On analysing the return on investment, floor space and labour, a newsagent I was talking with recently has concluded that they will be better off without Tatts in their business.
They are yet to undertake the new corporate image and digital marketing fit out and therefore they have been running the numbers.
While their Tatts numbers are good, growth is average for any Tatts outlet. It is not keeping in line with non-agency parts of their business where they are growing revenue by 15% with most this coming from high-margin products where year on year growth is even higher.
Looking at one of their growth categories, they have lifted revenue by $26,000 on the back of less than $3,000 additional inventory tory investment and with no additional space investment. The $26,000 in revenue represents $14,300 in gross profit. This is equal to more than $200,000 in lottery sales.
What is even more important is that the category example above is a new traffic generator, it bring in people who in the past have not traditionally shopped in the business. Lotteries, on the other hand, rely on traditional traffic.
So, the question for the retailer is do they cut ties with Tatts? It is a business-specific and tough question as the raw numbers are confronting. For this business, do they really want to turn off what is certain revenue and take more of a risk in the business? Recent results indicate that they can safely back themselves.
As they thought about a business without lotteries they started to see greater potential.
For example, the most valuable retail space in the shop would be freed up to be 100% under their control. Sketching that out from a street front perspective they started to see a very different business to what shoppers see today with lottery collateral dominating the image of the business.
This led to the contemplation of what would our business be? This is a good question. Even thinking about it can be liberating in terms of what could be if you had complete control.
The decision is not yet 100% locked in. They have several months yet before they must lock it in. However, they say they are set. I am writing about this today in part to give them a way to gather other opinions.
Let them know what you think in comments here.