Australian Newsagency Blog

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

What does the future look like for retail newsagents and indie retail businesses?

Mark Fletcher
August 11th, 2020 · 9 Comments

Are retail newsagencies closing due to COVID-19? I see no evidence of this. While I am aware of a couple of business owners saying they closed due to Covid, these businesses were on a trajectory to closure long before the outbreak.

In my experience and based on data I have seen, gift shops, jewellers and hospitality businesses are more likely to close due to Covid than newsagents. I am aware of plenty in these channels that have closed, businesses that were trading okay and not on a trajectory to closure.

By trajectory to closure, I mean data in year on year comparison – revenue and profitability were declining before Covid, showing the business to be on a trajectory to closure unless it took drastic action to play against the trajectory.

Most retail newsagents, particularly high street, regional and rural newsagents are doing well through Covid. It is rare to find one not doing well. And, by well, I mean with year on year revenue somewhere between -20% and +33% – yes, that is the actual range I am seeing reported.

Of the 150+ I have spoken with that are doing well, all had diversified in one or more ways, attracting non traditional newsagency shoppers, driving up overall GP% and broadening the appeal of the business. And, by doing well, I mean they did not qualify for JobKeeper.

The retail newsagencies more likely to not come out of Covid well are those in shopping centres, especially those without online revenue and those that have not pivoted enough. Covid has laid bare the risk of their the traditional newsagency situation of low margin agency lines and an ever growing operating cost base.

The good news for the channel is the successful pivots undertaken. There is the traditional pivot to gifts. then, there is the less traditional and often equally or more successful pivot to coffee, cafe, toys, games, homewares, baby, outdoors, electrical, locally made, services and more. Successful pivots usually involve 2 or more of these categories.

Covid has brought into focus the need to evolve. This need is not new nor are the suggested changes new. Indeed, they have been discussed and debated here for years as well as at conferences and workshops. indeed, the first time I laid out the need for fundamental change in new traffic categories was at the ACP Magazines Connections conference in 2005.

Newsagents who want help to pivot can speak with a marketing group. A good marketing group will offer options for consideration, new traffic opportunities, execution training and platforms through which you can discover new shoppers. This work is all basic to any engaged marketing group.

What Covid has brought into focus is new opportunities for the channel. These are in the form of new suppliers as well as new operating practices such as being online, offering click and collect and bundling. I see these as positive for those for whom they are new.

While the channel has evolved and continues to evolve, newsagencies are here and are strong. The biggest difference today is in the types of businesses that consider themselves to be under that shingle.

Now, if you plan to comment that it’s doom and gloom, I say, again, there is no evidence of this, no matter how much you may want there to be.

The newsagency channel is filled with plenty of good news, which we should celebrate.

Footnote: I expect Covid will result in a fundamental change in areas including occupancy cost, a shift, for some, out of malls and on to the high street, access to new suppliers and, maybe, changes to employee arrangements. These and other areas of change will lead to fundamental recasting of retail, business and our channel.

Note: My information comes from my software company, Tower Systems, which serves 1,700+ retail newsagents, my work with newsXpress members, 220+ retail newsagency businesses, newsagency suppliers and others.

15 likes

Category: newsagency of the future · Newsagency opportunities

9 responses so far ↓

  • 1 Colin // Aug 11, 2020 at 12:04 PM

    I have seen businesses close because of covid, but they were not newsagencies. As you say, the newsagencies that have closed had other underlying issues and would probably have closed soon anyway

    I also agree there are newsagencies that have pivoted and are riding the storm, some doing well. Where I disagree is on the future of the channel. The businesses that are succeeding are pivoting away from the channel, they remain in the channel because the journey is incomplete or the destination is unsure. Many will end up as gift shops, lifestyle stores, cafes etc, but there be any newsagencies, or just former newsagencies ?

    The answer I believe lies with magazines. If a model emerges whereby an excellence in magazines is appreciated and therefore a destination, then the newsagency channel can be said to have survived, albeit on a much smaller scale.

    But if the magazine distribution model and availability fails to evolve and become appreciated, then I fear there will be no channel. But there will be many former newsagents, successfully trading and looking for an identity.

    The future is bright but unknown.

    1 likes

  • 2 Graeme Day // Aug 11, 2020 at 12:28 PM

    Colin, I agree, we are full of vision for opportunities and we do have the foundation.
    Magazines are a worry as they are “print media” which is easy downloaded or read on line.
    It needs investment by the owners especially in the retail end as their revenue to survival is/has always been advertising. Newspapers are finding out the break even point of Distribution versus news which is a very disposable item in that the minute the consumer reads it is is no longer required. Magazines haw a longer life span and therefoe the advertising is not so time critical as in the Newspaper model however the third and very important part of the equation is the effect social media has in the transmission of new by its immediate distribution effect.
    Some solutions: Put this instore display into perspective and cut the space down to suit the actual profitable turnover from the net sales.
    Use the new founded space to put in new product .
    Do the same with Greeting Cards.
    The new identity crisis is individual as one size does not fit all, however it will emerge especially with communication among those that want results.

    It is a Big picture that needs a lot of thought, development, stucture and the conceptualisation to make it a separate idenitity from the failing current newsagency system.

    0 likes

  • 3 Peter // Aug 11, 2020 at 2:15 PM

    In the retail space the big winners out of Covid19 have been businesses with a strong online presence. I’ve never bought more things online prior to the pandemic. High st newsagencies have benefited from the “Steven Bradbury effect”, with competitors and shopping centres “falling over”. I would expect the online habits to keep going post Covid19, the challenge for newsagents is to build their online business, as the competitors will come roaring back. There will be fundamental changes to the High st as well. I would expect an acceleration in bank branch closures from next year as Covid19 has reduced in-branch transactions to very small numbers. David Jones and Myer will both be under extreme survival pressure and cafes and restaurants will be significantly reduced once jobkeeper ends. The good retailers with strong online presence will be the big winners

    0 likes

  • 4 Graeme Day // Aug 11, 2020 at 4:22 PM

    Absolutely Peter and from there real opportunities arise. In the buying arena I am asked constantly “what else can we do with this business” apart for referring them to buying groups, if the business their looking at is not already part of one, I tell them to look around the business area and see what is needed, Check out the local demographics. age groups are important. mortgage repayments lead to disposable income, birth rates and school attendances etc.

    0 likes

  • 5 Steve // Aug 11, 2020 at 6:17 PM

    As an accountant I am noticing each of my newsagency clients and my own high street store enjoying both a healthier cashflow and a stronger bottom line since the beginning of the Covid pandemic. Whilst government stimulus and support is playing some role only 1 in 4 are receiving JobKeeper subsidies. Like Peter says each have benefited from the essential business classification & the temporary closure of other retailers.

    Each of these newsagencies continue to transition to the newsagency of the future each in their own individual way diversifying into giftware, games, toys, puzzles, books and coffee . As the Covid recession continues to bite the closure of other retailers will present further opportunities.

    Having said that it is not all rosy. Newsagency valuations continue to fall and I fear that many sellers hang onto long hoping to recover some of the prices of yesteryear. I can think of the closure of 2 stores in recent years in nearby tourist towns similar to my own where the owners simply walked away and closed their doors. To me these are opportunities lost sadly with lotteries agencies transferring to chemists and service stations probably never to be regained.

    0 likes

  • 6 Graeme Day // Aug 11, 2020 at 7:31 PM

    An excellent summary of where newsagencies have come from to where they are today.
    It’s what to do about it in the sense that we remain an “industry” that needs discussion.
    To do this we need conceptualisation of image for the local community plus structure in business management for Bankers and Buyers to take us seriously.
    It reminds very much of the closure over the years of the Milk Bars in the late 60’s with the gradual transition of some into Cafes and others closing and cafes opening to take their place. This is now on the vacant space yet to occupied by the new Business combination mentioned above. Concept and structure, Steve, you being an Accountant would know this being the case. Hope you weren’t flooded out last weekend as a couple of my freinds were staying there howver the Town was busy I hear.

    0 likes

  • 7 Steve // Aug 11, 2020 at 8:32 PM

    Yes Graeme it was a very wet weekend however the town was still surprisingly busy. All short term rentals remain booked out until next month. Withe wet weather we had a good weekend with book and board game sales, again the benefit of diversification. Visitors to our store are frequently saying that they wish they could get the same in the city. increasing the overall margins remains the key to the success of our industry.

    0 likes

  • 8 Graeme Day // Aug 11, 2020 at 8:46 PM

    Absolutely.

    0 likes

  • 9 David // Aug 11, 2020 at 9:22 PM

    Good and useful analysis Mark.

    2 likes

Leave a Reply

Your email address will not be published. Required fields are marked *

Reload Image