Australian Newsagency Blog

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

What happens to magazines newsagents don’t sell and why are newsagents treated differently to supermarkets?

Mark Fletcher
October 19th, 2016 · 27 Comments

Small business newsagents have no control over the range of magazines they receive. Nor do they have control over the volume of magazines they receive.

An average newsagency sells 55% of all magazines received. 45% of what is sent to the business fails to sell and is either returned for resale or dumped.

Unsold magazines are handled in two ways:

  1. Some newsagents are given permission to rip covers off unsold magazines with the covers returned to the magazine distributor for a credit with the rest of the magazine being disposed on however the newsagents choose.
  2. Other newsagents have to return all unsold magazines, at their cost.

There is also a mix between the above two points where a newsagent may return covers of some titles and full copies of other titles.

In supermarkets, my understanding is they do not return unsold product. They get to trash it locally.

The amount of paper water must be considerable. Yet no one appears to care about this.

That magazine titles continue to be sent to small business newsagents in a volume that is often far greater than would ever sell is a financial and operational overhead on newsagents.  It disadvantages us because of what we have to do to process returns. Since our competitors are not confronted with the same costs it gives them an advantage over us.

Shame on those in a position of power who have refused to act on this.

The big issue here is the waste of paper, labour and fuel on the 45% of magazines printed that do not sell.

What a waste to the environment and a waste of small business newsagent resources.

Despite lots of talk, little has changed in terms of the magazine supply model. Sales data provided by newsagents is not used to drive a more efficient and more fair supply model.

While the model for supermarkets evolves and serves those big businesses, small business newsagents are stuck with a model that is out of date and environmentally unfriendly.

What newsagents want is for supply to more closely match sales. It is a simple request. Those setting supply have the data. Yet too often they ignore it – probably for reasons that serve their ad model. Plus, supply is too often a manual process when it should be automated and 100% data driven.

I think our best chance of addressing the continues oversupply and cutting the 45% failure rate to 10% or less is to target Greens senators. We need to educate them about the wastage of paper, labour and fuel in the magazine returns process. We need their engagement politically to force the matter to be addressed.

If nothing is done, more newsagents will get out of magazines.

For the record, click here to see changes I proposed to the magazine supply model, changes that would benefit Australian publishers.

24 likes

Category: Ethics · magazine distribution · Magazine oversupply · Newsagency management · Social responsibility

27 responses so far ↓

  • 1 Colin // Oct 19, 2016 at 7:32 AM

    I agree, reduced returns would assist me continuing to stock magazines that sell. But a better returns model will do nothing for the 100’s of titles that make up the 600 offering that never sell. Only a move to a margin of 35% plus and better control of outlets will persuade me to stop pocket reductions.

    If the industry wants specialists and survival of niche publications. I will need margin and to see the IGA 30 metres away stopped from cherry picking titles on a different contract.

    Ain’t gonna happen.

    0 likes

  • 2 James // Oct 19, 2016 at 8:10 AM

    Only one thing can save small niche title magazines…..and thats a return to a genuine one channel agency model.

    Ever wonder why the agency model was set up in the first place a hundred years ago. So that publishers could convince retailers to devote space to hold and sell their (at the time) limited volume range of products.

    Anything else is simply shifting the deck chairs on the Titanic. I struggle with the notion that retailers could devote the space and cost of 600 pockets that don’t generate a sale simply to retain their identity as a magazine destination.

    Magazines are a declining product that the producers have self identified as a commodity convenience product. Commercially, you simply cant afford to sell the loss making sausages without the profitable fillet steak. Commodity convenience means the sausages go and you only stock the steak.

    As someone once famously said….. God save the Queen, because nothing will save the niche title magazine.

    6 likes

  • 3 Mark Fletcher // Oct 19, 2016 at 8:47 AM

    I have added a link to the post – it outlines my thoughts on an alternative model where we are made the specialists, again. http://www.newsagencyblog.com.au/2015/10/30/i-urge-magazine-publishers-to-make-newsagencies-magazine-specialists-once-more-ditch-supermarkets/

    0 likes

  • 4 Mark Fa // Oct 19, 2016 at 12:57 PM

    The article on page 37 of the Fin today certainly adds another dimension to the debate.

    1 likes

  • 5 SUI JING zeng // Oct 19, 2016 at 5:02 PM

    I need some newspapers sell in my milk bar but I don’t know how can appple

    0 likes

  • 6 SUI JING zeng // Oct 19, 2016 at 5:05 PM

    I don’t know how can star sell herald sun newspaper to sell in my shop

    0 likes

  • 7 Adam // Oct 19, 2016 at 5:29 PM

    I saw it all today. Went into a newsagent in SA today, and they had magazines with their covers ripped off for sale! They weren’t even in a bargain bin. They were on the shelves next to new titles. Clearly they had sent the cover back for credit and decided they would sell the rest of the magazine without it’s cover as well! I didn’t think that was allowed…

    2 likes

  • 8 Mark // Oct 19, 2016 at 6:46 PM

    Newslink also do not have to send any magazines back to the publisher. I have seen many unsold magazines in the bin outside Central Station in Sydney. I am told it is something to do with their scanners that send back info to the publishers what they sold and how many.

    0 likes

  • 9 Mark // Oct 19, 2016 at 6:47 PM

    Newspapers as well. They do not cut the top off except for the Chinese papers and overseas ones.

    0 likes

  • 10 John Fitzpatrick // Oct 19, 2016 at 8:16 PM

    All
    I choose to send back full copy returns. We drive past the magazine warehouse on our way to the News print site for newspaper returns.
    For us it’s easier and quicker than topping, plus I don’t want the hassle of getting rid of the topped mags.

    0 likes

  • 11 Jenny // Oct 20, 2016 at 8:09 AM

    John Fitzpatrick that sounds an even crazier waste of time driving the newspaper returns back to News.

    I don’t think we should even have to send back returns for unsold papers, waste of time and money for both parties. Trust us we are not rats!

    And I can’t believe that Fairfax still pick up full copy newspaper returns from city newsagents, is there money to be made or is it just another dinosaur procedure of theirs?

    3 likes

  • 12 Colin // Oct 20, 2016 at 8:50 AM

    Mark,

    You mention in original blog a detailed plan. Was it ever received, considered and commented on by the publishers

    0 likes

  • 13 Mark Fletcher // Oct 20, 2016 at 11:13 AM

    Colin, received and ignored.

    0 likes

  • 14 Australian Family Tree Connections // Oct 20, 2016 at 1:53 PM

    Mark
    I could not agree more that newsagents should have 100% control over the range of magazines they sell – after all, they are the sales experts in their area (not the distributor and not the publisher).

    I also believe that all newsagents should only have to return magazine tops – in Reply Paid envelopes provided by distributors – because this would achieve:
    1) Irrefutable proof of actual sales
    2) Cost saving for newsagents
    3) Distributor paying for return of (part of) over-supplied titles
    4) No more old magazines being re-sent to newsagents
    5) Sales based supply in a relatively short space of time

    You wrote: Sales data provided by newsagents is not used to drive a more efficient and more fair supply model.
    With monthly titles, why would newsagent-supplied sales data not be used?
    Because distributors set newsagent allocations for the next issue before sales of the 2 previous issues are finalised.
    Why?
    Two reasons:
    1) Monthly titles are printed weeks ahead of cover date
    2) The length of time newsagents are given to finalise their sales

    That means when most distributors calculate allocations for a monthly title’s November 2016 issue they worked off final sales figures for its August 2016 issue. (With IPS the time lag averages 1 month less, i.e. they work off final sales figures for September 2016).

    NB IF publishers elect to receive allocation details in advance, they may be able to change them.

    You also wrote: Those setting supply have the data. Yet too often they ignore it – probably for reasons that serve their ad model.
    Sorry Mark, if you’re referring to monthly titles I cannot agree with you on either of those points.
    As previously explained, distributors do not have the previous month’s finalised sales data when they set supply for the next issue. If distributors don’t have it, how can they inform publishers? They can’t.

    I’m fairly sure most thinking publishers and newsagents would like supply to be accurately based on sales, but for this to even get close to happening it’s clear that all aspects of returns must be thoroughly re-assessed.

    0 likes

  • 15 Colin // Oct 20, 2016 at 10:31 PM

    AFTC,

    Are suggesting that you need returns data to monitor sales ? Speak to the distributors and ask the question …could the data on daily newsagent sales be available … you might be surprised at the answer.

    After you get over that shock, try asking the printer to produce just a week before publication. They are not exactly overburdened with work !!!!

    0 likes

  • 16 Neil // Oct 20, 2016 at 11:21 PM

    @Colin – So all you’re demanding is a huge commission increase, to keep what you don’t sell and for your competition to be removed or you’ll slowly quit the channel.

    Can’t imagine why anyone would turn down that offer….

    0 likes

  • 17 Colin // Oct 20, 2016 at 11:58 PM

    Neil,

    Correct….. prepared to make a go of it at 35%……despite achieving 50% on gifts. And competition on equal basis. What’s your solution

    0 likes

  • 18 Neil // Oct 21, 2016 at 12:24 AM

    Well as a publisher or distributor I’d want to reduce costs fast, while keeping numbers up as much as possible… I’d sell through chain stores and supermarkets that have robust operating procedures for slightly less income in, but are a hell of a lot cheaper to deal with in man hours etc.

    As a retail outlet I’d be exiting print media, fast. Probably even 2 years ago.

    As a customer it’s been years since I bought a paper or magazine. I pay a reasonable monthly subscription and it’s all there when I wake up every morning.

    2 likes

  • 19 Chris // Oct 21, 2016 at 7:08 AM

    I cant see how supermarkets and chain stores would be cheaper to deal with, other suppliers would be quick to point that out! The magazine companies would have to merchandise themselves and pay for promotional space unlike in newsagencies. The main benefit would be compliance in these channels that our channel does not provide.
    Also, I will not be exiting print anytime soon as it is very profitable for me. The foot traffic is still very good and I do hope anyone wanting to exit magazines does complete a thorough SWOT before going ahead.

    0 likes

  • 20 Mark Fletcher // Oct 21, 2016 at 7:20 AM

    Supermarkets are not cheaper. Their one benefit is a guarantee that all outlets will behave the same way and some publishers love this and will pay extra for it.

    0 likes

  • 21 ed // Oct 21, 2016 at 8:41 AM

    Well why do we have to sell at recommend retail when Breuer give discounts to supers.. why should we be dictated to on price, If they want to make us look mean and expensive we should just start selling at 30-35%.plus..

    2 likes

  • 22 James // Oct 21, 2016 at 8:52 AM

    @Neil, as a publisher or distributor of high volume weeklys, you want to reduce costs while keeping numbers up.

    Yep got it…… thats the 50 titles that publishers have pumped into supermarkets and supermarkets are prepared to sell.

    For the other 1,950 publishers of niche monthlys, Bi Monthlys and Quarterlys, they just want someone to stock their product.

    Who is that is the question??

    0 likes

  • 23 eric // Oct 21, 2016 at 12:34 PM

    i only need 100 best sellers, the rest can stop printing and distributing please. save our planet!

    3 likes

  • 24 Henry Henderson // Oct 21, 2016 at 1:51 PM

    Regarding Mark’s suggestion that publishers ditch supermarkets, wouldn’t this require publishers to collude to do so (even if they wanted to)?
    I believe magazine will disappear from supermarkets, but it will because they ditch magazines, not the other way round.
    We talk a lot about margins and costs in regard to magazines, but we should remember in the end, the market will decide: in the competition for shelf space magazines will have to deliver more net profit than any other item that can take their place; therefore, the decision on how much shelf to give magazines simply comes down to asking do I have other items that will be more profitable.
    In doing so we should not be deceived by the complexities of the current model: no newsagent receives 25% gross margin, for the average newsagent it is 15% to 16%. This is gross profit. For the definitive study of real net profit, every newsagent should read Mark’s, “The Cash-Flow Impact of Magazines in Australian Newsagencies”, in which Mark uses pristine data from 30 newsagents of varying category in his exposition.
    (I should make it clear, the reference to gross margin above does not come from Mark’s study, I take responsibility for that.)
    The frustrating thing for all of us is that newsagents, as a body, have not come up with an alternative model that can be argued and lobbied for. This should be the role of the ANF, but its response to the MPI application to the ACCC was so pathetic my mind boggles. So how can we go about constructing such a model? Any ideas?

    3 likes

  • 25 MARK. R // Oct 21, 2016 at 3:34 PM

    Henry, Magazines occupy prime space in supermarkets ,particularly in the 2 majors .

    I find it hard to believe that the publishers are not paying for that space

    2 likes

  • 26 Henry Henderson // Oct 22, 2016 at 11:47 AM

    Mark, you are absolutely right; that’s what supermarkets do: they sell space. Their deals with suppliers are complex, but fundamentally they are selling the best retail space in the land. The reason I believe magazines will exit the supermarkets is because the intense competition they are under having a prime position in the best locations. There are thousands of suppliers barking at magazines to get out of the way. Assuming the downward trend in magazine sales continues, the cost of being in a supermarket will eventually be more than the revenue.
    (I’d also like to make the point in passing that Gordon and Gotch’s main activity is selling space: that of newsagents.)
    However, I readily concede that my record as a prophet is left off my job applications.

    3 likes

  • 27 Australian Family Tree Connections // Oct 22, 2016 at 5:03 PM

    Colin @ #15
    You wrote Are suggesting that you need returns data to monitor sales ?
    No Colin, I was not.

    John Fitzpatrick @ #10
    You wrote I choose to send back full copy returns.
    Even though that enables some of those magazines to be re-supplied to newsagents? Magazines that did not sell first time around?
    (Not criticising, just making the point).

    1 likes

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