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

Author: Mark Fletcher

Gotch email demonstrates a core problem with the magazine distribution model

Magazine distributor Gordon and Gotch yesterday emailed many newsagents reminding them that their account was due to be paid yesterday:

Dear Customer,

We take this opportunity to remind you that your Aug’10 account was due on the 20th of Sep. As has previously been communicated, continued disregard of trading terms may result in supplies being suspended.

We urge you to promptly settle the debt due at present and adhere to our terms of trade going forward, thus avoiding any disruption to trade. Attached below are our banking details for electronic transfers.

I know of several newsagents who received this email who had already paid their account.  While that is disappointing, it is not what galls me the most about the email.  The email reflects the abuse of small business newsagents by the magazine distributors.  Consider these points:

  1. Most newsagents do not have access to appropriate levers with which to control the amount they will owe Gotch each month.
  2. Newsagents have to fund retail real estate in store, labour for managing magazines and the freight cost of returning unsold stock.
  3. Newsagents are billed for product supplied to the end of the month.
  4. Gotch operates with a ‘fluid’ end of the month for processing returns from newsagents – we are not told when the end of a month will be and can find that we have missed it by a few days and therefore miss needed credits.

It is unfair for a magazine distributor to aggressively pursue newsagents to pay bills on time if they do not provide newsagents with the capacity to manage the amount they will owe.

The current magazine distribution model is unfair to newsagents.

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magazine distribution

Halloween 2010 kicks off early

halloween-foresthill-2010.jpgYou know you have a winner of a season when customers are buying stock as you are putting it out.  This happened for us at our Forest Hill store as we were putting out our Halloween range.  With not even half the stock out nor this year’s collateral up sales are already strong.  It helped that it is school holidays with plenty of families with time on their hands in the shopping centre.

The window display is attracting shoppers, young and old, stopping for a look at the display and inside – as you want with a window display.  Our team has made sure that you can easily see through the display and into the store.

For many years now newsXpress has owned Halloween in the newsagency channel with some stores selling in excess of $15,000 worth of Halloween product at an excellent margin.  While we will not do that much, it is in our top four seasons for non greeting card sales.

While it may be premature, we are wondering if we will have enough stock.

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marketing

Moving Oprah’s O magazine

Given the blitz of publicity since the announcement that Oprah is to bring her show to Australia in December, we have moved the O magazine to a more prominent location.  While we only sell two or three copies, I’d expect there to be a jump for the next few issues.

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magazines

iTunes for newspapers and magazines

The long awaited iTunes for newspapers and magazines appears closed from news reports over the last 24 hours.  The Wall Street Journal has the story, Mashable has a good summary.  Ken Doctor at Newsonomics asks nine pertinent questions about the move.

From a newsagent perspective, the move by Apple is another challenge to print.  While publishers tell is that the digital channel is different to print, I disagree.  There will be migration. I know from my own iPad experience that I am reaching for a print product less today than six months ago.

It remains to be seen how many newsagents seize the opportunity of the news from Apple, the opportunity to look carefully at the investment in print into the future in terms of shopfits and space allocation.

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magazines

Why the late return for the AFL Footy Record Gotch?

Gordon & Gotch has asked newsagents to retain the AFL Grand Final Footy record until the end of October, saying that the title will sell for weeks after the Grand Final.  I am not sure where they get their data as my experience is that we would be lucky see sales beyond the big day.

If newsagents follow the Gotch advice, returns for the Footy record will fall into November returns and a credit not appear until the December statement.

I will be returning my stock, if there is any, the week after the Grand Final.  It’s my money.

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magazine distribution

AFL Grand Final Lottery Syndicates

afl-grand-final-lottery.JPGWe are embracing AFL finals fever with house syndicates for Collingwood and St Kilda for Saturday night’s Tattslotto draw.  From the moment we put signs up customers started commenting about the game and their preferences.  These syndicates are priced lower than our usual syndicates to encourage them being purchased in addition to regular purchases.

The early preferred Grand Final favourite based on sales – St Kilda.

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Lotteries

Books the great story of 2010

foodbooks.JPGWe are seeing book sales continue to grow with food and children’s titles doing exceptionally well.  We all but sold out of children’s books which we brought in for our Father’s Day Book Sale and are close to selling out of food.  We are adding stock as there appears to be no let up in demand and school holidays will provide an opportunity for growth.

With a margin above 50% and sale or return terms, books are also popular from a management and risk perspective.  The margin allows us to compete with outposts in the shopping centre.  We do this by running 25% off sales occasionally for a short period.

Books are key to us achieving an above average overall gross profit for the business.  They are also a central part of our basket building strategy.

For what it’s worth, our approach to books in-store is as follows:

  1. Four to five book sales a year.
  2. Display on trestle tables.  No frills.
  3. Place close to the greeting card department – in a high traffic location.  The basket penetration of books with cards is high.
  4. Simple signage: BOOK SALE.
  5. Refresh the table regularly during each day.
  6. Move categories within the sale each week.
  7. Change the high traffic sides of the tables at least weekly.
  8. Segment books by interest.
  9. Promote the launch of each sale with a catalogue in around 5,000 letterboxes around the store.
  10. Understand that stock – to guide customers looking for a gift.

I am sure that others have their success stories with books.  Make a comment and share…

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Book retailing

The challenge of displaying a free magazine with another title

shape-magazine.JPGThe latest issue of Shape magazine which went on sale yesterday was supplied with an old copy of Men’s Fitness from may this year  The two magazines were held together with a paper strap (see photo) half way down the cover which would not be seen once the magazines are traditional newsagency shelves.  Indeed, this strap would be easily damaged by customers shoving the stock back into the pocket.

Considering the flimsy paper strap and the state of the old copies of Men’s Fitness I decided to remove the free magazine from the offer.  This also enabled me to fit all the stock in one pocket and thereby better manage the real estate costs associated with this issue of Shape.

While applaud a publisher looking for more browser friendly ways of placing a few magazine with a current issue, the approach taken with Shape is not ideal.

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magazines

Better packaging for K-Zone

kzone-packaging.JPGKudos to Pacific Magazines for printing K-Zone on the packaging for their kids magazine.  This makes it much easier to find by our team and by shoppers.  Too often publishers do not reproduce the masthead on bags, frustrating newsagents and their customers.

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magazines

Chasing a sell out of the AFL Footy record

afl-record.JPGWe have placed the AFL Footy record in the best location of impulse purchases, between the Herald Sun and The Age.  If all goes to plan we will be sold out by mid week.  We are also running St Kilda and Collingwood syndicates as well as stocking up on white, black and red crepe paper and balloons.  We are all set for a good AFL Grand Final week.

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magazines

Are you located near Kenny’s Cardiology store?

Allied Brands, the business behind the Kenny’s Cardiology card and gift stores, is experiencing challenging times.  The Kenny’s business is suffering as a result.  Several company owned stores have been closed with more expected.  In July, the company had 47 stores and announced that it expected to close 10 of these.

If your newsagency is near a Kenny’s store, you may want to scope out the opportunity for increasing your focus on cards and gifts.

While it is a challenge to kick a competitor when they are down, in this instance newsagents could argue that it is fair.  Kenny’s opened around twenty years ago and took considerable greeting card business from newsagents.  Their difficulties today provide us with an opportunity to win some of this business back.

Newsagents can win back card business by becoming more actively engaged in the category.  While greeting cards deliver almost the best margin in a newsagency, newsagents are less engaged than with most other categories.  Some greeting card suppliers would argue that many newsagents are not engaged at all.

Here are my tips for creating a more competitive offer in the card category:

  1. Talk to your card main card supplier and request a performance review.
  2. Compare your supplier’s performance numbers with your own sales data.
  3. Have slow moving items replaced by faster moving stock.
  4. Carefully assess the performance of lifestyle cards against everyday.  Everyday sells significantly more in newsagencies that lifestyle.
  5. Have your staff trained in putting out cards so that new stock gets on the shelves sooner.
  6. Promote cards in all major seasonal displays.
  7. Start a card of the week program – featuring a card which will appal to your customers at the counter.
  8. Find ways to include cards in your high traffic area displays to drive impulse business.

The opportunity for newsagents reaches beyond what is happening with Kenny’s Cardiology.  Newsagencies have excellent traffic and it is easier to leverage this for additional card business than it is for a stand alone card and gift shop to attract a customer to purchase a card.

It’s business and we owe it to ourselves and the rest of the newsagency channel to leverage our excellent traffic for a greater share of the card and gift categories.

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Greeting Cards

Woman’s Day make over

It is good to see Woman’s Day get a make over – out today.    The $4.5M TV campaign should generate considerable interest.  We are leveraging this with strategic placement of the title in two locations for the next two days.  But that is about it since ACP has not provided any special collateral with which to promote the make over.

When New Idea did the same earlier this year we saw a lift.  That was in part due to excellent collateral designed to drive impulse purchases.

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magazines

How to free up capital in your newsagency

Dead stock, stock which is not paying its way, can cost a newsagency thousands of dollars a year, tens of thousands in some cases.

The non-circulation categories where I see the most dead stock are: everyday pens, premium pens, home office products, lifestyle greeting cards, maps and certain social stationery / gift lines.

Tobacco related products is probably the best managed category.

Newsagents who rely on supplier representatives to order for them have, from what I see, more dead stock than those who order using their newsagency computer system based on actual sales.  This is especially true in the pen and social stationery / gift areas.

Supplier representatives are usually at least part paid by commission and while they will protest at what I am writing here, human nature is such that they will put their needs ahead of the needs of their customers given that few newsagents check the stock turn and return on investment of what is ordered on their behalf.

Newsagents like that suppliers provide the labour to order, price and put out stock.  They see this as a benefit without realising that this benefit can come with an extraordinarily high cost.

If you have a computer system, use it.  Stop letting suppliers order on your behalf.  Start ordering for yourself based on sales.  You will save time and money.  Profitability will rise as a result.

In the lifestyle card area, ask your car company for an in-depth analysis of sales for each lifestyle range you have.  Look carefully at stock  turn and analyse this against the cost of the real estate these cards are taking in your store.  You could probably lose some lifestyle ranges without any impact on overall revenue.

My core point here is that we need to take control of the stock on our shop floor.  We bleat and moan about magazines yet we all too often to not apply even basic retail management principles to the areas of our business over which we do have control.

Start with pens:

  1. Tell your reps that you will order for yourself.
  2. Set up your desired stock on hand in your computer system so that an order is triggered at a stock level you feel is right.
  3. Do a spot stock take to gauge the impact of theft.
  4. Reorder yourself for six months and compare your stock investment to the same six months a year earlier. 
  5. Quit entire brands which are not paying their way.  Let the numbers guide your decisions and not your relationship with your sales rep.

If you are like other newsagents who have done this you will find that sales are the same or higher and that your cost of goods is down by as much as 25%.  That is money in your pocket.

Sure there is extra work involved.  It means you take more control over your newsagency.  There is no harm in that!

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Newsagency challenges

ANZ and Commonwealth Bank pull back on newsagency lending

I am told that the ANZ and Commonwealth banks have pulled back from their considerable support for funding people buying and operating newsagencies.  Their moves are contrary to what the federal government understands to be the position of banks in terms of support for small business.

Both the Commonwealth and the ANZ have been major supporters of newsagents for many years.  The ANZ actively sought to support the channel with access to finance for the purchase and operation of newsagencies.

Their pull back may impact the sale of businesses.  It may also lead to some existing newsagents are required to reduce their exposure to the banks.

The changed circumstances of bank lending for newsagents is something which needs to be covered in detail with our key suppliers.

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Newsagency challenges

NDD closure impact (part 2)

Distribution newsagents receiving product through Fairfax Media Publication Solutions are being stung in terms of cash flow.  Previously, magazines which were supplied, say, in the second week of September, would have until the twentieth of October to pay for this stock.  Now, these magazines have to be paid for in the third week of September.

The cash flow impact of this change is significant and will make newsagents even more reluctant to carry titles distributed through Fairfax Media Publication Solutions.

You never know what you miss until it is gone.

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magazine distribution

NDD closure impact (part 1)

With NDD no longer distributing diaries, publishers have moved distributors and newsagents now receive a lower margin for diary product.  This will push more of us to source diaries directly.

A fair margin for diaries in a newsagency is 50% or more.  Anything less is probably loss making given the long on-sale and somewhat flat sales curve.

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Diaries

Apple moves closer to newspaper and magazine subscriptions solution

Stephen Northcott has written an excellent piece outlining the importance of AirPrint which was announced by Apple a couple of days ago.  He outlines how this plays out for the bigger goal of providing a better solution for newspaper and magazine publishers.

Australian newsagents will be interested in this paragraph from Northcott’s report:

One big bone of contention between magazines, newspapers and Apple has always been the rules around collecting user data. User data is the holy grail of any kind of targeted, ad laden media. As we all know! The rub there is that Apple has insisted on allowing users to opt out of this kind of data harvesting if they like. Chalk one up for us, the consumer, there.

As distribution newsagents know, the data they have collected over the years through hard work is now considered to be by the publishers to be theirs.  Publishers use this data to switch newsagent direct customers to lower value subscription customers.

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Media disruption

An online newsagent forum on the way

Following feedback here to my post about establishing a complaints forum, I can announce that I am involved in establishing a forum which will be open to all newsagents for raising topics including discussing the performance of newsagency suppliers.  Here are some key points about the new forum:

  • It will be separate to this blog.
  • Only verified forum members will be able to comment.
  • There will be posting rules.
  • Moderators will have the ability to remove or edit posts.
  • Suppliers will be welcome as long as they adhere to the forum rules.
  • The topic coverage will be encouraged to be diverse – positive and negative.
  • The forum will be searchable by Google.

I hope to announce more details in the next week.

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Newsagency opportunities

Our obligation to each other

From time to time I am offered an amazing deal, a free trial or some other valuable benefit in the hope that I will say good things about the product or service.  Unless the offer is made to others, either through a marketing group or based on some other relevant criteria, I say no to the offer.

Newsagents have an obligation to each other to declare if they get something for free or through some special treatment which they then go on to endorse, promote or act as a reference site in sales situations.

Too often newsagents have been led into products without knowing of a conflict for the person offering an endorsement.

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Newsagency challenges

Pacific Magazines supports newsagent putaway service

tl-putaway.jpgPacific Magazines is supporting newsagents with a putaway coupon included in That’s Life promoting the putaway sales for the Real Food Fast part series.  It is not often we see a publisher directly promoting our specialist services in this way.  We are promoting the putaway opportunity because, as I say here too often, putaway customers are more valuable than regular magazine customers – basket data indicates they are 33% more likely to purchase other items in addition to the magazine(s) they are collecting.

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partworks

Using card pockets for magazines

nxpfh-mags.JPGIn our new temporary location at Forest Hill Chase we are using card fixtures for our magazines.  While pocket depth is a challenge, we can usually only fit four copies of New Idea or Woman’s Day in a pocket, the card fixtures allow us to achieve more facings in less floor space and this was the most critical part of compressing the 330 sq m store into 97 sq m.

I’d note that the card fixtures are not the mass produced card pockets in most newsagencies, these ones were purpose built a few years ago and are slightly deeper.

Since we cannot have as many copies of each title on display, we are using the card drawers below the display to hold spare stock.  This is driving extra work managing moving stock from the drawers but that is manageable.

The goal of usual card fixtures was to fit 75% of the old magazine range into less than 40% of the old space and we achieved that.

I like the single waterfall but I do miss the flat stack for volume.

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magazines

Gettting started with diaries

knox-diaries.JPGNewsagencies continue to be the best retail store in which to find a diary.  Many have stock for 2011 now and the range will grow over the next few weeks.  In one of my stores we are using flexible magazine fixturing on the dance floor to announce the arrival of the 2011 diary range.  The impact has been immediate with good early sales.

For success with diaries, range and product quality are the keys.  Get this right and you can usually sell for a higher margin.

Regardless of what other retailers do around us, our diaries will remain at full price until well into 2011.

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Diaries

Lip gloss a hot little seller

lip-impulse.JPGWe are enjoying success with these novelty lip gloss items at the counter.  They are good margin easy impulse purchase item and like all such items, once we sell out we will not replace them – not for the time being at least.  The key is to have them somewhere where daughters shopping with Mum can see them.

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Basket building

Another example of a broken magazine distribution system

pigeons.JPGWe received Pigeons & Peacocks yesterday for the first time.  While an interesting looking title, I doubt that supply was warranted based on any sales data from our business.  We received two copies and would need to sell both in four weeks to recover our costs.

Just who made this decision to send us this title and why did they decide to put my money at risk?  This is the fundamental question I have about every new title sent to us by magazine distributors who think they are better at putting my money at risk than I am.

If it sells out I will be thrilled.  If it bombs I will be out of pocket.

Magazine distributors cannot have it both ways – controlling what titles we get and at what volume and making us financially responsible for their allocation decisions. yes, this is as it has been forever.  Well, in today’s marketplace something has to give.  I think we are seeing that with newsagency closures on the rise.

One source told me that there have been more newsagency closures in the first four months of 2010 than in all of 2009.  If true, this would be alarming.  I am not seeing any change in behaviour by the magazine distributors to indicate that they are concerned.

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magazine distribution
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