Check out a quote from Richard Goyder, CEO of Wesfarmers, from a couple of weeks ago in The Australian Financial Review:
Any business in this country has to be looking at how efficient it is. Our business is not to prop up inefficient suppliers but supply great products to our customers in the best way we can.
This is very true. The problem for newsagents is that we have contracts in place with Gotch and Network that see us propping up inefficient suppliers. We are treated differently to our competitors by these companies, with less efficiency, and this costs us tremendously.
There was a crisis meeting of all newsagent associations almost a year and a half ago about this and to my knowledge nothing has happened.
I predict that once the issue of newspaper home delivery efficiency and value is resolved, more newsagents will turn their eye to the value of magazines. I have already heard of several newsagents actively considering closing their magazine distributor accounts because of inefficiencies they cannot overcome due to the poor business practices of Gotch and Network.
Magazine publishers should get engaged in the issue of supply efficiency – otherwise they will find newsagents not wanting to carry the category.
Richard Goyder is lucky, his one account is so big that suppliers must take notice.
I hear on the grapevine that there is a large Melbourne based distribution only agent who has handed back their magazine accounts. I know of a few others including ourselves who early return all the junk magazines as a matter of policy as it is uneconomic to send them out, and in our case there is no subagent who will take them.
We have one advantage and that is we don’t pay freight to send back Gotch and Network returns as we take back Gotch ourselves and for a couple of other newsagents, one of the other newsagents reciprocates the favour for Network.
the publishers must start pulling the distributors into line, they will lose out as much as we will in the long run
Rick I suspect this will happen only after newsagents start getting out of selling magazines. This will happen.
Dean you are lucky, two weeks ago we returned 10 boxes to G&G and Network (a record) last week another 5 all at $4 per box. All these mags where stopped some time ago then all of a sudden have reappeared. Just to top it off we put a claim in to G&G for a bundle of missing mags from the 29th April and informed them do not replace as we do not want them. Last friday the original bundle arrived with 29th invoice, very frustrating.
As Rick said the publishers need to take to the distribitors with a bloody big stick and let our chanel have control of our stock.
I agree Mark.
I for one am seriously considering how to either exit magazines completely or just carry the top 100-200 movers in my store. For me in a strip store they are simply not worth the shelf real estate, labour and electronic costs of keeping them as it stands now.
Network in particular is getting rediculous with what they are pushing through even after I notified them of my pocket decrease. I’m getting at least 5 new titles a week that are going straight to returns and even the sales based replenishment is rediculous because they are replacing sold magazines but aren’t taking into account the original supply number and my normal sales and returns based on that number meaning I’m returning more but still selling the same number.
We received a magazine ABC Organic Gardener special from gotch Wed week back and sold out last Saturday. That is 37 copies in 10 days of a magazine that is on sale for 3 months. I went on GG site to order more but they have no stock. I then phoned publisher and they to have no stock.
What happens to the stock (full copies) that has been early returned, does it just get trashed?
If some newsagents have returned copies of this magazine and it is not redistributed to those newsagents who can sell more then GG are losing sales for the publishers as well as for newsagents.
With handling, freight cost, and time spent trying to decrease the re-bounding supplies, cost of topping magazines to supposedly save freight and then paying increasing postage due to the increasing volume being returned to send tops back, the cost of staff to top and paying to dump mags makes me wonder how profitable they can be. But do I see a newsagecny with no magazines ? Never.
I actually believe I could run my shop alone
if I didn’t have magazines.
This would save me many dollars and would increase the amount of gift items and other higher prices items that we
currently don’t have enough room for.
I am interested in what other agents think
about this as we need to ensure we survive into the future and I don’t think
we will do so with mags in their present form with their push model.
Comments?????
I am doing my sums on the wages I pay ONLY because we have mags to handle, return, sticker and pull and put on the shelf.
I’m pretty sure that on a cash benefit analysis (CBA) it could be like Swan’s deficit.
Maybe I do not do enough with magazines but I cannot see what takes so long to label ,display , and do returns . My mags are all labled by 7:30 in the morning and on the shelf by 8 all this while serving customers . Take away magazine ,papers , lotto and everything else we complain about do you really think their is enough foot traffic for just gifts ,cards and stationary .
June, While you are doing the sums on dumping magazines can I suggest you also do the sums on becomign a magazine subagent. You lose half the commission, but as long as your distribution agent is any good you should get only what magazines you want to receive. Quantity, now that is a whole different issue.
June, take away magazines and what are you left with as far as being a newsagent?
Don’t magazines generate good foot traffic.
I think gifts do well in newsagencies because of the number of customers that come through our doors.
Kick out papers, magazines and lotteries and then you are just a gift shop that customers will only come to when they need a gift.
Jenny I would keep lotto because that is
what makes us a destination but I still
think I could make a better living with cards and gifts and get out of mags altogether.
The rents we pay in centres makes mags
a bad part of our mix for profitability but
I think regional agents would do very very
well still with their mags as an important part of their mix.
We have a Coles next door and that sells
all the product that people want and the old “niche product” line that we have been peddled for years just doesn’t cut the ice
any more.
Just perusing what we actually pay for to handle mags.
Wages (approx $24 ph). Xchangeit (payment p.a.) returns labels ($2.50 each parcel) labels for magazines, and retail space per square metre.
Doing my sums I think I am actually only
making approx 5-7% on this category so
it doesn’t warrant that sort of investment
IMHO.
I totally reject the “it brings people in to your shop” scenario.
Our friendly faces, commitment to service,
Lotto and local knowledge are far more important. (I think)
June you sound a lot like my wife 🙂 she says the same about mags but I always disagree with her .
Talking of coles well not coles but actually woollies I see they are doing the same VOICE promo that we have with the mags this month with ACP
Circumstances have “allowed” me to do magazine arrivals myself starting 5am on Mon/Wed/Fri for the last three weeks.
Quite an eye opener. Hubby being unavailable, I have met a whole lot of early morning customers I heard about but ever knew – wonderful ! The mag job -I do it in half the time I previously paid someone to do. Enough said, employment restructure underway lol.
Is Richard Goyder = Wesfarmers = Bunnings? Well, his big PowerPlay makes me deliver 5 newspapers ( 2 titles) a DAY to his Big Box store in my territory, and receive back half of those. I am his wee slave via his Big Power over News/Fairfax, they should all be so PROUD of themselves, plus they then expect me to shop with them – BIGGER LOL ! This is equivalent of the garment industry and Bangladesh, it cannot last and we need to rethink win-win scenarios quite frankly.
Re Fairfax today and off topic : our usual 40 copies of SMH on a Wednesday was carefully cut to SEVEN copies today, day after Budget Day ! WOOT – we were beefed up nicely by Fin Reviews, so guess what got front and centre. Really, who cares, the local paper is still going Ok, and yes June, magazines in a regional strip centre are doing fine.
I for one agree with you June.
I think it is possible to operate without magazines but I think the preferable option is to operate with a very restricted range of magazine such as 7/11 does. We need to get rid of the non performers and stop the rampant oversupply. At the moment the distributors need somewhere to shift the poor performers so that they can still make their delivery targets regardless of whether the magazine is actually really worth shipping because that is simply not of concern for them.
Lotto is a traffic generator but, as Mark presented in his workshop, the percentage of people who buy addittional items is low.
For me my magazine buyer IS often a multiple item purchaser but its often another magazine (which I’m assuming is often the paired purchase of NI & WD or Take 5 and Thats Life).
The biggest category of purchaser if sorted by basket GP amount is the card purchaser who is often buying a gift or paper etc to go with the card or purchasing multiple cards.
I should note that I do believe I draw more people in because of my Post Office than I do for any single Newsagency category and that about 35-40% of my Post Office visitors often also spend money in my newsagency section after having done a head count survey one day.
I have one section of wall of approximately 6 square meters shelf space that used to be magazines that I had refitted and now devote to a hobby line. In the 10 weeks that has been up there, and bearing in mind I still haven’t “launched” that product line to it’s intended audience yet, I have made more GP per m2 than any 4m2 of magazines when costs are taken into account by comparison !
This is part of the reason I’m eyeing off losing another 12m2 of magazine space to devote to other things such as more of what appears to be working. In the current climate I can’t afford to carry anything that isn’t pulling it’s weight in my store and I’m no longer afraid to walk away from or greatly decrease more traditional areas of the business to forge ahead in newer often less competitive ones.
This is something I have been warning magazine publishers and distributors about for some time. Unless we are treated equitably compared to our competitors, newsagents will quit the category. I’m not happy about it but it will happen.
June,
My guess is that if you are getting between 5 and 7% on mags you are doing better than many others. Back in 2008 I did the exercise on overall magazine profitability and after accounting for rent/square metre, staff costs – not only in the back office but also at the counter apportioned to mag sales, depreciation of fixtures, costs of sending returns, the value of the stock on hand and value of returns yet to be credited (though with weekly returns this is not as much of an issue now as it was then) my magazine department was returning me -3.70% on gross sales. Compare that to cards at 58% and ink at 33%.
When I looked at my annual net profit return on the value of my stockholding, magazines was -48%, cards at 144% and ink at 423%. These results for magazines both shocked and astounded me – I never dreamt it was that bad – so much so I went through the process several times looking for where I had made a mistake and had other newsagents go over my numbers looking for errors.
In 2010 I repeated the exercise and it was returning roughly -6%, so it had got worse despite a more concerted effort to control it. At the end of 2011 I went about cutting 35% of my magazine space and introducing non-traditional products, and I am about to go through this exercise again with my new shop layout to see what the difference is.
I do think we (our shop) need to have magazines, the big question is how many titles and in what volume?
It’s certainly about more than profit for newsagents and, unfortunately, our suppliers know this.
In October 2011 I reduced my mag from 1000 to 750 pockets.
In that space at the font of my store I have experiment with differnt gift lines.
From August to December 2012 I made more gross profit in the reclaimed space than I did from my mag section.
I believe mags are breakeven at best once realestate and wages are deucted from your margin.
Magazines are now 24% of my sales an 11% of my profit excluding comissions
Bill we certainly need to balance magazines in our overall business if we are to achieve above average GP. The dying newsagents have a GP imbalance and see GP languishing between 28% and 32%.