Newsagency business penalty rate survey
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The case for newsagents newsagents receiving more margin from magazines
Australian retail newsagents is a direct account with magazine distributors make 25% of the cover price of a magazine.
Distribution newsagents make 25% and have to share that with retailers they supply. The share they make can range from 12.5% to as high as 5% depending on terms negotiated.
Newsagents want more than 25%.
While some cover prices have increased, overall they have not kept up with CPI – meaning in real terms our gross profit is lower today than last year and prior.
The gross profit from magazines has not kept pace with the increases in rent, labour and other business costs. Rent increases at least 5% a year and labour closer to 4%.
The freight cost of handling returns has also increased.
Many newsagents say that while magazine sales have been declining on average by 8% year on year for the last three years, their magazine bill remains the same. The reality of the sales decline should be that magazine supply bills decline. That they are not declining in line with the decline in circulation speaks to the unfairness of the magazine supply model to newsagents.
Distributors would say that newsagents knowingly signed their contracts. Fair enough – but since then they have started supplying new channels and they have changed how they deal with other retailers that benefits other channels and disadvantages newsagents.
Magazine publishers would say that they have no financial capacity to pay newsagents more. To those who supply supermarkets I’d say you do have capacity given rack fees, promotion fees, zero returns and other costs of handling the supermarket channel. To those not in supermarkets, I’d say our channel offers the most cost effective way of reaching new eyeballs even if you were paying us 40% of retail sales.
Paying newsagents more could open up more certainty around shelf life, in-store promotion and overall shop floor engagement. It stands to reason … let’s say I have two product categories generating roughly the same in revenue but one delivers 25% gross profit and the other delivers 55% gross profit, both have similar space requirements and similar labour requirements. High will I focus on? 55% GP of course.
Magazine publishers should embrace our channel, give us a better margin, eliminate the need to return unsold stock and free us from the restrictions of the current supply model. Do this and entrepreneurial newsagents would emerge with a focus on magazines. I suspect they would drive sales increases.
Magazine publishers who want newsagents to be more commercial with their products need to treat us more commercially. This is what it comes down to.
Magazine Publishers Australia has been working on a code of conduct which they think will make newsagents happy – I have written about it here and I have written about it here. If you compare this code of conduct to my suggested magazine supply KPIs you will see the MPA draft is biased to serve the publisher whereas mine is biased to serve the newsagent. I think the MPA code needs some more work but it is a start. For example, the financial viability of a title in a newsagency has nothing to do with the size of the print run … the ideal sales efficiency has nothing to do with the size of a print run.
I’d also note: early returns are essential to cash-flow management in newsagencies. If Network and Gotch want to be paid they must allow early returns. If a title has not sold in two weeks it ought to be a reasonable candidate for early return.
The challenge for newsagents is what to do about magazines. If you decline your range too low you stop being a destination for the shopper who likes to browse and this could have a knock-on effect for other parts of your business, you stop being a newsagent. You would need to be bringing traffic in for other reasons.
Take a look at stand-alone businesses around you like gift shops, toy shops, stationery shops and card shops. They struggle with this single category attracting traffic. One thing that works for newsagents is the multiple reasons people come through our door.
Our businesses are very layered with different departments relying on each other for support. This is why cutting magazines too far is a serious danger for us. Magazine publishers and distributors know this and I suspect that is one reason they have not moved on offering fair compensation for our services.
The magazine supply model which makes newsagents the least competitive of all channels and the compensation paid to newsagents for magazines are issues the ANF could have and should have owned. They have failed us over and over. Most recently the ANF represented newsagents at a magazine publishers conference and if what I am told is right – they failed us abysmally. The ANF handling of the matter is a reason newsagents should stop funding the organisation in my view.
What’s the answer, what should newsagents do?
While I don’t have the answers and am not in a position to tell newsagents what to do, where is what I’d suggest are reasonable action items:
- Trim your magazine space to what is financially viable in your shop but not lower than 650 titles.
- In appropriate categories display three titles where you would in the past have displayed two. Get more value from your real estate.
- Write to your distributors with a copy of your own sell through rates report showing their gross oversupply over a twelve month period and put them on notice that you will act.
- Lodge a complaint with a government authority and ask for mediation. See my previous advice here.
- Write to publishers explaining what you would do if you received higher margin. Be specific.
It’s on you to act as no one is doing it more you. Complaining about it achieves nothing. Act, and act now.
Careful what you wish for though as we are dealing with businesses that have bullied our channel for many decades. They can be spiteful and bullying. Approach this in the wrong way and you could find yourself without magazines and what does that business look like?
I have written about this topic many times in my team years of blogging and which there have been some changes, they are not sufficient. I really do think that achieving a good outcome for newsagents depends on newsagents acting themselves.
Quick survey on weekend penalty rates
I have created a simple three-question survey for newsagents about weekend penalty rates. Please click here to take the survey.
Sunday newsagency marketing top: sell an outcome
I saw this wall of wrapped packages and immediately started choosing the packaging solutions I liked.
Show don’t tell is true in retail. This wall shows wrap outcomes customers can choose.
It’s inspiring – to staff, customers and suppliers. I love it.
This is my marketing tip today – use the wall behind your counter to inspire your customers, to drive sales. For this to happen, the wall needs to be impactful, something that stops people in their tracks.
This photo shows a wall right at the back of a retail space. It was noticeable from outside peering in. I had to go down and have a look. Yes, the wall is what got me inside and I’m not a wrap shopper. Looking at it close up I wanted to buy a gift so I could have it wrapped in one of these stunning styles.
I think it is the grouping of all the boxes as a full wall display that makes it work well.
The wall is inspiration to newsagents and, indeed, all retailers to show, don’t tell.
Click on the image for a more detailed version.
Sunday newsagency management tip: give people waiting something to buy
Supermarkets, fuel outlets and convenience retailers nail the candy lane, the floor space in front of the counter where people line and wait to be served. It’s called the candy lane because it’s where candy is often sold. I am using the term to refer to the space and not products.
What is it you present to shoppers who approach the counter, any counter in your business? Are impulse purchases by your shoppers growing?
Products need to be easily understood and relevant to your business. They need to be products on which customers can make a split-second decision.
My management tip for you today is to manage your candy lane for success.
Success is shoppers purchasing items on impulse from display units placed in your candy lane.
Track your results by knowing the quantity of an item you place in the candy lane and when. My philosophy with this is simple: do more of what works and less of what does not work. Sales results guide your decisions.
Take a look at your own candy lane and think about what you can do to get more action from customers.
The photo shows the candy lane in a US drug store (large convenience store).
Weekend penalty rate survey for newsagents
I have created a simple three-question survey for newsagents about weekend penalty rates. Please click here to take the survey.
Weekend penalty rates are the most contentious not only for newsagents but many retailers where there is no enterprise agreement.
My own experience is that it would be easy to find good people to work weekends without penalty rates. I think such a move would see newsagents have more family time and more people get work.
More Apps that challenge newsagents and magazine sales
There are several Australian Apps for mobile devices that challenge sales of TV guide related titles from TV Week to the weekly listings in newspapers – apps that list TV programs and provide even more details beyond the listing.
The various TV guide apps I have played with are easy to use and accessible anywhere thanks to our connected world.
While the example I have used is not as rich as some in newspapers or TV Week, it’s good and well serves the need to know what’s on.
If you’re someone who visits a newsagency to buy TV Week or a newspaper on the day the seven-day TV guide is published, the App could encourage you to not make that trip.
While our businesses do not live or die by the traffic generated by selling a TV guide, losing a single customer may hurt as they could then ignore us for the cards they buy through the year and other items.
We can’t stop the growth of use of TV guide Apps. But we can develop a business plan that takes into account the take up of this and other Apps.
A Valentine’s Day card from your cat?
I’ve been looking at new card giving captions, at Valentine’s Day card captions from a range of companies. In the US they go all out for this season including cards from pets. I’m not sure how it works – maybe someone who knows a pet lover buys the card. The pet could not buy the card! People buy the card for themselves – or would they?
Newsagents have an opportunity to strengthen their position as card retailers by considering a broader range. That can include whole new ranges and captions within ranges. It can ilso include how we engage with the card category in store.
Too often we really on our suppliers to do this work for us. If we want a more unique business we need to be more engaged in the card category.
No, I’m not seriously stocking Valentine’s Day cards from pets. But I am looking for different product through which I can enhance my positioning.
Is News Corp. running a campaign against Tatts?
The story on news.com.au about an invalid scratch ticket in New Mexico was reportedly accompanied by a Golden Casket (Tatts) image. Regardless, there is no point in News running such a story here – unless they have an agenda against Tatts or some other party.
It’s not relevant news.
At what point do you decide to not sell low-margin agency product?
A discussion with a newsagent elsewhere this week about selling NSW Transport Opal card top-up has prompted me to revisit this topic of being an agent versus a being a retailer.
Regulars here will know my views – I see no upside in being an agent … margins are low, converting traffic to other purchases challenging and the demand on your labour diverting you from being a retailer.
So why are newsagents attracted to agency business? I think it’s the love of traffic and the belief that any traffic is better than no traffic.
The risk with good low margin traffic is that it keeps you busy and this can take your eye off the real focus of the business – being the best retailer possible, generating genuine value of your business.
Work for the sake of work adds no value to a business. Low margin work, where you’re making 2% out of which you have to pay overheads and for which dedicate valuable retail space is not smart.
But I understand why newsagents are drawn to agency business. With newspaper traffic down, magazine traffic challenges and lottery traffic flat, attracting shoppers for other items can be seen as an easy move. When you are asked two or three times a day if you have the tickets or other agent product you will feel pressured.
What is it worth? In newsagency basket data I have seen for city and suburban businesses, 80% and more of the time people purchase transport tickets they purchase nothing else. Okay these people may think of them business when they do what another item, I doubt it. Transport tickets are about convenience and convenience shoppers shop for convenience more so than loyalty.
The counter is where you see the real conflict. Transport ticket and other low-margin agency product sales require attention at the counter. Customers purchasing them tend to be impatient. So you need to ensure the counter is maintained.
If the customer in front is purchasing a $100.00 gift item which needs to be boxed, the transport ticket customer will be frustrated at waiting a couple of minutes. Likewise, the customer interested in the $100.00 gift item may walk away when confronted with a line of four or five people buying transport tickets.
What you do, whether you sell agency lines like transport tickets or not, comes down to what you stand for, your Unique Selling Proposition. If your focus in on high margin repeat customer business for which you achieve good word of mouth support and are known regionally, what role do transport tickets play … are they not in conflict with your mission?
If you have a track record of converting low-margin traffic into more valuable purchases then it’s an opportunity to consider. But you need to be honest with yourself about what your business achieves, you need to look at your data and have it speak to you about what you are really doing rather than what you think you are doing.
If you are not good at converting low-margin traffic to other purchases, get out of it and focus on being a professional retailer. Chase a USP. Drop it right. Get known in your region. Build a business for the long-term based on your retail prowess and not based on being convenient.
My goals with this post are to acknowledge the challenges, provide food for thought on the question of whether to take on low-margin agency business and to open the topic for discussion.
Footnote: just because my view is against agency business for newsagents does not make it right. Every business owner gets to make this choice for themselves based on their circumstances. That is the strength and weakness of our channel of independently owned retail businesses.
Herald Sun runs a non story and whacks small business Tatts agents
Shame on News Corp. for sloppy reporting in the Herald Sun today with their story that a customer could not get their payout.
The reason for the store not paying on the prize was valid – they were out of cash. They could not give what they did not have. Their offer of a payment later in the day was them offering good service. The way the story reads, a Tatts rep says the store was not honourable.
The Herald Story blows it up, making the business look bad. I feel for them as customers will have read this and will think badly of them because of the News Corp. spin. Shame on you News Corp.
The editor of the Herald Sun owes an apology to the Tatts agent.
If you sell paper shredders
If you sell paper shredders in your newsagency here’s a great way to get attention. I saw it at a trade show yesterday. They had a range pf shredders on display and in front of each type is a see-through cylinder of paper shredded – so you can see the type of shred.
This simple placement of a see-through cylinder with shredded paper in it brings the display to life and gives me more reason to consider purchase.
Thoughtful visual merchandising of stationery and office items works.
If you don’t see shredders, why not – they are an easy sell in this security obsessed world.
WH Smith kids magazine feature shows how it’s done
This photo shows the aisle-end display of kids magazines at WH Smith’s Zoodle store in Melbourne. It’s terrific. Anyone shopping for kids titles would feel that they could find what they are looking for from the range featured in the display.
I’d encourage newsagents to include an aisle-end feature of kids titles in their in-store marketing program to reinforce the newsagency as the place to purchase kids titles – and that you have more than shoppers will see in other retailers.
Check out the subscription offer in this magazine
While I accept subscriptions are important to the sale and distribution mix of magazine publishers, sometimes they go too far, abusing our low cost retail channel for completely selfish gains. Take the latest issue of Men’s Muscle & Health. The issue has a card inserted which partially covers the title in the pocket behind. On this car they pitch a subscriptions deal and a digital product which I suspect is their long term game. Either way, it’s not a card I’d leave in the magazine if I had it on the shelves.
The Spectator Australia supports newsagents
1,382 followers on Twitter of The Spectator Australia have been encouraged to purchase the latest issue from newsagents with this tweet.
Newsagents on Twitter should re-tweet the tweet. Every mention by a supplier about our channel as the go-to retailer for a product is welcome. The more we show our appreciation the more they will support us. Their tweet included Julie Bishop’s Twitter handle reaching another 95,200 people.
BTW – I love the cover … cheeky and fun. I suggest placing this next to newspapers.
UPDATE: I tweeted a link to this blog post and copied the publisher and Julie Bishop. Our Foreign Minister re-tweeted that tweet to her 95,200 followers – further promoting newsagents.
LATER: More re-tweets thanks to Julie Bishop’s support for our channel. Great stuff!
The Tatts App could challenge traffic to newsagencies
More products and services people used to visit newsagencies for or to purchase are now available on mobile phones and other devices, potentially reducing the traffic into our stores. Newsagents need to be aware as core traffic is migrating but at a pace that it is barely noticed.
Using the Tatts app I can now check paper ticket results as well as purchase tickets in future lottery draws. It’s fast and easy. Why stand in a line when I can buy when and where I want? Regular Tatts ticket customers will find buying through the App easier and not forgotten.
While the Tatts website has offered Check my ticket for a while, that the App offers this is relatively new I think and it;s the type of innovation people want from mobile Apps.
The Tatts App is getting better – for the consumer and for Tatts – with time. With the App, tatts is doing what it needs to do for its business.
If you are a newsagent who has ever complained that people come in to check their tickets and buy nothing else, you could soon be complaining that people are not coming into check their tickets at all.
Newsagents can’t stop or stall the growth of the Tatts App. But we can develop a business plan that takes into account the take up of this and other Apps.
Footnote: the expansion of Tatts services online and mobile is further argument that newsagents should not be pressured to make the capital investment they are asked to make in Tatts corporate image.
Terrific newsagency counter opportunity from Pilot
I like this small counter display unit for the Pilot erasable pen. The small footprint, understandable pitch and sample pad for shoppers to try the pen for themselves make this something to try at the counter. We’ve had it out for a few days and the pen is selling.
We don’t often place stationery at the counter of the newsagency. It’s good when a supplier packages it in a way that makes giving the premium space an easy decision.
Just read: Hack Attack
I have just finished reading Hack Attack: How the truth caught up with Rupert Murdoch by Nick Davies.
While I knew the story and had followed it for years, this book shed new light on the awful crimes committed and the subsequent cover up. It should be compulsory reading for any who earn income from newspapers and those interested in what newspapers print. I’d also make it compulsory reading for journalism students.
My only frustration is that News International and those in control of it at the time have not been dealt harshly enough for the crimes committed.
Tasty looking Donna Hay magazine cover
I love the cover of the latest Donna Hay magazine. It’s a perfect pitch for this time of the year and perfect to tap into the craze in Australia now for BBQ. Indeed, BBQ /grill cooking has come of age – you only have to look at the new books out and listen to it being discussed on cooking programs on the radio. This is an ideal Donna Hay cover which we can use to get people buying this magazine who might otherwise have missed it. I suggest co-locating with newspapers.
Your situation in your newsagency is yours to own
It’s not my fault newspaper and magazine sales are falling. It’s not my fault I’m going to lose my business and my home.
The newsagent speaking to me recently was explaining why they were so close to losing their business.
Creditors are circling and they are looking for help. It looks like the request for help has come a year too late. Their own business data from 2012 and 2013 provided evidence of what could happen if they did not act and change their business. The data from 2014 is worse.
They did not act. Indeed, they continued to run their newsagency in a traditional way, offering the traditional range of products.
The result is their situation today, where creditors are circling and their business looks like going into receivership.
This business offers a traditional mix of cards, newspapers, magazines, stationery and lottery products. They have some gifts for Christmas and other seasons but no permanent gift department. They have some soft toys for baby gifts but they are not from a specialist soft toy supplier.
This business is not unique in any way. It’s biggest asset is its convenient location, an assets which have not been leveraged in any way.
I’m not a retailer I’m a newsagent – is what the newsagent said to me in response to me suggesting what they could have done over the last couple of years.
I feel for them as they look set to lose hundreds of thousands of dollars, more than the equity they have on their home.
We have many people in our channel who have been brought in through a system that did not choose and approve retailers. Rather the approval processes focussed on the self interest of a some suppliers selecting based on skills for their products and not for the overall business. Those processes over the last twenty or so years have left us with too many newsagents and not enough retailers.
If this is you, if you feel ill-equipped for being an engaged retailer in today’s market, I say: OWN YOUR SITUATION as that is the starting point for you to create your own success.
Own your situation ASAP. Look at your data, know what it shows you, project your future based on past performance and embrace every change necessary to make your business relevant and viable for your future.
Don’t wait until it is too late to act.
I’d be glad to help.
I don’t like writing a post like this but I feel I have to to get attention of newsagents to look at their numbers and act for themselves on signs of rough waters ahead.
People’s Friend selling out in the newsagency
This special edition of The People’s Friend commemorating The Great War is one issue away from being a sell out. Like every title published under The People’s Friend it’s a great story – not only of the sales of the titles but often for those titles we place around them. We use the traffic attracted by The People’s Friend to help drive sales of other titles. A small amount of effort like this is another way we can grow our magazine sales.
Magazine covers pitching weight loss
These three magazine covers tell us that magazine publishers think people who purchase weeklies are interested in weight loss this time of the year. I’d agree with them based on the interest in other weight loss related titles. This placement is another example of taking note of the covers and placing titles that fit appropriately next to each other.