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

Month: October 2016

Supermarkets drive confusion around loyalty points value

I don’t get why any small business retailer would run a loyalty program based on points when the supermarkets have ruined the value of points programs with change after change and a value proposition that is dreadful.

News Corp. published an article about this in August. Consider the Woolworths supermarket pitch:

$1 spend will earn one Woolworths Point, with no minimum spend.

$2000 spend on anything in the supermarket, BWS and Caltex will earn 2000 Woolworths Points, which can be redeemed for $10 off your next shop.

Now, take a look at the Coles supermarket pitch:

$1 spend will earn one FlyBuys Point, with no minimum spend.

$2000 spend on anything in the Coles supermarket, Target or Kmart will earn 2000 FlyBuys Points, which can be redeemed for a $10 gift voucher in Coles or Shell petrol, effectively $10 cash off your next shop.

Now, if you run a points program, think about your offer. I know newsagents who accuse a point per dollar spent and the points are worth 2.5 cents each. In this scenario, $2,000 in purchases results in a value to the shopper of $50.00 – considerably more than the $10.00 you get from the same value purchase at Coles or Woolworths.

The comparison is reasonable because the currency is the same – the currency is points. Regardless of the value of the points.

I don’t understand why any retailer would offer a loyalty program that can be easily compared with a big business competitor, especially where the competitor actively runs a loyalty program that is anything but.

In small business especially, the loyalty program you run needs to be an easily understood point of difference. It needs to be something people will switch to your shop for.

If you run a points program, ask your customers if they understand it. Next, run your management reports to assess whether you are actually making money from the program. you know what it costs each year, are you achieving incremental business to justify the investment?

Many years ago we all jumped into points based loyalty because it was the big new thing and because we wanted to be like big businesses because that’s what we thought was right back then. However, that sea quickly became competitive and bloody. In fact, now it is so cluttered and confusing that copying big business is not a smart move at all.

Be smart about your loyalty offer. Ensure it is easily understood, differentiating and offering understood and appreciated value.

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marketing

Newsagents need to confront the challenge of the surcharge free movement

The surcharge free movement in Australia is growing momentum. So much so that newsagents charging a surcharge for the use of a credit or debit card will face even more pressure than before.

While I don’t charge a surcharge in my newsagencies, I know of plenty who do. Given the 6% commission on lottery products or 2% commission on transport ticket sales, a surcharge is necessary for many transactions that would otherwise be loss-making.

There is no future for a retail business that sells goods or services where it does not even cover operating costs.

However, Surcharge Free is a thing, a movement … apparently funded by American Express, surprise surprise – and they are using consumer advocate and former Choice spokesperson Christopher Zinn as their public face.

Check out this video:

This video from House explains the retail business value better.

From a newsagency business perspective, the House story does not connect as they control their prices and therefore their margin. Agency focussed newsagencies do not have this luxury. Newspapers, magazines, transport tickets, lottery products, phone top-up … they are all sold at a fixed price with a fixed, small, margin. It is these products that are problematic when it comes to credit and debit card surcharges.

Here is a video from tailor Germanicos:

Again, a product where the retailer controls their margin.

All these videos are from American Express. The surcharge free website is full of data, presented well, that encourage retailers to confront the challenge of surcharge free:

Screen Shot 2016-10-03 at 7.34.16 AM

And if that is not enough, there is this:

Screen Shot 2016-10-03 at 7.35.46 AM

My own view is that a surcharge in retail is a point of friction. It is an invitation to a shopper to shop elsewhere. It has them wondering where they could shop next time – yes, to save a few cents. They do not care about your margin situation.

So, what do you do?

One option is to pull back on low-margin agency business. I think that is the smart move. It is happening naturally with transport tickets, lottery products, mobile phone recharge and phone cards – with suppliers of these pushing online purchases aggressively. But I know this is easier said than done with many newsagency businesses relying on agency business for more than 50% of foot traffic and revenue.

The other option is to grow non agency business, higher margin business, to fund the credit and debit card fees.

The other option is to charge a surcharge. However, I think that will only end badly for the business given the forces being rallied against surcharges.

I do think shoppers see it this way: no surcharge = better customer service.

My advice to small business retail newsagents is to think through carefully what is best for the long term health and value of your business asset, do not apply a surcharge without thoughtful consideration.

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Newsagency challenges

Sunday newsagency challenge: think twice about putting products aside

I see plenty of newsagencies where products are held for customers at the counter for purchase later, that day, that week or even that month. While this is a nice customer service touch, it can cost you sales – especially if the item is highly sought after and the customer may not collect it.

Take a look at your processes and be more firm on how you handle this.

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Newsagency challenges

Sunday newsagency management tip: be open to challenge with inventory

A supplier to the newsagency channel recently reviewed the top selling items in a product category and discovered that the top product across all retail channels was not the top product newsagents chose to stock. In other words, newsagents were buying poorly and sales were impacted as a result.

My tip today: act on advice as to what to stock. If you are not sure, ask for evidence supporting the advice.

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Management tip

The different shoppers you see

With the AFL Grand Final is full swing it is fascinating the different shoppers you see this afternoon in major shopping centre situations. This morning was a surge as people who would have shopped in the afternoon got it out of the way. This afternoon there are plenty of grandparents and kids as well as families. It is terrific seeing the change in mix of shoppers.

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Newsagency management
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