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

Author: Mark Fletcher

Reissue of magazines

Consider this for a business practice. A magazine title is distributed to newsagents and copies not sold are returned for a credit. Some weeks or months later, the same copies which were returned (or new copies printed) are reissued, even if the sales of the original issue were low. This happens regularly to newsagents. Occasionally sales are such that a reissue is warranted. Usually this is not the case. Reissue titles cost newsagents cash, real-estate and time. They are another barrier to newsagents spending time on the growth titles in their businesses. I saw an example of a reissue today where the newsagents initially received 20 of a title and returned 15. Now, a few months later, the same issue is back with 25 copies. Where is the logic in that?

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Newsagency challenges

Telstra/ACMA block access to directory data

Telstra is required to provide access to Yellow Pages data. We have sought access to this data and have been told by Telstra:


Thank you for your enquiry.

You may be aware that the Australian Communications and Media Authority (ACMA) will be promulgating an ACMA-developed IPND Standard which will replace the existing Australian Communications Industry Forum IPND Code. It is anticipated that, under the new IPND Standard, ACMA will be responsible for approving applications from prospective Data Users.

ACMA has therefore directed Telstra to not accept any new applications from prospective Data Users until the IPND Standard has been promulgated. Consequently, we are unable to progress an IPND Data User application at this stage.

We don’t care about the standard, it’s the data we need. A change to the standards will not, as we understand it, affect the data itself.

Having Telstra effectively in charge of access to the IPND data is like having the sweet tooth in charge of the candy jar.

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Uncategorized

Strong interest among newsagents for online classified start up

filogo.JPGOur online classified start up, Find It, has been attracting strong interest from newsagents with many already agreements in advance of our launch later this year. Many more have booked for launch events commencing next week. Newsagents are important to our business model as we see an opportunity to leverage their footprint to extend the reach of an online business.

Two or three of the 100+ calls from newsagents have concerned me. They say that every supplier is out to rip them off at some point so we must be no different. Our pitch is that they can become a Find It newsagent for no cost and they can opt out at any time. They see this easy approach as demanding a catch. While this response is in the minority, I had not expected it at all. One person I spoke with today says they prefer the sale or return over supply under supply tough trading terms approach of a magazine distributor because it’s what they have grown up with. They worry about Find It because “you want me to take initiative, at least with magazines I just put them there and if they sell they sell”.

While I am confident that Find It will deliver to newsagents new traffic and new revenue from a unique online classifieds model, the launch process is uncovering some newsagents who have lost the enthusiasm for building a business.

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Newsagency challenges

Mustang titles symtomatic the flawed magazine supply model

mustang.JPG Here are four of the Mustang titles we carry in my newsagency. Each takes a pocket of real-estate. Each has a sell through rate of 50% or less, some at 25% and even 0%. None is cash-flow positive. The performance of these titles is worse this year compared to last. Last year was worse than the year before. Through the course of a year I get more Mustang titles than these four. Consumer interest in Mustang titles is over satisfied based on what I, and I suspect other newsagents, receive. Given that there are three magazine distributors and no one taking a whole of market view of consumer satisfaction the Mustang and other fringe categories the problem will not be rectified. Newsagents carry the financial burden of this.

Car magazine sales are in decline. Newsagents would not know this based on the range and volume of titles they bare supplied. Magazine distributors have an obligation to adjust their supply model to reflect changing consumer interest. They also have an obligation, to work together to balance categories. While this would mean collusion, the alternative is what we see today and competition between distributors with each bringing in magazine titles of dubious value to newsagents. As long as magazine distributors profit from distribution rather than sales this problem will exist and newsagents will be the losers.

The more space taken on my shelves by oversupply in categories like car magazines and, specifically, mustangs, the less space (and time) I have for the main magazine game, the top 200 titles.

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magazines

Fairfax changes IT standards without considering newsagents

I own Tower Systems, software provider to over 1,300 newsagents. I also own one of those newsagencies. For more than 20 years my company, and other major IT companies in the industry, have been consulted about newspaper delivery fee changes well in advance of any change – to ensure newsagents can cope with the change. For the first time in almost 20 years Fairfax has released new delivery fees without consultation. The new fee structure operates outside the agreed IT standards. Either the software companies have to change their software to accommodate the Fairfax surprise or newsagents have to significantly bend their systems to cope. However, by bending their systems it means they use the system in a way that other data flowing from those systems back to Fairfax is unusable.

We are changing our software and providing an update without cost to our newsagent clients. We have taken developers off other work to do this. The total cost to us will be between $5,000 and $10,000. Given the lack of contact from Fairfax on this I see no point in asking for a contribution toward the expense they have imposed upon us.

The Australian Newsagents’ Federation announced the Fairfax delivery fee changes as they were involved in consultation about the matter for some time prior. It is a pity that they, too, did not consider that any newspaper home delivery fee change needs to work with well established IT standards.

If this were a change being imposed by Fairfax on a major trading partner then Fairfax would have approached the matter differently. It is disappointing that Fairfax and the ANF have been ignorant of the operational needs of newsagents.

It is worth noting that the folks at News are well organised when it comes to interfacing with newsagent software systems. Just a few months ago they took us into their confidence on changes before they were announced to ensure that existing systems work. This is how such changes should be handled.

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Newsagency challenges

Tattersalls feeds of newspaper traffic again

Tatts2.jpgTattersalls is a regular advertiser on the Herald Sun website. If you click on the Tattersalls ad you are taken to their lotteries online service. Newspapers and lotteries are by far the biggest traffic generators for newsagents and newsagents have returned the favour with more than 100 years of faithful low cost service. Tattersalls grew in Victoria on the back of newspaper driven traffic to newsagencies. Newspapers are repeating history in redirecting offline lottery sales to the Tattersalls online business.

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Newsagency challenges

Gotch pressures newsagents on trading terms

Gordon and Gotch has surprised many newsagents with a letter this week advising that they need to pay Gotch by the 20th of the month.

Historically, Gotch has been flexible when it comes to payment, acknowledging the challenges of cash flow for newsagents who have to pay for all stock received even though often half or more received and paid for by newsagents does not sell and is sent back the next month for a credit. Newsagents have been grateful for this consideration.

The letter from Gotch this week represents a change to the terms implied by Gotch’s own trading practices. Many newsagents will see this as an attempt to alter accepted business terms.

When you remove the popular Pacific Magazine titles (New Idea, That’s Life, Famous and Better Homes and Gardens) delivered by Gotch, the Gotch returns rate jumps to above 60%. We know from the magazine cash flow research that Gotch supplied (non Pacific Magazines) product is cash flow negative in 50% of newsagencies. Given this, it is unreasonable that Gotch takes away payment flexibility it has offered newsagents for years since it would force newsagents to pay for product they will loose money on.

At least Gotch ought to have approached the change to terms with greater sensitivity and at best they should not change their practices.

Newsagents make 25% from magazines. They lose around 3% in theft, 11% in wages and between 8% and 11% in rent. The numbers do not add up. This is why the pain of any change in trading terms will be significant.

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Newsagency challenges

Free Newspaper action

This story at Mediaweek about News International moves to launh a free daily afternoon newspaper in London.

Free Daily Newspapers reports that free dailiye have reached a circulation of 25 million this year, up 49% on 2004. In Europe circulation of free dailies is up 58%.

Australia’s most successful free daily is the News Ltd’s MX.

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Uncategorized

How to starve a newsageny – cut New Idea supply by 25%

My New Idea supply has been cut by 25% without warning. The new supply quantity is less than I sell on a usual week. We will be sold out from early morning today leaving us five days without New Idea on the shelves. Our return rate from the last 12 issues has averaged just under 20% so I can understand a supply adjustment of, say, 10%.

If newsagents are as important as Pacific Magazines claim, they would not use a supply model which inflicts such a supply cut. The more appropriate approach would be to advise us of a planned cut of no more than 10% and to allow discussion. I could point to last week when the Brad Pitt Angelina Jolie baby edition sold out on the back of 10% more stock. Had they asked my opinion I would have also advised that they delay any cut until after school holidays as we traditionally sell out at those times. School Holidays started two days ago.

Elsewhere in my shopping centre the supermarket shelves are loaded high with New Idea. Customers who cannot get their fix from my shop with go there and maybe I will lose some for good.

It is decisions like this which are killing the newsagency channel in Australia. The New Idea decision is starving my business of vital oxygen this week.

UPDATE (11am): Pacific Magazines responded quickly and delivered enough New Idea stock today to see the week out. They are researching the initial supply cut. I’m happy to have the stock on the shelves.

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magazines

New gambling related offer for newsagents

Several newsagents have commenced a trial this week selling Sports Acumen betting account recharge. Sports Acumen is an ACT licenced betting agency offering Fixed Odds and Spread Betting markets for Aussie Rules, Rugby Union, Premier League Soccer, Horse Racing, American Football, Baseball, Basketball, Boxing, Cricket and more. Newsagents facilitate account top up. They are not actually involved in providing betting services. They are a natural retail partner for Sports Acumen because of their traffic and well established lottery connection. Newsagents attempted to get involved in this space in 2004 with Betcard and have been looking for a new partner ever since that fell apart. With Australia Post involved with the soon to launch Betfair, newsagents are expected to embrace Sports Acumen once the trial is over.

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Newsagency challenges

Trading Post sales continue to fall

If the data I am seeing is accurate, Trading Post sales fell 23% for the eight weeks to June 15 compared to the same period a year earlier in ten newsagencies which are usually a good indicator of industry trends. Elsewhere in the same category, sales of classified related magazines have also fallen sharply. The folks at the Trading Post will most likely deny that there has been any fall. Denial helps no one, especially not newsagents who are chasing new products and services to ensure future relevance.

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Media disruption

Magazine theft

The call from the police Saturday morning was a reminder of the hidden cost of the current magazine supply model. The police had executed a search warrant at the home of a suspect and, along the way, found around $800 worth of magazines – around half from my shop going back over the last year. The frustration is that the titles were outside the top 200. Magazine distributors scale out based on return data and not over the counter sales. This means that the theft will be seen by my suppliers as sales and most likely have lead to increased supply.

Managing theft of magazines in a newsagency is challenging since electronic tagging costs between 10 and 15 cents per copy and is labour intensive to implement. We know we lose around $200 a week. It’s a cost of business. My frustration is the knock on effects.

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Newsagency challenges

Vodafone chasing newsagents again

Having just done over newsagents by slashing commission on recharge product down to 5% (while maintaining Coles at 16%), I’ve heard that Vodafone is preparing an offer for newsagents based around SIM card sale. If what I have heard is right, they will be offering above average commission and other benefits in return for premium counter space. The only way Vodafone can fix the problem they have created with newsagents is to lift commission to something close to what they pay Coles.

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Newsagency challenges

Drowning in Popular Mechanics

DSC01366.JPG Popular Mechanics is dying. I suspect that monthly sales are under 10,000. We usually get two copies and we’re lucky if we sell one. Cover price is $10.50 so even if I sell both copies I am barely cash-flow positive for the month. Based on my numbers and what I suspect others do, Popular Mechanics should be killed off – in Australia at least. Imagine my shock, therefore, when this month, instead of the usual 2 I received 10 copies. It’s part of a promotion in pursuit of sales. Okay they were paying for me to display the extra stock but the fee is less than the real-estate costs. This title is dead and no amount of promotional CPR is going to bring it back. Someone needs to turn off the life support. In the meantime, the promotion this month costs me $78.75 in cash and I won’t realise on the unsold copies for another eight weeks.

Popular Mechanics is not alone. I could list another fifty titles just as lifeless.

And while we are drowning in these titles we continue to struggle to get enough stock of the popular weekly titles. I feel like an anorectic glutton.

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magazines

Sales growth beats a poor mystery shop rating

Tattersalls mystery shops its outlets and provides feedback on each visit. In the latest feedback we’ve slipped behind our previously average position. The measurement points include: whether the employee serving has a uniform; whether they wear a name badge; whether an up sell is offered; whether they ask if you have a Tatts card. There are plenty more. It is a good process and keeps business owners focused on making sure these things are covered.

In the same period as this last mystery shop we increased our Tattersalls sales by 17%. The Tattersalls rating is based on one visit while our sales growth is over the whole period. Without wanting to dismiss the Tattersalls rating approach, I’d prefer the sales success we have achieved even it means we’re below average on the rating.

Some in Tattersalls would have me believe that my poor rating means I am not a good representative. Smarter ones would say, ignore the ratings, 17% growth is well above average. Keep doing what you are doing.

Asking customers about an up sell is not that important for every sale – employees need the flexibility to be spontaneous. Just go to a Coles petrol outlet and see what happens when you are forced to offer cheap candy to every customer. It’s reverse evolution in action. Humans have become monkeys.

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Newsagency challenges

Newspaper versus online advertising and a tough decision

We received a phone call last week at Inkfast, our online ink and toner business, from a daily newspaper offering a display advertising deal for an upcoming end of financial year business feature. The cost was $5,000. We have built Inkfast to a $1 million a year business in eight months based primarily on a pay per click advertising campaign. We ran a test campaign based on faxes to accountants and another using radio 3AW. Neither came close to delivering the traffic of the pay per click campaign.

The offer from the newspaper was compelling. A decent size display ad for $5,000. We could expect a readership of several hundred thousand, well the newspaper could. Who knows what our page could attract. The salesperson from the newspaper called five times over three days despite us saying that we would get back to them if we were interested. In each call the pitch was more urgent. The last call was rude.

We established our pay per click campaign without the use of sales people. We did it all online and are able to tweak the campaign at any time as we choose. This flexibility and the outcome focused pricing is ideal for our business model.

We know that $5,000 spent on pay per click advertising for our business lands more than 5,000 people on our website and most are searching for what we sell. We only pay for them to step through the door whereas with newspaper advertising we pay for the right to be near traffic.

For the newspaper approach to work we need a good ad whereas with pay per click the website does the work, there is no middle creative point which could be a further barrier. Also, pay per click puts us in front of people when they can best respond – they are online. A newspaper ad for an online business means they either have to write the URL down or tear out the ad or remember the details.

We decided not to take up the newspaper offer. While we do want to experiment away from our pay per click model, this newspaper offer was not right for us.

That was late last week. Over the weekend I have been considering this experience with Inkfast in the context of my ownership of a newsagency. At my Forest Hill (Vic) shop, newspapers are one of the top two traffic generators. I feel as if I have betrayed myself and my newsagent colleagues in the decision but I know it was the right decision for Inkfast. More and more businesses will decide that newspapers are no longer an appropriate advertising medium.

I can feel the ground shifting from deep underneath.

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Newspapers

Media reform in Australia

Newspaper today carry a story reporting that News Ltd has changed its position on the proposed media reforms outlines by Communications Minister Senator Coonan. The only interests the government should consider in any reform of media regulation are those of the consumer. If only this would be the case.

Voters only vote. Media companies influence.

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Uncategorized

If you put a title down you want it to stay down

Gordon and Gotch canceled a range of poor performing magazine titles last year. It is disappointing to note that many of these poor titles have been picked up by a Gotch competitor. This means that the titles newsagents were glad to see cut are now back in force. Newsagents receive no payment for poor performing stock whereas the distributor involved receives fees for distribution and management. Newsagents also have to pay to return the unsold stock at the end of the month.

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Newsagency challenges

The business defining decision facing Australian newsagents

It is time to decide if I want my newsagency to continue to try and be a retailer, wholesales and distributor or to specialise in one of these areas. My delivery run is a reasonable size but not of the scale to justify the capital investment for the coming flat wrap push so if I want to stay in home delivery I will need to purchase additional territories. My retail business is strong and growing. The nature of that business is that I have more control (despite my complaints here from time to time) and I get a faster return on capital invested. What I do know is that I cannot continue to operate the traditional newsagency: retail, home delivery and supplying sub agents. News and Fairfax tell me those days are over and I’m okay with that.

My dilemma is shared by thousands of newsagents across the country It was a natural consequence of the deregulation brought about by the Howard government in 1999. Unfortunately, newsagents are not farmers, auto workers or miners in Beaconsfield Tasmania. There is no deregulation assistance or support. We’re having to navigate the issues alone including weathering any write-down.

I expect to make a final decision sometime next week.

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Newsagency challenges

Healthy eating magazines growing

Two years ago newsagents were supplied one or two healthy eating related titles. Now, we are supplied ten or more, depending on the time of the year. Sales in this segment are exceptionally strong in many newsagencies. I am not talking here about the diet related magazines like the excellent Symply Too Good series by Annette Sym. My comments relate to titles such as Healthy Food. We usually sell 3 or 4 copies a month. This week I moved Healthy Food next to the newspapers (in a secondary spot we usually reserve for New Idea or Woman’s Day)and we sold 5 copies in two days. The speed of moving the stock tells me the segment is hot – as long as the magazine looks appealing.

One of the challenges for newsagents with healthy eating magazines is whey they are located. Do they go with health and fitness or food or women’s interests. Each of these segments can be a distance from the other. My feeling is that with new titles recently arrived we need to feature the segment to let or customers know that we’re strong in this growing space. In the meantime, I’d expect the weeklies to pick up on this stronger interest in healthy food – but then, cellulite on a scared looking star makes for a better cover.

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magazines

Consumers, newsagents ripped off by flawed partwork magazine supply model

This is a story which should be on one of the nightly TV current affairs shows. The images would be of secret backroom deals, angry customers, children in tears and big business call centre staff more immovable than the great wall of China.

For decades newsagents have sold partwork publications – magazines which publish for a set number of issues. Newsagents are the only retail outlet for these. Current partworks include Funny Bones and Midsomer Murders. Newsagents love partworks because customers sign up for the series and these regular visits underpin the habitual visit which is crucial to the newsagent retail model.

Partworks are supplied to newsagents with colour brochures inserted encouraging newsagent customers to go direct to the supplier to subscribe. While newsagents have complained about this, the main partwork importer in Australia, Bissett Magazines, claims subscriptions account for less than 5% of total sales. Newsagents give over their real estate without charge and often actively promote new titles. This raises the profile for the Bissett imported product. It’s very cheap advertising. The pay off for newsagents is customers signing up to get issue #2 and so on. If only it worked out that way.

The problems begin with issue 5 or 6 of almost any partwork you want to look at. Supplies to newsagents are cut. Often dramatically. When this happens, Bissett Magazines and their Australian distributors, Network Services (part of PBL) and Gordon and Gotch, say this is because the title is far more successful than their trial (usually conducted in South Australia) indicated it would be. They claim to be surprised and embarrassed that they cannot service all the requirements. There are usually three or four partwork titles a year where supplies are cut this way.

Newsagents are left unable to satisfy firm orders from customers. Customers get angry – some call Bissett and subsequently sign up for a subscription while others vent in store and yet others let their kids throw a tantrum because the newsagent has let them down.

The problem with partworks is systemic and not operational as Bissett and Network claim.

I want to share one personal experience to illustrate the problem with partworks and prove that newsagents are being ripped off by an inadequate system or something far more serious.

Funny Bones has been very successful in my shop. I have orders for 12 customers. Firm orders. We can sell another 5 or 6 copies on top of this. Network, in their wisdom and with the assistance of their IT technology and access to my sales data daily for years, decided to but my supply. Yesterday I received 4 copies of the latest Funny Bones issue. There is no business case for such a cut. I know o other newsagents receiving more stock of Funny Bones than they can move and Network would know who they are because they, too, provide daily sales data. Regardless, the Network team and their massive computer system cut me back. I have 8 customers who will not receive their Funny Bones. Contact with network says, no, sorry, no stock left. That’s the end of the matter. An angry email to the Managing Directors of Network and Bissett found another 5 copies for us late yesterday. It surprises me, in situations like this, that they can be completely out of stock and then find stock to help when one complains to the right people.

I know from my own research that I can call Bissett and order a subscription to Funny Bones. Yet I cannot get current stock and back order stock for my newsagency. This makes me suspicious about the claim than only 5% of all partworks sales are subscriptions.

A conspiracy theorist would suggest that newsagents get plenty of the first few issues of partworks to build title recognition and that the real game in town is to win subscription sales as that is where the real money is made. I don’t believe that, or don’t want to believe that – the on going mess with partworks makes me wonder.

I would have thought that the Trade Practices Act would have something to say about getting newsagents to promote partworks and then drying up the supply so that newsagents cannot supply so the consumer goes elsewhere. It does not make sense to me when I can prove that I sell out every time and the ‘experts’ cut my supply. They are taking hundreds of dollars revenue away from my business and causing considerably upset for my customers. They are starving me of oxygen.

No one wants to own this problem. Bissett says it’s their distributor at fault. The distributor says it’s Bissett. Bissett also says it the South Australian test prior to national launch which has let them down. My customers blame me. Bratty kids blame their parents.

I have offered to review future partworks and place firm sale orders for the whole series. This was rejected. I have offered to bypass the distributor and pick up my supply direct since the Bissett office is a few minutes from my shop. This was rejected. It’s almost as if the faulty supply model suits Bissett and Network. But that’s too ridiculous to contemplate.

I am a retailer. The partworks supply model denies me the opportunity to be a good retailer. It makes me look stupid. It turns customers against me. The only people profiting are the magazine distributor and Bissett because the costs of calls, customer anger and attempting to get backorders eliminates the profit from the initial sales.

Bissett and the magazine distributors need to get this sorted out. They risk newsagents pulling the plug and that would hurt the model as no other retail channel would provide the high exposure real estate support (at no cost) of newsagents. Maybe newsagents should pull out of partworks anyway.

Sometimes you really have to break something before it can be fixed.

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Newsagency challenges

OzLotto jackpot kicks up the stakes

OzLotto is worth $15 million next Tuesday thanks to no one winning last night. This will boost sales from today on and traffic from the weekend. Tuesday next week will see a 25% lift in newsagent traffic in most stores. Smart newsagent suppliers would find a way to leverage that Tuesday increase. (Last night’s $12 million jckpot delivered to my shop a 28% traffic kick.)

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Lotteries