News Corp. Australia has this morning released the long-awaited results of the national newsagent remuneration review. I see the changes announced as a reinforcement of commitment to newsagents from News. The headlines as I see them are:
Three year contract. This gives newsagents certainty, something they can sell. It will help newsagency sellers and buyers. But most important, the three year contract term will help banks better understand and price the value of a newsagency business. This should make borrowing to purchase a newsagency easier. The three year term also encourages newsagents to consider capital investment within the context of such a term.
Consistent fee structure. Under Kim Williams leadership News transitioned from a state and regional business with many silos each with its own approach to management and each with its own newspaper delivery fee structure to a more centrally run company. The new fee structure of essentially two fixed fee-per-copy fees – category 1 (20 cents a paper) and category 2 (25 cents a paper) – quits close to fifty fee structures. Gone is a fee that reflects a percentage of cover price. I see this as focusing attention on the distribution business as a freight business.
Fixed fee-per-copy replaces sliding scale delivery fee. Gone is the discount for second and third newspapers delivered to one address. The new approach treats each delivery as a delivery. This move to a fixed fee-per-copy approach is sensible from what I can see. This change should increase the income earned by many newsagents.
They remuneration decision shows that News is committed to the newsagency channel. Beyond the increase in fees, the more valuable changes are contract tenure and the fixed fee-per-copy. My understanding is that these moves will increase the income earned by distribution newsagents.
While newsagents will be frustrated that they have to wait for six months for the remuneration changes to take effect, the time is necessary for News deliver changes to its internal systems. The delivery pricing model is quite different to what some News systems have been used to.
I see the remuneration and contract changes as part of a broader process being undertaken at News. The company has work to do with retail newsagents to drive single copy sales. As a retail only newsagent this issue is important to me if I’m to continue to sell newspapers.
News also is yet to fully address the issues of consolidation following the suspension of the T2020 project in Queensland earlier this year. That said, the FAQ document accompanying the announcement indicates the company is supportive of voluntary territory consolidation. I’d be keen to see it go beyond this and actively encourage newsagent-driven distribution territory consolidation.
News has a website with some details. All affected newsagents will start receiving letters from today.
While these are my views, what really matters is what other newsagents think. Over to you…
Not sure about this Mark and will obviously wait to see the exact detail. Simplification is undoubtedly a good thing. A flat 20 cent per paper fee seems good on the surface, but not sure whether its a net positive. The current seven day home delivery fee is 18 cents, so we are talking 2 cents up. However a 2 days per week delivery fee is 26.5 cents per paper, and 4 days per week 21.8. These fees are in addition to the commission on the face value of the paper. I assume that component remains the same. I reckon overall on home delivery its a net zero gain to agents which all would agree is loss making at current remuneration levels (total 43.6c exc gst per delivery on a weekday compared to a stamp which costs 60 cents).
A subagent delivery fee is simply the commission on face value, so $0.15 on Herald Sun weekdays, $0.25 on Saturdays, and now $0.3125 on Sunday. Again if the 20 cent fee applies to subagent deliveries across the board, I again suspect this is a net 0 sum game because the much heavier delivery volume days of Sat and Sun will be heavily reduced in terms of remuneration).
Simplification and certainty are good. I guess I’m a little sceptical on whether there is any financial upside for Agents. I will delay final judgement until the I have analysed the detail.
Waiting on letter but from what we’ve read on their site and depending on which category we fall into (20c or 25c) we are happy with this change.
Will make sense to push more publisher offers if we are getting this extra delivery fee from them.
It still comes back to a small home delivery/distribution is a loss maker compared to a larger operation which can be a good profitable business, though the downside is still that it controls your life.
My first question is are they treating Saturday and Sunday with the same flat rate; or does it fall in line with penalty rates?
I haven’t yet fully read the document; my store is based in country Victoria.
No penalty rates.
if there is no penalty rates for the weekend News can kiss my arse!
Of course any increase in delivery fees is welcome but we lose so much money on the delivery run that a few cents is not going to make any difference. We cannot hand the run back because we would not survive the 50% cut in retail sales commission.
After reading more closely my snap shot is as follows
1. 3 year contract (good)
2. Retail rumuneration stays as is for now. (no time frame on an increase given; BAD)
3. Home delivery goes from $1.26 to $1.75 for 7 days (there’s a catch)
4. Sub Agents remain the same for now.
(remember i am a country newsagent)
Here’s the thing;
If you deliver single papers:
1 paper week (worse off)
2 papers week (worse off)
3 papers week (same as current)
……if it’s on a weekend you are considerably worse off because of the flat fee.
So for those that deliver one paper per week on the Saturday and Sunday to multiple addresses, which a lot of us do, you are considerably worse off because News Ltd will STILL NOT recognise we have to pay penalty rates.
What is wrong with these drochonian clowns???????
Shayne if you “cannot hand the run back because you would not survive the 50% cut in retail sales commission” then you might as well start planning your exit strategy now. Sorry to be so blunt. Home delivery is a declining market as the older generation die and retail sales are also slowing. How many ‘young’ people come into your shop to buy a paper?
You can survive after you hand the run back and you will also get some control back of your shop and life. There is no other choice unless you want to expand and move into distribution.
Move the papers to the back of the shop. Clean the shop to make it and the product looking schmick. Take a sledge hammer to the current paper stand that is probably taking over your dance floor and create a seasonal display (Fathers day, mothers day, valentines etc). Look at toys, ink, plush and gifts etc. It will take 6 or 12 months for word of mouth and locals to see what you are trying to achieve, plus some extra cash to buy and display the product, but you have to change. Otherwise in two years time when home and retail distribution is a third of what it is today and you try and make the changes above, your competition will be way ahead of you alreading doing it with multiple supplier relationships, which also take time to build.
We have to change and try different things otherwise its not you controlling your future. That’s my take on the landscape.
Thanks Clive we have done all of that. We are a newsXpress store so we did actually manage to increase our GP by more than 20% this FY based on nXp strategies and doing pretty much exactly what you have said. I should clarify by saying that we could not survive the cut in retail commission as well as put ourselves at the mercy of the other newsagent in terms of supply etc. if you knew our local situation you would understand that we are better off paying someone 3 hours to deliver 1 paper rather than the alternative
Shayne News will have another announcement soon(ish) about retail that will factor into your consideration.
Sorry Shayne, i just get too passionate about this industry. They are good businesses if they are worked on. Some people are like deer in the headlights when it comes to paper runs. They are too scared to do anything because that is all they know.
Don’t apologise Clive everything you say makes perfect sense. I certainly didn’t take offence. Mark, looking forward to that one for sure.
A couple of points of order here.
Recent research indicates the average Australian newspaper reader is in their 40’s. The biggest demographic for home delivery consumers is in their 50’s. Research provided by Ibis World. You’ll need a subscription.
The way I see it, these people have, in general, 30 years left on the planet, at least.
Show me another industry where your core customers provide you with a 30 year time frame for planning and sales. Ha. Most other industries would kill to know they can plan for the next 3 decades.
The issue revolves around newspaper publishers getting back to their core business, and providing their customers with a product that provides value for money, and a service that fulfills their requirement for an expedient delivery model. Papers must get their head around the idea that there are myraid ways for people to get information,so it’s features and content that will sell, but only if you’re on the street on time.
Home delivery customers should be recognised for what they are, the newspaper’s best friend. You see, these people will even pay in advance to guarantee themselves a copy of your ‘paper. Anyone else can simply decide not to buy the ‘paper today.
There is no need for all the doom and gloom about home delivery, or retail newspapers, and it disturbs me to think that the very central item that created the existence of any newsagent’s business is something to be discarded and hidden at the back of the shop. The ONE point of difference any newsagent holds to every other gift/stationery/convenience retailer, and you want to give it up? Remarkable.
What IS required is for publishers to get off their arse and find out what their customers actually want, not waste time listening to Marketing Degree graduates who have no experience of the shop floor.
The negative sentiments this blog seems to generate serves to only undermine the channel. Not all news agents are located in leafy eastern suburban shopping centers, with high income bored middle aged female shoppers buying overpriced gift ware. Some service traditional, established communities that many large networks are failing to service and understand. Distribution needs to be approached from a customer first basis, rather than the revolutionary take over of traditional markets by businesses who simply do not understand them.
Peter this blog publishes far more positive content in posts and comments than negative.
Your comment in your last para is offensive and ignorant.
Mark. I apologise if I have caused any offence to anyone reading or involved with your blog. Just as I have taken offence to many of the contributions posted here, because not everyone sees the industry the same way.
Not all businesses are the same. Just as not all markets are the same.
Peter I don’t expect everyone to see things the same, never have. Through my work with newsagencies of various sizes I am well aware of the diversity of the channel.
While stories about what I’m doing are from my businesses, most of the tips and advice I publish are not size specific.
I don’t write the blog to get people to agree with me. I write it, in part, to provide an accessible resource of ideas and insights to encourage people to do more research to form their own views.
Peter I think you would find that most agents have left the distribution industry have done so because they were losing money but and could not see a light at the end of the tunnel. If commission/remuneration/ flat fee payments structures were indeed fair and relevant to the costs of todays newsagent, then perhaps so many agents would not have left distribution already!
I believe your comments have some merit in regard to the longevity of newspapers, however they are essentially a product thats importance is becoming less and less to retail agents.
Why? Because both newspaper publishers (and magazine Distributors) use and abuse the channel. Have Fairfax and News Ltd capped wage and remuneration increases to their employees, directors and executives like they have in payments to Newsagents? Hell No! So why do you except the paltry fees you are paid to distribute their product?
Over a 22year period I have had various levels of involvement and ownership in 5 different newsagencies. Four of those had very large and profitable distribution areas which were eroded overtime through increasing insurances, OH&S, petrol, rent, wages, superannuation and all other costs associated with Distribution. Yet the remuneration increases over that time can be measured in CENTS!
Find another industry which is not govt subsidised which has survived on remuneration / commision increases of less than $1 over a 20year period.
Those comments are not doom and gloom or negative They are simply facts.
Amanda – I couldn’t agree more. We sold
our rounds in 07 and it was one of the happiest days of my working newsagency
life. For 9 years the paper had not had an incremental price and wages and rents
and utilities and petrol had all increased exponentially. Since then we have worked
hard on our retail store in the LEAFY EASTERN SUBURBS OF ADELAIDE and we continue to sell overpriced goods to the good dames and burghers. The prices have to be reasonably high to continue to pay centre rents so I don’t feel at all guilty about that.
Gifts have been far and away our most important change. Cards and stationery
are both very important but the gifts are
the “point of difference”.
Having said all that I am glad that we kept
magazines because it does bring the people in to browse and they often buy a gift or a card as well so I think we now have the right mix.
Our gifts go from $4.95 up to $400 (some are more at Xmastime).
We have also moved into a lovely range
of wooden chess sets and mah jong and they look sensational.
We buy a huge Father Xmas every 2nd year and then we sell it for the same price
that we paid for it so it gives us 2 years’
worth of marketing and then we rejig for no cost except the initial outlay.
I saw a great Father Xmas postbox at the giftfair this year but it was $800 and I thought it was sensational but a bit too expensive for us but it would have looked great at the entrance to the shop and the
kids at the centre would have loved it.
I think we will all be ok if we just accept that when the digital media converges with the advertising revenue from the print media the papers will cease and when that will be is anybody’s guess.
I certainly don’t miss the work and effort that goes into distribution – retail is so easy compared with distribution.
I would certainly hand back a round that was losing money.
These are just a few of my thoughts and I certainly don’t think our industry is full of
doom and gloom
June, you make me laugh so much, if I ever visit your leafy eastern suburb or adelaide I would love to shout you a coffee for the smile you bring to my face with your comments.
I would love to know where you get your chess sets from, we have a great range of novelty male gifts but would like to source something a little more mature.
P.s I love your idea about the Santa at front of shop I think I might be stealing that this year.
Jessie, my husband doesn’t think I’m funny at all??????
The new co. we sourced the wooden games from is called Dal Rossi Italy but you will find them at http://www.puzzlesandgames.co.nz
Their products are beautiful
ANY FEE BASED ARRANGEMENT IS OPEN TO ABUSE BY NEWS LTD. IN QLD THEY CHANGED TO FEE BASED REMUNERATION FOR HOME DELIVERY IN 2003 AND HAVE GIVEN US ONE PALTRY INCREASE IN 10 YEARS.
NOW THEY WANT TO DO THE SAME FOR OUR SUB-AGENTS AND SCREW US AGAIN.
NO INCREASE FOR DISTRIBUTOR WHEN PAPER PRICE INCREASES—FORGET IT!!!
Denis, what increase for sub agents?
ALAN, AS I READ IT THERE IS NO INCREASE. THE DIFFERENTIAL BETWEEN WHOLESALE AND RETAIL SAY FOR A SAT COURIER IS 50CTS. WE GIVE THE SUBAGENT 10% OF $2.00 AND KEEP 30CTS. FROM NEXT MARCH THAT WILL CHANGE A FLAT FEE—NOT BASED ON PERCENTAGES—OF 20 CTS AND 30 CTS WHICH IS NO CHANGE. SAY THE COURIER GOES TO $2.20 UNDER THE PRESENT SYSTEM WE WOULD SPLIT 25% OF $2.20 OR 55CTS WITH SUB AGENT 22CTS/33CTS.
WITH A FEE BASED REMUNERATION IN PLACE WE WOULD STILL GET 30 CTS AND THE SHOP 20.
WE BOTH LOOSE!!!