Australian Newsagency Blog

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

Let’s talk about newspaper closures

Mark Fletcher
June 3rd, 2020 · 22 Comments

I grabbed a moment yesterday, June 2, 2020, to shoot this 10 minute video to talk about the newspaper closures announced last week by News Corp and to consider them and other closures in the context of 2005. Take a look…

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Category: Media disruption · newsagency of the future · Newspaper distribution · Newspapers

22 responses so far ↓

  • 1 Peter // Jun 5, 2020 at 5:53 AM

    There is good information here. You are right that the closures are not a surprise. I know of plenty of newsagents though who have ignored the warnings. They will be lost to us soon I suspect.

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  • 2 Peter // Jun 5, 2020 at 9:30 AM

    I’d be interested to know how many newsagencies have closed in the last 5 years and especially in the last 6 months. Same with print circulation, how much has it declined during the same period. Hard to get circulation figures, they only want to talk about readership numbers these days, for obvious reasons. Retail is being smashed at the moment. A growing number of for lease signs popping up and that is before jobkeeper and jobseeker are removed. Scary days ahead.

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  • 3 Mark Fletcher // Jun 5, 2020 at 9:45 AM

    Over 5 years, the number is somewhere between 1,000 and 1,500, depending on what one classes as a newsagency. The closure rate slowed last year. This year, there has been a slight uptick ion last year but not at a point of concern.

    Many newsagencies are in growth. No, that’s not made up.

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  • 4 Peter // Jun 5, 2020 at 10:12 AM

    The closure rate would want to slow, those are awful numbers and there are real people and families behind them. Devastating

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  • 5 Mark Fletcher // Jun 5, 2020 at 3:17 PM

    I think that traditional businesses that remain agency focussed will remain challenged. Those that have diversified (games, toys, gifts, homewares, clothing, coffee or any mix of these) and with more than 50% of revenue achieving 50%+ GP have a much brighter future … and, of course, a question as to the shingle. Although, I think the shingle is less relevant today.

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  • 6 Peter // Jun 5, 2020 at 4:03 PM

    I think all businesses are challenged at the moment. Everybody is selling the same stuff and competing with online. Throw on top the pandemic and the resultant recession and retailing has never been tougher. Coffee retailing has grown exponentially over the past two decades, that growth I believe is symptomatic of the debt fueled, high consumption world we’ve been in. I think in the future, many fewer people will be able to afford the coffee culture.

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  • 7 Steve // Jun 5, 2020 at 7:26 PM

    I agree with Peter those closure numbers are horrible. The true test of how many will soon follow will come the end of September when the Covid rent deferral period comes to an end. The shopping centre 30 year rental boom is over and something has to give. With JobKeeper also ending at that time both our channel and all other retailers will be challenged. I fear many have an inflated view of their business’s value.

    Change is imminent and will bring opportunities. Like Mark states diversification into higher margin product lines is the key

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  • 8 Graeme Day // Jun 5, 2020 at 9:23 PM

    i agree with the three of you re the situation of our retail industry.
    The complex situation is complicated.
    First of all Newsagent is NOT what we are any more .
    Yes we can own Newsagencies with the shingle outside the shop in lights or we can transition the process of change with education to the public. Which is what is needed.
    We have been too busy internalising our problem which really is many of them are NOT retailers they bought for safety, they bought for Visa reasons and citizen related causes -in short they brutalised the system as passers through rather
    than business career people.
    Opportunities are incredibly out there. all of you recognise this.
    I deal with buyers (potential ones that is as such)
    They have no pathway to reverse the declining sales and profit of the presented newsagency for sale and if explained what’s needed to reverse the decline (as you well know and have proven, can be done) cost money -lot’s of it-new stock -some refitting and many more I am sure yoiu know about.
    Add this to the asking price with their own lack of Retail knowledge makes for great uncertainty.
    NOT many newsagents know that their business is not the same price as compared with what they paid for it.
    So they stay -take their wage as long as they can and then go belly up -or close the doors when the lease runs out.
    in short it isn’t the business at fault it’s the owner trying to reclaim original investment when they have run out of time and cash.

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  • 9 Steve // Jun 6, 2020 at 8:09 AM

    Graeme a bird in the hand is worth 2 in the bush. I wonder how many closed stores would still be trading today if those business owners had faced the reality of their business worth. I fear many more will close and the owners will not realise their true business value.

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  • 10 Mark Fletcher // Jun 6, 2020 at 10:23 AM

    A point I make in my video is that back in 2005 these challenges of print media disruption and Coe newsagency traffic challenges were being actively discussed in our channel. The closure of newspapers is not a surprise. The migration of lottery shoppers online is not a surprise. The decline in magazine sales is not a surprise. Greater competition from other retailers is not a surprise. Online itself is not a surprise.

    Most newsagencies close because the owners have not been up for the fight to embrace change to create businesses that are relevant.

    Plenty of closures can be avoided with early engagement and, sometimes, more capital.

    Shopping centre closures can be different, though, with most national landlords not offering fair rent.

    Related, I wrote about this following the closure of a newsagency in Sydney: https://www.newsagencyblog.com.au/2015/09/30/my-advice-if-you-think-closing-and-walking-away-from-your-newsagency-business-is-the-only-option-available-to-you/

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  • 11 Peter // Jun 6, 2020 at 10:41 AM

    “More capital”. That’s the fine print in the bright future contract.

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  • 12 Mark Fletcher // Jun 6, 2020 at 11:58 AM

    I disagree. If you started early you can transform with minimal capital.

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  • 13 Graeme Day // Jun 6, 2020 at 4:16 PM

    Prices are now based on income for two, plus some extra Return On Investment.
    The income for two needs to be paid to the owners as salaries for actual work participatedstating their hours per week on a roster along with other employees.
    The R.O.I. factor can be utilised by re inventing the store, changing its Retail, offer or if one has already done that and the figures are showing a halt or increase in sales tgen they know their business is sustainable.
    They need to realise that the market (purhase price) is going down elevator and the vendor is adjusting the price by coming done the stairs especialy the one’s who have a financial Profit and Loss showing a drop in net profit each year over a number of years, usually three years.
    Yes, to change you do need capital expenditure left over from profit (if you have any) or a loan showing the lending body the “new business plan”
    which in turn shows a cash flow projected profit.
    As for closing, it’s a matter of How do you go broke and the answer is Slowly then Suddenly.
    Best to do something about the business’s Health, get it fit again by changing the diet otherwise
    it will die. (close) or take an under performing price as the purchaser has to the heavy lifting.
    Can’t have the Cake and Eat it too.

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  • 14 David // Jun 6, 2020 at 5:53 PM

    I think the video speaks for itself on this issue. I agree with what’s said. Our future is up to us and we have seen this coming.

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  • 15 Peter // Jun 6, 2020 at 6:43 PM

    “Income for two” Graeme. Almost sounds romantic. Whenever I see that or “Business perfect for a couple” it sends shivers down my spine. Maybe the newly arrived migrants will buy that, not this little black duck. Up there with renovators delight and hardly been used.

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  • 16 Steve // Jun 6, 2020 at 7:32 PM

    I am seeing many newsagents on the market who are offering no return on investment. The owners of these stores will struggle to sell. These owners have failed to transition from the traditional agencies lines and have not reinvested in their business. They have lost their original passion and I fear many will simply shut up shop.

    Mark is correct reinvestment does not necessarily involve huge capital commitments. No one should be asked to pay for potential returns from their own reinventing of the store.

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  • 17 Graeme Day // Jun 7, 2020 at 9:00 AM

    Peter, Look at the bottom line and then deduct a Household income (between $78k and $82k p.a.) from that and you have the business R.O.I.
    The left over is the amount that is needed to be valued as it is necessary to pay back any loans and/or invest into new stock and presentation if required.
    Buying the business and paying Goodwill for your own wages is long gone.
    Extending a Visa and buying the business for the minimum two years required for citizenship is another matter and is reponsible for more than 50% of all enquiries.
    These are guidelines that a purchaser would use and it’s up to the seller to make sure the “books” make sense.
    Unfortunately, too many vendors are expecting yesterday’s price.
    The new norm being established, many prospective buyers are asking for Vendor finance and rent reduction as a condition to purchase.
    During Lockdown our enquiry rate increased.
    After talking with the prospective we found that many were concerned that their current job was over.

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  • 18 Peter // Jun 7, 2020 at 9:56 AM

    Yes, you have a lot of very sage advice Graeme. I would add, if you can’t read financials (probably shouldn’t be going into a business), then get someone that can. Creative accounting can be picked up pretty quickly if you know what you’re looking for. Tends to make those two income and ROI figures meaningless. Secondly, spend some time in the business before committing. If the vendor is confident in their product, they should have no problem with this. Equally, spend some time observing without them knowing. Foot traffic, staff morale, customer feedback all very important and never represented on a balance sheet.

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  • 19 Graeme Day // Jun 7, 2020 at 10:59 AM

    Yes, there are plenty of components to look. The Staff roster including owner’s participation is another problem. You know, the owners say’s If you run it this way you can make a lot more money” answer, why don’t you do this? It goes on and on.
    Owner’s are not only reluctant to let people work with them before time to take over, they just refuse this request. However one week after exchange of contract and before takeover and one more week from the changeover is allocated as the norm for training and if the purchaser wants more than this it needs to be condition in the contract.
    I do a Due Diligence before listing including market appraisal however it’s up to the vendor for the price asking. All want to “test” the market for their business is “different” from others therefore I may get a “cash” buyer.
    There is plenty of transparency if one looks at the figures properly. The P&l is just a form targetting ATO minimisation.that is if they are making a profit after their own wage drawings.
    The P.O.S. Systems are very good so we do Top Down accounting and if that doesn’t prove the Sales figures we then do Bottom Up from invoices.
    The only problem with the latter is Stock very, very few newsagents do physical stock takes. Then those that do electonic ones need to do physical as well for electronic doesn’t show shrinkage.
    The real point is that even when the Due Diligence is done, the vendors want what they want.
    This is what Mark is referring to in paragragh two of this post.
    Mark also points out that newsagents should go early into change.
    This is ever so important or “too little ,too late to try again” applies.
    The BIG difference is that yesterday’s Agent were guily of “taking” sales and Today’s newsagent needs to be “Making: Sales.

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  • 20 Peter // Jun 7, 2020 at 11:48 AM

    Businesses that are too reliant on add backs are a no no for me. Also, if I use my local supermarket as an example, I’m well aware of who I’d employ and who I’d plan to move on, if I bought such a business. Amazing what you can observe from employees. Laziness, self-entitlement, open back stabbing all on display. Equally, you can see the friendly, engaged employees too. Beware the older , been there a long time, self entitled, inflexible know it alls. Move them on quickly.

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  • 21 Mark Fletcher // Jun 7, 2020 at 12:39 PM

    Stock takes are common in newsagencies. I say this based on the requests for advice and training from newsagents. There has been a spike in the requests since March this year as retailers had lower foot traffic.

    When prospective purchasers ask me I advise to go off the business financial records (P&L and Balance Sheet) understanding that there could be business structural aspects to understand and the tax returns that flow from these. Add backs are dangerous. I also suggest a review of age of inventory. Anything greater than 6 months old has, in my opinion, a discounted value.

    The encouragement of change started more than 15 years ago. While many newsagents attended workshops and conferences where this was raised and specific advice was provided, t many did not follow.

    An engaged newsagency today, too me, is achieving 45%GP or more and bringing shoppers in for categories not in the 6 core to our channel – papers, magazines, cards, stationery, lotteries and tobacco.

    Thee are newsagents doing this, delivering terrific results. This is well shown by the number unable to meet JobKeeper criteria due to year on year growth before and during COVID.

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  • 22 Graeme Day // Jun 7, 2020 at 2:47 PM

    Mark, you are dealing with Retail current market. A lot particpants in today’s market are doing very well.
    I am in the “give up hope” market for whatever the reason of exiting the newsagent.
    You have hit it on the head re those than can do and those want out.
    My perpective has always been for the future which is what you are doing best.
    The videos in particular are to the point, interesting and directional in the most positive way.
    They are great for the industry.
    What I have written here is about the exiting newsagent, No stock takes for years and years gets under the ATO’s criteria of an allowance of $5k to $10k difference from Opening Stock and Closing stock. However the figures are wrong but the end result is the same.Maxed at $10k variation. The advice on inventory and marketing etc are excellent.All the Reports are available from Tower system and others Unfortunately,the out going Agent doesn’t know about it, or doesn’t want to, for whatever reaons they have.
    They just want to sell and as you state often, if the transitioned thir agency to an uip to date model, they may just stay.
    The alternative for them, is what is stated on the Blog.
    It’s sad and avoidable, for the industry has bones and just needs the fleshing out procees to show that difference.
    We are living with variable differences for those staying and for those leaving the industy.
    Add backs are essential and be restricted Depreciation is one as it is not a Cash item.
    Interest paid is also an Add back this belongs to the current owner and has no relevance what so ever for the buyer as they need to add the own.
    Banks and other Financial Institutions insist on cash flow sheets as do the Lott (Tabcorp)
    The rosters are a guide only, we suggest to the purchaser, the need to work out what their
    hours will be and adjust the staff roster accordingly. Some prospective owners are buying the agency for one person owner operator – if this is the case than they will need to fit the criteria to suit them.
    Peter, you are 100% right in this in fact some purchaser insist on all the curent staff be paid in full by the current owner and then they put the staff on 3-6 month probationary period ,. Three months would be plenty if they want a clean out.

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