Author: Mark Fletcher

The report in the Sydney Morning Herald yesterday about the District Court case commenced by NSW Lotteries against a newsagent demands careful attention from newsagents.

It highlights the risks newsagents face in managing payouts, regardless of whether NSW Lotteries, or the lotteries operator in any other state, has robust procedures. Consider this from the SMH report:

Mr Bannon claimed that the newsagency was in breach of its contract with NSW Lotteries and therefore the lottery company should be indemnified against the loss.

I would have liked the SMH to explore this further and report on why NSW Lotteries considers the newsagent to be in breach and what the implications of such a breach could be for the newsagent if proved.

My understanding is that if such a breach is proved, the insurance coverage NSW Lotteries requires lottery agents to have could be considered void by the insurance company, leaving the small business operator to carry the cost of the fraud – unless their general business policy offers relief for the employee fraud they appear to have been victim of.

I am shocked that NSW Lotteries had a system in place which allowed newsagents to manage a first division prize claim. To blame the newsagent for a breach of contract, over a process which should never have been handled at the store level in the first place is nonsense. NSW Lotteries have acknowledged issues with the old process by making changes.

The case this week in the District Court is not the only matter involving major NSW Lotteries prizes, newsagents and the issue of breach of contract. Of course, Lotteries is safe if they can prove the breach in other cases. That only leaves the insurance company to void the policies – because of the breach – to protect their bank balance. Newsagents face the biggest risk in these cases and that’s the story I would like the SMH and others to cover.

Newsagent associations ought to be all over this case. I suspect that when they do become involved it will be too late for some of their members.

UPDATE: Today’s SMH has this story including this from the newsagent’s lawyer:

“The [newsagents] have been betrayed by a person they had no reason to doubt. They now find themselves in the position of being sued for half a million dollars plus costs by an agency of the government,” Mr Stevenson said.

As I suggested earlier in this post – watch for more cases on State Government owned NSW Lotteries suing newsagents.

I have been in Adelaide today meeting with newsagents who use Tower Systems software. Prior to the software part of the meeting there was a robust discussion about the many problems with magazines and with partworks. With magazines the most common problem seems to be with gross oversupply of the fringe titles – titles outside the top 200 performers. With partworks the problem is with undersupply – the cutting of newsagent supply by 80% after the first two issues.

The financial and emotional damage done by problems in the magazine supply chain costs newsagents a fortune every year. Suppliers and even some in newsagent associations complain that newsagents are their worst enemies when it comes to matters of magazine supply. Such comments are ignorant.

Take the group of newsagents I met with today. they are the best of the best – each following best practice in terms of magazine data management. This means they provide suppliers with sales data electronically every day. This sales data is not used in determining scale out – especially for the fringe titles. These titles consistently have a sell through rate of less than 50% and temporarily steal newsagent cash flow. Distributors see the financial cost their ignorant scale-out decisions wreak on newsagents yet they do not act on the sales data they fought hard for years to access. It’s as if compliance means nothing to newsagents.

In terms of putaways the problem is worse. Newsagents, through industry standard technology, let distributors know about fixed orders – putaways – for customers yet distributors consistently under supply so that newsagents cannot meet these orders. Instead they sent the product to others only to have the product returns and, possibly, mad available to the newsagents with fixed orders.

My point is that in both situations the distributor’s own technology and the technology used by newsagents – to the standards dictated by the distributors – can fix this and provide a more equitable scale out to compliant newsagents. The distributors ignore the opportunity. NDD is the worst by far. This was discussed today in Adelaide and the room concurred that some of the junk they are supplying to newsagents is appalling.

This is why we, newsagents, need a magazine czar. Our channel is open to any publisher who wants to pay magazine distributors to ship their product. For their part, distributors are covered. Newsagents are not. We have cash at risk, real estate in use, labour in use and theft to face. A magazine czar, on our payroll and on our side, could stop some of the crap we see today. They could also work on the perennial issue of gross oversupply as well as the problem of the partworks con where stock is not available after a couple of issues.

To those who are moaning that I am beating my usual hobby horse I’d say read what I have written. I want to sell more magazines. I know that if my suppliers used the data I and other newsagents provide this could be achieved. All it takes is a will, on their part, to sell more magazines.

The four year old NSDP program run by the PBL owned Network Services is to close by June, newsagents have been advised today. NSDP had tremendous potential had it been run well. It sought to leverage spare capacity in the newsagent home delivery infrastructure for the delivery of subscription magazines. It’s main competitor was Australia Post.

For much of the life of the program my newsagency had seven NSDP territories. We had people on the road most days of the week delivering magazines. I know from this experience that a key problem with NSDP was what newsagents were paid. Despite early promises from Network to support infrastructure costs, NSDP was loss making for many participants, myself included.

A key cost to newsagents was time spent sorting product. Rather than allowing newsagents to address pre-bagged magazines to be delivered, they arrived from Network already addressed. Newsagents then spent hours sorting the product into a delivery sequence. This would have been easy and cheap to fix. I suspect it the various solutions proposed to Network were not taken up because there were other problems with the subscription delivery offering.

My theory, based on no evidence, is that the contracts with publishers caused problems for Network – there was not enough money in the contracted delivery fee for them and for newsagents and that, as a result of poor returns, newsagents were pulling out. Indeed, we resigned months back when we saw that Network was not going to agree to a price structure which at least covered costs.

Network’s intention was honourable. The best asset newsagents had/have is their national network.

My blog post about Geare magazine has generated another example – thanks Greg at Chelsea Newsagency – Australian Roadrider (Motorcycles & Travel) (Vol 9 #2 (No.41). PBL owned Network Services reissued this today. In the case of my newsagency we received 9 on April 4. Today they supplied another 4. While we have sold 5 of the first 9 there is no evidence in our sales history suggesting we would sell out. And if Network is using sales data about the 5 sold so far to justify extra stock then it process they can also use the sales data to provide for more equitable supply of other titles.

This grab for cash from newsagents has to stop. There is no justification for Network supplying additional copies today other than to serve their cash flow.