Australian Newsagency Blog

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NSW Government / Tatts Group sign MOU – risks newsagents thinking it’s business as usual when it’s not

Mark Fletcher
January 29th, 2015 · 35 Comments

The NSW State Government and the Tatts Group have announced today the signing of an MOU in relation to distribution of lottery products for the next few years. As the SMH reports, the key points are between now and early 2018:

  1. No major supermarkets to sell lottery products.
  2. Fuel outlet expansion to proceed is Tatts chooses.
  3. NSW Government to help agents rebrand up to the value of $10,000.

The certainty offered by the MOU goes further than I expected newsagents to achieve. It goes considerably further than one could / should expect from in a free market economy.

Newsagents would be wrong to complain about this in my view.

My position on the April 1 sunset of current arrangements is well documented here. The sunset date has been known for five years. To any business which says they have no future if more outlets get lotteries I have said and say again: what have you done for the five years you knew the change was coming, what have you done to make you business more relevant, how different is your business today to five years ago.

While there are some newsagencies where the circumstance is that lottery traffic and GP is essential and dependance cannot easily be shifted. However, I’d say that is not the majority. Smart newsagents acting like retailers can run enjoyable and valuable newsagencies without lotteries or with less dependence on lotteries – and should have been working on this over the last five years.

The real challenge to over the counter lottery product sales in newsagencies is from online. This is the growth area. It is not part of the MOU nor should it be.

I think newsagents have focused too much on the demon supermarkets and not enough on the fundamental change in how, when and where people shop for lottery products. The only way to compete with online is to offer a compelling and memorable in-store experience for products people want. This is retail 101 in this online always-connected world.

When newsagents realise that lottery product sales have been lost to online will the complain that they should have been protected now? Following the logic of recent lobbying I expect some will.’

The future of our channel is not to be found in government protection of any form or level.

Sure the supermarkets are too big. Fight that – not by seeking protection by governments but by challenging their market share on the basis of their abuse of market power. That is a fight that more will engage with. The fight for protection because oh we’re newsagents and we’re important is misplaced and not a fight which provides for a strong future for newsagency businesses.

In the benchmark data I will release Monday I will share insights into what a newsagency not engaged in future planning looks like. It is a dying business and has been for the last five years. No amount of government protection or assistance will save such a business in the long run.

Here’s my tough love, because I do love the newsagency channel: the best thing the government and Tatts could have done is nothing, let competition play out. The newsagents remaining would be stronger and more competitive because their future would have been 100% on them. Now, some will be chasing the $10,000. Others will think they have until 2018 when in fact they have no time at all.

It is unfortunate Labor politicians engaged in the politics as they did. What they said and plenty in the media said made newsagents look weak, certain to close without protection.

If I was a politician dealing with this issue I would have said something like this:

I can’t and won’t protect you but I can and will help you and other independent and small retailers like you and primary producers and service providers to bring the major supermarkets to account, to stop them growing bigger as their market share is already too big, to make them deal fairer, to ensure their lease costs are fair compared to yours and to ensure that they’re not getting deals that you could be funding through poorer deals for the same products – as could be the case with magazines.

I don’t want to be part of a channel that says poor me I need protection to survive. There is no future in that.

I want to be part of the new newsagent channel made up of proactive retailers who are embracing change and generating net new traffic because of innovation in their shops, building GP%, attracting new customers and operating more efficiently. I want to be part of the new approach to managing magazines as I wrote yesterday – fixing bigger competition challenges than Tatts.

Now is the time to chase change in your newsagency. The opportunities are wonderful and the success stories growing. There are newsagencies in highly competitive situations growing overall GP% and growing sales. But I’ll have more to say on that next week.

13 likes

Category: Lotteries · Newsagency management · newsagency of the future

35 responses so far ↓

  • 1 andy // Jan 30, 2015 at 8:25 AM

    Hi Mark

    I don’t see how this can be anything other that positive sure we have to make changes and most are but I think we should take what ever help we can

    2 likes

  • 2 Lance // Jan 30, 2015 at 8:29 AM

    From ABC News………..

    NSW lottery ticket deal raises concern among newsagents over future exclusivity.

    Newsagents have raised concerns over the future exclusivity of lottery ticket sales after a the NSW Government extends its agreement with the Tatts Group for three years.

    More………..
    http://www.abc.net.au/news/2015-01-30/newsagents-raise-concerns-over-nsw-lottery-ticket-deal/6056544

    0 likes

  • 3 Mark Fletcher // Jan 30, 2015 at 8:37 AM

    Andy, I understand that view but worry that it will give newsagents a false sense of security as the five years to end April 1, 2015 provided – see how many did not use the five years to future proof their businesses.

    0 likes

  • 4 Chris // Jan 30, 2015 at 9:22 AM

    I do not have an issue with other outlets selling Tatts as long as we are all treated fairly. If Tatts want me to do a shopfit to sell their products then they have to pay for it themselves (or offer an area of exclusivity like a franchise). Not a partial payment as the $10000 would be.

    7 likes

  • 5 June // Jan 30, 2015 at 10:26 AM

    In SA Tatts have just taken over SA Lotteries and we have not had any issues with them at all.
    The reps are extremely helpful and when I asked to see where the new OTR S/station stood (so that I could see if they were impacting on me) my rep brought it straight up on his ipad and then showed me how to check it myself online.
    I was concerned because they are another outlet near me impacting on my sales (maybe) but so far so good.
    I am sure they will go into the Coles/Woolies eventually but hey they already have our cards, mags, stationery etc and we are still ok. My stationery is up this year on last and is for the first time my best performer for the month.
    I don’t do a BTS per se but I have all the product that is needed and I don’t price check the supermarket either because I know I have other stuff that they don’t have like spencil book covering etc that once the parents know that we have something that the kids want they just buy the other stuff from us as well.
    I agree with Mark (no, I don’t always agree with him) that online will be far more of an issue than physical competition.
    Tatts are very very proactive here in SA with central, group and store syndicates being one of their hot topics.
    If you don’t know what to do they will come out and help.
    I know it is early days (they only rolled Tatts out in April 14) but so far so good.
    I think they are on our side because we are still their top agencies so we need to be proactive with their product.

    0 likes

  • 6 eric tjie // Jan 30, 2015 at 10:35 AM

    i am not concerned about supermarket having lotto, iam more concern how to improve my gift and cards sale and away from dying mags .

    0 likes

  • 7 David // Jan 30, 2015 at 10:57 AM

    June… we have to deal with this 5 years after Tatts take over as well… I’m sure though, good bad or indifferent that we won’t be seeing any help from our state government. About 2 to 3 years before our shopfits are the talk of the town

    0 likes

  • 8 Gary // Jan 30, 2015 at 11:14 AM

    A question for you Mark.
    Do you depend on your newsagency for your sole source of income? Are you going to depend on the sale of your newsagencies for your retirement? If the answer is no (and I am sure it is) to these questions then gives the rest of us a break.
    Mark you have got to stop pulling the channel down with your rhetoric. This is a new paradigm and each newsagency will evolve the best they can.
    You do some great work as a leader propelling the channel forward, but hold back a bit on the negatives. We all know what they are.
    Anyone considering entering the channel wouldn’t touch newsagencies with a barge pole if they were a regular reader of this blog.
    One of the major argument that persuaded me to buy into this channel was the legislation in Qld that precluded big business from selling Golden Casket products. It may not always be this way but at the moment I will bask in the security of knowing this is so. I am hoping a future buyer of my business will find this “protection” an equally persuasive argument.
    Being protected through legislation does not make me a bad retailer. It does give me peace of mind.

    11 likes

  • 9 Carol // Jan 30, 2015 at 11:26 AM

    I wonder how the new branding of TAB to Tatts Bet will be used in the future possiblely for Lotto products? I believe operator’s do not have to pay for the new fit outs and signage.

    0 likes

  • 10 Mark Fletcher // Jan 30, 2015 at 11:35 AM

    Gary you know my newsagencies are not my only source of income. If they were my rhetoric as you call it would be even stronger. This post is positive – it is a call for newsagents newsagents to be engaged and positive about creating their own future.

    NSW newsagents who have been in their business for the last five years and who have not changed their model to work in a more competitive tatts environment are the ones who have acted negatively.

    There are plenty of people who decide a newsagency is what they want to purchase after they read this blog. I say this based on contact I get weekly from such people. Smart retailers look for opportunities with upside – many newsagencies provide upside.

    Gary, I’d close with this – what I write is the truth. Newsagents and prospective newsagents benefit from the truth.

    0 likes

  • 11 shauns // Jan 30, 2015 at 2:08 PM

    Mark, I am curious as to how many people walk into your store expecting to buy lotto . I am in North Qld and I cannot ever remember walking into a newsagency without lotto . Do you think some of your customers may be drawn into your shop thinking you have lotto

    1 likes

  • 12 Gary // Jan 30, 2015 at 2:59 PM

    You are right Mark, I knew the answer all the time. I was just attention seeking. You are using the “truth” word way out of context here Mark. I’d probably describe as your opinion. And my post is to ask you to hold back on your online lotto opinion a little. You are justified to bring it to our attention. You have done this. Let it rest now.
    Just another question. Those newsagencies that are selling, what net maintainable profit multiple are they achieving? When I bought ours in 2009 the asking price was 3.5 times NMP. Just for the record, I don’t know the answer to this question but I’ll bet its not 3.5 anymore.

    0 likes

  • 13 Mark Fletcher // Jan 30, 2015 at 3:09 PM

    Shaun, a couple of times a day.

    Gary, the multiple I most often see is around 2.5 times net earnings with tighter compliance around what net earnings is.

    The most important thing a newsagent can do is their business is to run it as if every day is your pay day. Success with that will make you more money than when you sell. Too many newsagents look to the sale of their business as their pay day.

    On the lotto matter, I make no commitment on what I might say.

    2 likes

  • 14 andy // Jan 30, 2015 at 3:20 PM

    Why are you so anti lotto?

    1 likes

  • 15 Andrew t // Jan 30, 2015 at 3:39 PM

    Blind freddy can see where this MOU is going. First there was the 5year moratorium and now there is a 3 year moratorium and next? All bets will be off. Time for a career change me thinks.

    0 likes

  • 16 Gary // Jan 30, 2015 at 3:50 PM

    Thanks Mark, much appreciated.

    0 likes

  • 17 Mark Fletcher // Jan 30, 2015 at 4:02 PM

    Andy I am not anti lotto as such. There is no upside for lottery product sales yet your cost of infrastructure to offer the category is increasing. You make less from each $ in revenue today than five years ago. This plus the rapid growth of online and the little control you have to be an entrepreneurial retailer leave me saying – it/s not for me. I want products over which my success is more dependent on me.

    It comes down to the agent versus retailer question.

    0 likes

  • 18 Dean // Jan 30, 2015 at 4:10 PM

    The multiple for distribution only is even less. Over 5 years ago it was 2-4 depending on the circumstances, but now is 0-1 times earnings.

    0 likes

  • 19 Mark Fletcher // Jan 30, 2015 at 4:21 PM

    I sold my home delivery business in 2007 and wrote about it here and spoke at conferences about it at the time – encouraging newsagents to move out of what I saw then as a declining business: http://www.newsagencyblog.com.au/2007/03/22/getting_out_of/

    1 likes

  • 20 Chris // Jan 31, 2015 at 10:13 AM

    Tatts is good for my business and I will not lie about that. But I also started studying my figures a few years ago and realised that I will be just fine without it. Yes, I will see a drop in customer numbers but when I take out extra staff costs assoc with lotteries it is not so bad. A high percentage of my customers who buy lotto buy nothing else in store ever! I will still sell the same amount of everything else plus I will free up a massive amount of premium space for other products plus energy to promote other products. If you have not factored the loss of lotteries into your strategic plan for the future then you have not done a proper risk assessment of your business.
    I am really disliking the media reporting right now. Newsagents are being branded incorrectly, well mine is. When I have customers talk to me about it they are surprised when I tell them the only issue I have is fairness. They are surprised when I say I don’t care if it goes into other businesses. I don’t want to be seen as a protected species, I want to be seen as a vibrant 21st century retailer who loves competition.

    3 likes

  • 21 Gary // Jan 31, 2015 at 1:10 PM

    Anyone who is interested in the corporate world of lotto should check out yesterdays FR column, Street Talk. Article titled “PE runs Tatts Group break-up scenario” is only is only gossip but could be a game changer if it comes to fruition.

    0 likes

  • 22 Amanda // Jan 31, 2015 at 3:18 PM

    The whole protect the newsagent strategy put forward by NANA is a strategy that suits the members of this association, and not the Newsagency industry as a whole.

    There is NO strategy or plan which would have pleased the whole industry.

    The MOU has basically given the industry another three years of preparation, when it should have prepared during the past five.

    I would have preferred that NANA (being the official representatives of the newsagency industry) had focussed on achieving better commissions for newsagents rather than playing the “death is near” card.

    I would also prefer if had the option to be part of a group of let’s say the “Top 500” lotto selling newsagents whom formed an alliance / conglomerate / union / guild / council…whatever you want to call it, and that this group could negotiate a better deal on behalf of its members. That top 500 outlets would sell 65% of lotto sales in NSW.

    This would not have to limit itself to Lotto negotiations.

    Such a group could then negotiate a deal with Tatts that they are the BEST Tatts retailers selling the biggest slice of the pie and thus want better trading terms, commissions, negotiate more affordable fit out designs.

    If one of the marketing groups were to indicate this would be there intention I would sign up immediately.

    I am no longer represented by NANA, and most newsagents in NSW do not feel NANA represents them. NANA have not achieved anything in at least the past 20 years. I feel today they represent the retailers who expect other people to do everything for them, who are still hanging onto the days of newspaper deliveries and have still not diversified into anything other than traditional newsagency lines. If you doubt this, then visit the stores of those who are board members.

    This is a controversial idea in its rawest I suppose to place on your blog, but I am sure the backlash will come!

    3 likes

  • 23 Mark Fletcher // Jan 31, 2015 at 3:55 PM

    Amanda, I agree with you. This is what I have written what I have written here since the campaign started.

    The challenge for associations is they must serve all members. They are only as good or as bad as their worst members.

    Tatts has said is the past it will not deal with marketing groups – just as it has not dealt with associations for the most part. Intralot did deal with groups, one at least, but they’re gone now.

    A good group can help you in areas over which you have far more control and earn a considerably higher GP and which will serve your interests for a longer period.

    0 likes

  • 24 Alan // Feb 1, 2015 at 7:35 PM

    Mark, I like to read your Blog and you offer many interesting insights. However, in this instance, I do not agree that online sales are a biggest issue than physical competition at the moment. In theory, online shopping will eventually take over most physical business sales. It is inevitable that even your retail business model will become useless in the end, not just for Newspaper and Lotto agents. Why cannot a customer buy stationery, cards, magazines, gifts and toys online? Then why will we even need physical supermarkets? In your words, we don’t even need physical Casinos anymore. The social aspect of gambling is nothing to you. Plus, how long will what you have described come to happen? 15 years or 50 years? By that time, Online shopping may even kill gifts and similar retail before Lotto. Supermarkets may also eventually swallow the profit potential of all small businesses. No one knows for sure. Therefore, as for now we can only do what we are capable of to continue making a living.

    We are not going to move away without a fight. I support NANA fighting for us and the Newsagency industry as a whole.

    4 likes

  • 25 Mark Fletcher // Feb 1, 2015 at 8:03 PM

    Alan, the sales data published by Tatts guides my opinion.

    On general retail sales, online will not replace all retail for the foreseeable future (20 to 30 years). Indeed, data presented at retail conferences I attended in the US in January indicates online sales growth has slowed to a crawl.

    Online is growing fastest in the area of non physical products – like phone recharge, phone cards, event tickets and lottery products.

    I expect online gambling sales to account for 20% of Tatts sales within the next few years.

    Regardless of whether I am right, newsagents should do what I suggest – focus on being retailers more than being agents, embracing traffic generating opportunities, spend less time on busy unprofitable work, buy stock wisely, living your USP and relying less on lottery traffic. There is now downside to doing any of this.

    My concern with the NANA fight is that it is narrow in focus and risks newsagents waiting for others to provide for their future.

    I think it’s important to challenge newsagents to make their own future.

    1 likes

  • 26 eric tjie // Feb 2, 2015 at 12:25 PM

    many people paid over $1 million for their newsagencies and now it will worth much less if they still make money. i think we need to operate more wisely as Mark said

    0 likes

  • 27 Amanda // Feb 2, 2015 at 10:35 PM

    Alan, my problem is that there is no fight from NANA. There has not been for decades. NANA has NOT achieved anything positive in negotiations with Tatts, newspaper suppliers, magazine publishers or distributors in at least 25years.

    Newsagents currently have the biggest slice of the pie in regards to Tatts sales. in NSW. Now is the time to demand more, not protect what is inevitable in 3years time anyway. The whole negative thinking employed by NANA is typical of a couple of simple newsagents who are simply out of there depth.

    NANA should be negotiating 15% commission not 10% on current gaming products. Furthermore, negotiating 20% on any new games or products introduced in the future as Tatts rely on the newsagents customer base to make any launch successful.

    Gambling going into the bigger outlets is inevitable. But if NANA get this wrong, (which they have all too often done so), then Woolworths and Coles will take chunks of that pie, and they WILL demand a higher commission than newsagents, AND they will get it.

    And before you know it, Newsagents will be selling lotto at 5% commission and the big guys will be getting 15%.

    So, if Tatts want to expand into Coles and Woolworths, fine. But NANA should be demanding 15% for newsagents. If that means Coles and Woolworths start on 5%, then all of a sudden it does not seem so attractive to them does it?

    4 likes

  • 28 ashley spencer // Feb 3, 2015 at 12:51 AM

    apologies to go to another topic
    I do agree that duopoly should not
    b going to get another slice anything
    they have enough
    I just wanted to ask if there’s any newsagents on the sunshine coast qld that sell autocar magazine because I will be in the area for while soon
    the weekly edition not airfreight
    I know gg probably wouldn’t tell because its against the law from what I am told
    thanks for reading
    do read the blog due to working in stationery

    0 likes

  • 29 pat // Feb 4, 2015 at 4:05 PM

    Amanda .love your work .If only we could get every “newsagency” onboard with that sort of thinking we could draw some lines in the sand after all at this point in time they need us not the other way aruond.(not just tatts}
    Could someone tell me who wanted newspapers de regulated ,wasnt around back then
    cheers

    1 likes

  • 30 Alan // Feb 5, 2015 at 8:53 PM

    Amanda,

    I love your idea. I think that NANA should be negotiating 100% commission not 15% or 20%. But NANA doesn’t have that power.

    Realistically, You might want to suggest that we should have a new association who can call on industry action.

    0 likes

  • 31 Mark Fletcher // Feb 5, 2015 at 10:02 PM

    Pat the Howard government facilitated deregulation. 7-Eleven had been lobbying for years. I think it was Howard who said protection was not good for the economy. Unfortunately, big government did not handle it well, leaving newsagents half pregnant and less competitive as a result. That and the lack of compensation for taking away exclusivity was poor management of deregulation by the Howard government.

    0 likes

  • 32 Mark Fletcher // Feb 5, 2015 at 10:32 PM

    Anyone wanting negotiation on a higher commission for lottery products should outline the justification here. As with any commercial discussion there needs to be a commercial reason for another party giving something up. In this case, you’d be wanting tatts to give something up or shoppers to give something up.

    It’s easy to say I want more and considerably harder to explain where is why.

    0 likes

  • 33 pat // Feb 6, 2015 at 7:22 AM

    What if once the new franchise agreements were rolled out everyone made a concious and individual decision to put a hold on selling lottery products while they surveyed the new agreement and contemplated the financial viability of investing over 20k to move forward with tatts ,with commisions being what they are.
    And if coincidently everyone done that at the same time for the same reasons ?
    Im only saying everyones thinkin it

    4 likes

  • 34 Amanda // Feb 10, 2015 at 8:34 PM

    Is anybody in Victoria able to state the rankings of Coles Express outlets in that state in relation to outlet sales?

    0 likes

  • 35 Mark Fletcher // Feb 10, 2015 at 8:46 PM

    I don’t have information but my understanding is that the sales (or lack thereof) were a factor in 7-Eleven pulling out.

    0 likes

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