Author: Mark Fletcher

Someone deep inside a magazine distribution company decided that my shop in Forest Hill Victoria would sell the Queensland Tertiary Guide for next year and so they sent us four last week. We are supposed to hold the stock until May. I make $3.28 off each copy if they sell. The space the title takes costs me $3.50 a month in rent. I can’t make money off this title and sales history shows that it should never have been sent to me in the first place. So, I decided to return the stock and for that right I have to pay the freight.

This is a perfect example of how newsagents are being ripped off. Our competitors (Coles, Woolworths, petrol outlets, convenience stores) don’t have to put up with this. They get the magazines they order. Newsagents get everything. The magazine supply model sucks our cash and makes us uncompetitive.

This is the supply model the Howard Government brought in when they deregulated the marketplace to make it fairer.

If newsagents were farmers or miners they would have been compensated for the damage done.

I’ve returned the QTAC 2007 guide and will wait a couple of months for the credit to hit my account and smash my fist against the wall one more time.

Further to this post yesterday about Woolworths selling espresso coffee from their BWS bottle shop outlets, several people contacted me and advised they have seen the early morning coffee offer at other BWS outlets in the morning, suggesting that it is something the company is playing with. If they make it work, it creates a new newspaper and magazine market and further disrupts newsagent visits by consumers.

NDD, one of the three magazine distributors supplying magazines to newsagents, has scaled out calendars to the newsagent network. While the calendars have a commission of 35% (usual newsagent commission on magazines is 25%), they have a shelf life of six months. My prediction is that unless different terms are negotiated, such as delayed payment until December 2006, these calendars will be cash-flow negative for newsagents for their entire shelf life. While I do not have the NDD national scale out data, I’d suggest that even a modest scale out to newsagents will suck out in the vicinity of $500,000 from newsagent bank accounts. My store received 10 copies of V8 Utes and Beautes and 29 copies of a Melbourne calendar. Such product without the support of other calendar stock will not sell. We will be returning the stock and not paying the NDD account.

If data from a sample group of newsagents is reflected across the channel, newsagents were supplied with close to $4 million worth of dubious value magazine stock last Friday (June 30). That is, stock outside the usual range for these stores. In my own store I have been hit with more than $3,000 in stock which will, for the most part, fail. While newsagents can return unsold magazines, the cash is out of their businesses for up to eight weeks, imposing a cash drain many cannot afford. This gross oversupply stock newsagents being able to effectively manage and display the growth titles.

I’ve just completed two weeks of meetings with newsagents across the country and along the way checked in on some trends. Here’s a brief summary based on around 500 opinions:

– Crossword magazine sales are hot, especially the Lovatts brand. Many are tracking sales growth of 10% to 20%.
– Women’s Weeklies like New Idea, Woman’s Day, Take 5 and That’s Life are very strong. Thanks to Nicole, Bec and Simone.
– Beading magazines are overtaking the craft section.
– Cross stitch and quilting titles are suffering.
– Health, fitness and diet magazines are hot.
– Cars, motorbike, science and pet titles are soft.
– Travel magazines are dying.
– Music magazines are dying.
– Teen magazines are flat if not dying.
– Special interest titles are flat.
– Adult titles are dead.
– Newspaper sales are strong.
– Lottery sales are flat.
– Trade in newsagencies overall – okay, nothing stunning

The suppliers receiving the kudos remain the major players – ACP Magazines, Pacific Magazines, News and Fairfax. Despite newsagent complaints about some issues, overall they are happy that these suppliers support the channel with promotions and specials.

Further to my post on June 5 about restructuring newspaper distribution and whether I should sell my home delivery business and concentrate on retail, I have reached a decision. It will be sold, publishers willing. (Newsagents need permission from publishers to sell.) This will remove the conflict for time and capital between the distribution and retail sides of the business. Ever since the government forced deregulation of 1999 it was inevitable that newsagents would have to choose to specialise in one area of the other.

Deregulation has meant that my newsagency has many more competitors. While I agree with this, the deregulation driven by the government and overseen by the ACCC has left newsagents disadvantaged. We have less control over our costs than our competitors and this is killing the traditional newsagency.

The inability to recover the real costs associated with newspaper home delivery in a limited size delivery area made the decision clear. Every year in the ten years I have owned my newsagency the return from the home delivery side has fallen. Without any ability to control the prices I charge or the discounts offered for home delivery, the situation is not going to improve. Each special offer from publishers cuts the margin make if it turns a retail customer to a delivery customer.

The increasing price in fuel and the refusal by publishes for us to be ‘allowed’ to pass this on is also a key factor in this decision.

Some newsagents will say I am giving up by selling my run. On the contrary, this decision acknowledges where my skills and the skills of the team at by business at Forest Hill in Victoria lie. It frees us to leverage those skills to a much better return. It also enables another newsagent, more skilled and scaled for distribution, to take our small area and add value to their business.

As best I can I have calculated the economic benefit of the World Cup for my suburban Melbourne newsagency at $3,750.00 over May and June. This seven times the economic benefit from the Commonwealth Games.

From the Network Services website:

www.magshop.com.au is the online retail shop for Australia’s leading magazine publishers. It offers a diverse range of innovative and stylish titles from many publishers throughout Australia in one convenient location.

Magshop is currently attracting 225,000 visitors a month and generating 7,000+ orders, with a conversion of over 3% every month.

The benefits and guaranteed placements are endless with representation on all major Australian search engines and top five portals. Extensive work is currently being carried out to ensure effective listings on all search engines.

With over 200 titles and 2700 items of merchandise, each publisher is able to add as many publications or products as they like. With no upfront costs, the Magshop team will effectively manage all subscription offers, including magazine covers, promotional images and any information changes.

All orders processed through Magshop will safely and securely be stored on our administration server for collection by publishers. All sales are validated by ANZ egate ensuring all revenue from sales are guaranteed.

Affiliate marketing is an essential part of any eBusiness and provides significant competitive advantage. Publishers can now utilise magshop to increase their online subscription sales.

Network Services is part of the PBL group as in ACP Magazines.

While I do not begrudge ACP Magazines selling subscriptions online in this way, I am disappointed in the size of discounts offered in the face of just 25% commission for newsagents who work hard to support their brands in close to 5,000 retail outlets nationally

Some newsagents find it hard to get enough stock of the top selling ACP titles. On the other hand, many newsagents complain that Network Services supplies too much of non ACP stock, especially titles in the bottom 1,000 performing magazine titles. In today’s disruptive circulation market I’d expect newsagents to both situations more frequently.

Newsagents urgently need more equitable magazine supply arrangements. Less stock titles outside the top 200 and, in some cases, more stock for titles inside the top 200. I’d like to see Network and their colleague magazine distributors to work better together to provide newsagents with a fairer deal than the current magazine supply model. This would then enable newsagents to be more competitive against operations like magshop.

I heard of a major landlord yesterday demanding traders open on a Sunday for the full day. In the same centre the government owned Australia Post outlet is permitted to close even though around 90% of the floor space of this government retail business sells stationery, greeting cards, phones, books, office supplies and travel goods. Their competitors are forced to pay upwards of $25 per hour per employee to staff their businesses while Australia Post can close. This is another example of Australia Post exploiting their government ownership for an unfair advantage.

The Advertiser reports:

THE Independent Gambling Authority wants to ban newsagents and other retail outlets from selling Keno tickets.

It has proposed a five-year phase-out, after which South Australians would only be able to play Keno at licensed gaming venues.

The move would affect hundreds of small businesses, who claim they stand to lose more than $65 million a year in turnover.

Newsagents are trusted to sell pornographic material, tobacco products, scratch tickets and regular lottery products under strict age based rules so why not keno. I suspect that newsagents and other small businesses have been outgunned by the richer clubs and small lobby groups.

Business for newsagents is finely balanced. They need keno traffic to support newspaper, magazine, card and stationery sales just as they need newspaper sales to support lottery, magazine and card sales … and so on. This proposed move to strip keno from newsagents who have a significant knock on effect as The Advertiser rightly points out.

My question would be: newsagents in South Australia have had keno for years, what harm has come from that which requires it to be taken from the and if there is harm has it cost hundreds of millions of dollars in a year?

Newsagents arrived at their businesses in the early hours of this morning to, in some cases, two and three times the usual Friday magazine delivery. Like fuel goes up on the weekend and on holidays, the quantity of magazines supplied to newsagents increases on the last Friday of the month. Magazines delivered today have to be paid for in full in three weeks. Any which do not sell (usually between 50% and 80% of what is supplied) are returned four weeks later and a credit provided (often) a month after that.

Today’s oversupply is seen by many newsagents as a grab for cash. Magazine distributors will say they have no control over when publishers release titles. It does not matter who is right about the reasons, the fact is that the last Friday of the month sucks a ton of cash out of newsagencies and newsagents are the losers.

The titles of concern are those well out of the top 200 sellers. They are titles supermarkets, convenience stores and petrol outlets refuse to sell, titles which newsagents are forced to carry because of the out of date magazine supply model which the government did not fix when it deregulated newspaper and magazine distribution in 1999.

The oversupply today drains cash and resources from small businesses newsagents. It makes it harder for newsagents to actively promote magazines in the top 200. Publishers like ACP, Pacific, Time, FPC and Emap suffer because of the junk newsagents have been overloaded with.