Australian Newsagency Blog

A blog on issues affecting Australia's newsagents, media and small business generally.

Newsagent bankrupt

Mark Fletcher
December 23rd, 2015 · 18 Comments

A newsagent was declared bankrupt last week with debts on more than half a million dollars. Their failure has cost suppliers to the channel:

  • Newspaper publisher: $34,000.
  • Tatts: $16,000.
  • Magazine distributors: $12,500.
  • ATO: $41,000.
  • Landlord: $29,000.
  • Touch: $3,000.

While the majoring of the $500K is owed to banks, each time a supplier to our channel is hit by a failing newsagent, the rest of us in the channel bear a cost as it leaves less in the kitty of the affected suppliers to support our channel.

We are connected to the failure of a newsagency where the failure results in a loss for our suppliers.

11 likes

Category: Ethics

18 responses so far ↓

  • 1 eric // Dec 23, 2015 at 9:07 AM

    a decade ago , i knew a newsagent in prominent location in Sydney city , the newsagency business doing well , but the owner never there plus he was a gambler , spending everything on casino and he had to declare bankrupt

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  • 2 Henry Henderson // Dec 23, 2015 at 10:52 AM

    While I agree with the essence of mark’s remarks, that is, that the failure of a newsagency to pay its debts negatively affects all newsagents, I find it difficult to believe magazine distributors have a kitty to support our channel. The fact is that they have a kitty called ‘cashflow’ that newsagents finance by paying upfront for ludicrous levels of oversupply.
    As for the other creditors mentioned, I accept the idea of a ‘kitty’ if it encaptulates the idea of a supplier pursuit of self interest, positively benefits newsagents. This is the market operating at its best.
    My concern in relation to publishers and distributors is that oversupply yields a benefit to them and an unwarranted cost to newsagents.
    If a producer can benefit from deliberate over production, there are public interest issues that need addressing.

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  • 3 Carol // Dec 23, 2015 at 11:47 AM

    If the newsagent was not aware of doing early and supplementary returns they could go broke. When I became fully aware of how to handle this my monthly account dropped dramatically and my cash flow improved. I don’t think early returns/ supplementary returns were explained well when I did my training. The training course is no longer done so new newsagents with no training or knowledge could be crippled by oversupply. I still struggle and often find it overwhelming.

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  • 4 Paul // Dec 23, 2015 at 1:05 PM

    People going broke and not paying is a risk of business, any business. I just had one of the big hair salons go broke owing me a couple of hundred dollars which is small fry considering they went down with 8 million in debts.

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  • 5 Henry Henderson // Dec 23, 2015 at 1:45 PM

    You’re right Carol. I wonder how many of us realise that ‘early returns’ is the first point that human judgement comes into play in the supply process; up to then it’s central planning in the old Soviet Union sense: one formula fits everything, everyone, everywhere. It’s mindboggling that the distributors have the audacity to apply for the formula and the abolition of early returns formalised in a ‘Code of Conduct’.
    But, what is more astounding is that the ACCC appears to have given some credence to the application.

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  • 6 Mark Fletcher // Dec 23, 2015 at 2:02 PM

    The business I reference in the post went broke because the newsagent was an idiot. Buying badly. Not changing the business with the times. Managing poorly. refusing to act on advice. The closure and bankruptcy is 100% on them.

    All we owe a dead business is the truth. No shadows here.

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  • 7 Lance // Dec 24, 2015 at 1:04 PM

    Early returns may be one part of that bankruptcy, but no way know could it be the sole or governing reason.
    I’m not in this industry but do enjoy this blog and from what I’ve learned from it it doesn’t appear much different to any other business.
    1-If you are hands on and in control you stand a very good chance of success.
    2-If you step back and lose that control you are asking for trouble.
    I chose the first option in our business and it paid well for us over a number of years.

    If you feel you have already achieved control, move to one side and look at all aspects from a different angle, make even more changes for even more success. Flex that control and make it work for you.

    Enjoy your day off tomorra, you’ve all earned it.
    🙂

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  • 8 Henry Henderson // Dec 26, 2015 at 11:35 AM

    My comment did not suggest that ‘early returns’ were responsible for the bankruptcy, it was directed at the notion that magazine suppliers have a ‘kitty’ to support newsagencies.

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  • 9 Mark Fletcher // Dec 26, 2015 at 3:53 PM

    The magazine distributors turn over $30M and achieve a net profit before tax of between $1M and $3M. I don’t think there is much kitty.

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  • 10 Henry Henderson // Dec 30, 2015 at 11:28 AM

    So we agree: there is no kitty. However, I maintain we do a lot for their cash flow to the detriment of our own.

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  • 11 Amanda // Dec 30, 2015 at 12:26 PM

    This particular newsagent may have closed because of poor management.

    However Mark, there are a lot of newsagents struggling out there. Over 80 closed down in NSW last year.

    The bottom line is there has been NO significant financial achievements for newsagents by Industry Associations with key industry suppliers for over 20years.

    This is a fact that keeps getting ignored.

    3 likes

  • 12 Mark Fletcher // Dec 30, 2015 at 1:19 PM

    Amanda, The associations serve no value. Newsagents would be better off investing their association fees back into their businesses as I commented here: http://www.newsagencyblog.com.au/2015/11/26/what-60-a-month-could-buy-your-newsagency-and-why-it-matters/

    I don’t think the failure of the association’s is ignored in this place.

    This newsagency business that went bankrupt did so because the newsagent did nothing to embrace change, nothing to replace revenue lost from traditional newsagency lines, nothing to address the rising cost of space and labour.

    Newsagents can grow their businesses and make them more valuable through an above average GP achievement. The associations play no role in this. They never have and never will.

    To the newsagents who are struggling I’d say: what are you doing about it? Harsh as it sounds, your situation is yours to own. Your failure is yours to own. Your success is yours to own. Yes, it is hard work to turn around an old boat. But you can. I am sure of it. I see it happen through my work with newsXpress.

    I’d be glad to help anyone.

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  • 13 Amanda // Dec 30, 2015 at 4:29 PM

    I agree with your comments Mark.

    My point is that if any associations had achieved an increased financial benefit for members then the need to source other income from non-traditional lines would not be so dire.

    If we received an extra :
    * 2.5% commission on lotto.
    * 5% on magazines
    * 10% on newspapers

    All of a sudden those businesses that are on a knife’s edge are viable and profitable.

    Failure by the ANF and state associations to achieve any increases for members is a disgrace….and you are right, we are fools to give them any membership fees.

    On the flip side, why can’t buying groups such as newsXpress negotiate such deals for its members?

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  • 14 Mark Fletcher // Dec 31, 2015 at 5:33 AM

    Amanda, newsXpress has pursued a strategy of not relying on old traffic drivers such as lotteries, appears, magazines and tobacco. While these categories (some or all of them) play a role in newsagency and newsXpress businesses, there are other more highly valued traffic drivers bringing in new traffic, higher margin traffic. For most of these new traffic opportunities newsXpress members do get a higher than average margin.

    For example, there is one traffic generating product that newsXpress members had access to in December at 25% off wholesale, in advance of a major January promotion. The new traffic will come from national marketing by newsXpress as well as store level marketing – outside the business.

    On magazines, newsXpress has a commercial relationship that helps fund the national conferences – making them free for newsXpress members.

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  • 15 Jeff // Jan 2, 2016 at 1:10 PM

    I stopped paying VANA years ago and am better for it.

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  • 16 Henry Henderson // Jan 2, 2016 at 2:12 PM

    Amanda, thanks for raising this issue, although I’m immensely disappointed with the ANF’s position regarding the MPA application, I am sympathetic in regards to the matter you raised.
    The problem lies in the imbalance of the negotiating power of the parties: the ANF has nothing to offer by way of benefit or loss to the providers, and, given we individually need the providers and they don’t need us, the only limit they have to their demands is what they believe is the lowest terms that will keep newsagents in their category.
    In regard to this limit, magazines are on the brink of overstepping this barrier as its costs become higher and higher and it’s competiveness with other categories diminishes. These costs are set to rise even higher if the MPA’s aim to include even higher oversupply and no early returns into an ACCC sanctioned, ‘Code of Conduct’.
    It is unfortunate that the ANF support has been given weight by the ACCC; I think they must have been initially misled by the manner in which the application was written. However, I can’t understand why they are persevering with their support for the code now that they have been alerted to its real intentions.
    Anyone who is a member of the ANF should urge the executive to reconsider the matter because, if adopted the code will be seriously detrimental to your business. I’ve met with my state’s CEO and I have asked to meet with the national policy officer when he returns from leave.

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  • 17 Peter B // Jan 2, 2016 at 7:17 PM

    Henry, when I brought the MPA Trial flaws to the attention of our rep he told me that the ANF would be able to “force” change at a later stage.
    This is of course complete garbage, which I told him straight and declined to renew our membership unless the ANF changed their stance and conferred with newsagents about such large changes. Its been over a year now and I have received no representation from anyone at the ANF about the Trial, nor trying to get our membership back. Those that the ANF are interested in are the hangers on to the old ways and those who do not rock the boat.

    On your other point that we individually need the providers, I believe the importance of magazines is overstated for many newsagencies.
    We have been positioning our business and are at the stage now where no ONE supplier is relied upon anymore. If we take out magazines we have a huge space for other high margin product.
    I see it that magazine companies are PRIVILEGED to put magazines in newsagencies, and it is not a RIGHT as they once thought.

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  • 18 Henry Henderson // Jan 3, 2016 at 3:14 PM

    Peter thanks for you comment. The attitude of the ANF representative plays right into hands of the MPA: they will have set the agenda and it will be very hard to wipe the slate and begin again.
    In spite of being gobsmacked by the sheer blatancy of the application, it is not the applicants I’m cranky about, it’s the ACCC that seems to be taken in by the unsubstantiated claims that they have left unquestioned.
    The claim that newsagents are indiscriminately returning magazines is a case in point. I can think of 7 reasons why a newsagent might discriminate against a title, the most relevant of which is the potential profit of the title is not as high as a competing item for the shelf space.
    I take your point that magazine companies should feel privileged not entitled; I guess that what comes of not having to compete.

    3 likes

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