A discussion with a newsagent elsewhere this week about selling NSW Transport Opal card top-up has prompted me to revisit this topic of being an agent versus a being a retailer.
Regulars here will know my views – I see no upside in being an agent … margins are low, converting traffic to other purchases challenging and the demand on your labour diverting you from being a retailer.
So why are newsagents attracted to agency business? I think it’s the love of traffic and the belief that any traffic is better than no traffic.
The risk with good low margin traffic is that it keeps you busy and this can take your eye off the real focus of the business – being the best retailer possible, generating genuine value of your business.
Work for the sake of work adds no value to a business. Low margin work, where you’re making 2% out of which you have to pay overheads and for which dedicate valuable retail space is not smart.
But I understand why newsagents are drawn to agency business. With newspaper traffic down, magazine traffic challenges and lottery traffic flat, attracting shoppers for other items can be seen as an easy move. When you are asked two or three times a day if you have the tickets or other agent product you will feel pressured.
What is it worth? In newsagency basket data I have seen for city and suburban businesses, 80% and more of the time people purchase transport tickets they purchase nothing else. Okay these people may think of them business when they do what another item, I doubt it. Transport tickets are about convenience and convenience shoppers shop for convenience more so than loyalty.
The counter is where you see the real conflict. Transport ticket and other low-margin agency product sales require attention at the counter. Customers purchasing them tend to be impatient. So you need to ensure the counter is maintained.
If the customer in front is purchasing a $100.00 gift item which needs to be boxed, the transport ticket customer will be frustrated at waiting a couple of minutes. Likewise, the customer interested in the $100.00 gift item may walk away when confronted with a line of four or five people buying transport tickets.
What you do, whether you sell agency lines like transport tickets or not, comes down to what you stand for, your Unique Selling Proposition. If your focus in on high margin repeat customer business for which you achieve good word of mouth support and are known regionally, what role do transport tickets play … are they not in conflict with your mission?
If you have a track record of converting low-margin traffic into more valuable purchases then it’s an opportunity to consider. But you need to be honest with yourself about what your business achieves, you need to look at your data and have it speak to you about what you are really doing rather than what you think you are doing.
If you are not good at converting low-margin traffic to other purchases, get out of it and focus on being a professional retailer. Chase a USP. Drop it right. Get known in your region. Build a business for the long-term based on your retail prowess and not based on being convenient.
My goals with this post are to acknowledge the challenges, provide food for thought on the question of whether to take on low-margin agency business and to open the topic for discussion.
Footnote: just because my view is against agency business for newsagents does not make it right. Every business owner gets to make this choice for themselves based on their circumstances. That is the strength and weakness of our channel of independently owned retail businesses.
I saw this wall of wrapped packages and immediately started choosing the packaging solutions I liked.
