our competitors and to support newsagents with a plan of action in pursuit of fairness.
Hi Just did the deal with Jenlist ,sell phone + starter kits get 10% if it is cut i will going to ACCC .
We also believe about 40% pay by credit or debt card.
And quite a few ask if we can than up load the voucher.
What a way to lose money.
The Jenlist/ANF offer of 7% for basic pack and 10% premium pack is still valid and being rolled out to more newsagents as we speak. This letter about margin changes from Optus is generic and went to all channells to calrify the standard margin review procudure that has been in place for many years now.
Cassie, 4% is not respectful, nor is 7% given the additional costs associated with accessing this.
Yes, it has been in place for a long time. This does not make it right.
With rents rising 5% a year, labour rising between 4% and 6% a year and business expenses rising, we need to get the funds for these from somewhere.
The question remains, what do our competitors get?
So pleased to hear your thoughts on this Mark. I have deliberated about the Jenlist offer and came close to signing! I woke up to myself and said NO. No more low margin stuff. High margin gear is what I am now chasing.
Bruce it is a challenge. We need traffic and often it is the lower margin items that drive traffic. This is not so much the case with telco recharge from what I see. It is more likely to be added to a basket than be the reason for the visit.
My post intends no disrespect to Jenlist or yes Distribution. They can only provide what the telcos agree.
I think the telco offer is disgusting in that it completely disrespects Newsagents. The other issue here is the one whereby Woolies and Coles offer discounts on recharge. I am not sure who is subsidising the discount but it hurts my business directly and is obviously designed purely to convince customers that supermarkets are the go to place for recharge whilst we face dwindling commisions. It makes it a little harder to sell handsets as well.
On the other hand I have to say that I have had great success selling telco handsets and enjoy it. Sure the margin is lower than other products I could sell but low but you can leverage good accessories sales from the sale of handsets like chargers, cases, etc which carry much higher margin. It’s not easy work and you have to engage with the customer but then that is something I strive to do anyway and there is no doubt that it builds repeat business. Compare that to the service that you would get buying a pre-paid handset from the Post Office or Woolies.
I look at the sale of handsets first and recharge as something to sell on top of it. It suits my business but I appreciate that it may not suit others.
I know this is not directed at Jenlist and is about lower margins but I have to say that I think that if you are considering getting into this area focus on the sale of handsets and accessories. Jenlist have been an exceptionally good supplier for me and their assistance has definitely helped my business.
what kind of traffic are we trying to drive? Lotto, recharge and even newspapers do not make us any money and the people who buy these things are less likely to buy other items that have better margins.
We are an ABC centre as well and to me this is the traffic we want as for us we have both major telcos up the street as well as the supermarkets that offer customers better rates then I can. We cannot keep offering low margin products on bad trading terms in order to chase trafic for traffic sake. Handsets at 15-20% margin don’t add up for us if we are forced to sell a minimum each month or else.
An interesting discussion.
We sell handsets and get 10% on our recharge from some telcos.
The real issue is that the market power of the two supermarket chains has distorted the marketplace. They can demand better terms and get them, and you can bet that it is small business that is paying for those terms by getting margins like 4%.
If a supplier like a telco can offer a certain percentage, even for a short sale period, it should be available to all.
Good post Mark. This is an important issue vana and the anf don’t help us with.
Recharges on phones are fine and I find it worthwhile to buy a set quantity to obtain the extra service fee. I wont sell simcards or phones to new customers because I dont have the time to explain the intricacies of it all and simcard filling in the form and then having to send off to Canberra just takes to much time. When they reduce the margin like Vodafone in UK 1% i will stop selling. I have enough foot traffic from lotteries and papers so look to high margin to leverage from that traffic.
telco are not too concerned about losing resellers over a longer period of time, they will simply make it easier for customers to recharge online via the mobile phone they are using.
We will continue to be screwed because we will be less important to the telcos, pure and simple.
I have the sim stand on display that is required to get the higher % but i didn’t realise you had to achieve certain sales to quallify , The stand has been out for about 3 weeks and no interest at all . I have had it in the center of the shop at the door of the shop , on the counter and still no sim card sales .in 5 years i have never even been asked for one . I will give it another week and they can go in the draw ,because shop space is valuable at this time of year so high margin products will be getting the prime bits of realestate , this will also go for magazines for the next month they will loose prime space with counter units and the higher margin products will take over .
after saying i have never been asked about sim cards in the last 15 min i have been asked twice , both wanted telstra not optus or virgin so still no luck , i couldn’t believe it .
The only sim cards I ever get asked for are the Telstra ones. (I do stock the $2 cards) I have decided recently NOT to go for the extra margin, by selling phones. There are other things I can sell easier and more profitably and with less staff training required. If this sounds negative, am sorry but we have limited shop space, and the phone charge store traffic is not high quality. It is like the rail ticket traffic, in a hurry and focussed on getting in and out again.