Author: Mark Fletcher

Around 60% of all lottery sales in newsagencies are lottery products an nothing else. This is in part dies to rules by the lottery companies and rules by other key suppliers, newspaper publishers and magazine distributors, as to where and how their products are displayed.

Given the high foot traffic to the lottery counter it seems to me that a win win is waiting to be created. Maybe units which efficiently display feature products at the lottery counter to drive the add on sale. In return for lottery promotion elsewhere in store.

Lottery sales are great. They would be greater if they included a newspaper, a magazine or some confectionery. I’m working with one publisher on a trial. Newsagents, nationally, need a strategy.

Adult, Computer and Buying and Selling magazines are in trouble if the data I have been looking at from several newsagencies is reflective of what is happening nationally. I have compared magazine growth for the newsagencies with the national average and most are close. I have also compared year on year performance for six key popular titles with national data for these titles and they, again, are close. So, I know the data from my sample is good and it is reasonable to consider that other magazine data from this small group might reasonably reflect a national trend.

Based on the stores I have looked at I have grave concerns for the future of the Adult, Computer and Buying and Selling categories. In these stores, between September to November, comparing 2005 with 2004, unit sales were down by more than 30%. In the same stores women’s weeklies, women’s interests, house and garden, fashion and food and all solid growth categories.

When you think about it, falling sales for Adult, Computer and Buying and Selling categories ought to be expected. Here’s why:

Adult. If you want porn it’s easier and faster to get it on the Internet. Magazine porn is so yesterday.

Computer. Computer geeks through to novices all know that the latest information is on the Internet. There are new computer ‘magazines’ which only publish on the Internet. Duh!

Buying and Selling. Print lead times mean that ads in the trader type newspapers and magazines are out of date by the time they hit the shelves. If you want a car look online – the ad looks better and you have more useful search tools.

Magazine publishers and distributors and newsagents need to work together, urgently I suspect, to finesse space allocations and adjacencies to respond to the falling and growing categories. Sure it’s bad news but it’s also an opportunity. It is important that newsagents are not the last to find out about the sales fall. They cannot afford to carry the categories as they fade into oblivion. In my own store even though sales in the three categories are down, scale out has not been altered so my stock investment is generating less of a return today.

It would be easy to see if the data from my sample is accurate. Once it’s confirmed a clear strategy needs to be developed and implement.

My feeling at the moment is that I want to remove Adult altogether as the return is not there for the stock investment. I’d keep Picture and People and lose all the bagged magazines – Playboy, Penthouse etc. This over the counter market is gone. I’d shrink the computer section by 50%, relocate it and re launch the category. I’d cut buying and selling by 50% – specifically I’d eliminate the magazines with a long shelf life and out of date content.

With the reclaimed space I would reinvigorate Food, Fashion, Women’s Weeklies and Crafts – all strong categories in my store.

The Internet is affecting magazine sales and what we’re seeing with Adult, Computers and Buying and Selling is the beginning of very significant change.

I had a customer in my newsagency yesterday wanting to pay their Optus bill. It was $4.99 (yes, four dollars and ninety nine cents). At Australia Post, opposite my shop they wanted to charge a 50 cent handling fee. 10% for pushing some buttons on the computer. 10% after making the customer wait in line for almost ten minutes. The customer came to my shop, paid the account and was out in just over a minute. No 10% surcharge. No long line. Plenty more smiles.

This surcharge by Australia Post on Optus bills is appalling as is the long customer wait times. If I were Optus I’d cancel the contract altogether as the surcharge reflects on them as much as Australia Post.

The government has no business owning and operating the Australia Post retail network.

The ACCC called for responses to its paper about Principles for the public disclosure of record keeping
rule information provided by Australia Post. A Regulatory Accounting Framework (RAF) was issued in March 2005, following legislative amendments giving the ACCC the power to issue record keeping rules to Australia Post. Under the RAF, Australia Post is required to provide annual financial reports to the ACCC for 16 defined ‘service groups’.

The RAF is important because it creates a framework through which Australia Post is more open about its divers operation and how revenue and costs are accounted for and, hopefully, any cross reliances and cross subsidies.

The ACCC has received four submissions. One from Australia Post, one from an association representing post outlets and two from newsagent associations. [Declaration: the ANF submission includes material I prepared for the organisation last year which I was a Director and the United Newsagents of Australia submission was prepared by me.]

My concern relates to the cost of attracting business and achieving each sale in a government owned PostShop compared to any other retailer. I suspect that the Australia Post brand and its exclusive mail related services draw customers into their retail outlets for a significantly lower cost and would like appropriate data to enable analysis of this. I the data reveals a problem then it could support a complaint with the AGCNCO.

It is important that the public is able to determine for itself whether Australia Post is adhering to its obligations of the Act and in particular Sections 14 through 16 relating to the permitted functions. It is my contention that Australia Post is operating significantly outside what is allowed for under the Act.

I see Australia Post leveraging the brand recognition and respect earned through its reserved services into lucrative business for its non reserved services and that this provides an unfair advantage.

I am godsmacked that News Ltd’s decision in South Australia to ignore newsagents for their Star Wars DVD giveaway this weekend. For over one hundred years newsagents have been the retailer of choice for publishers. While an occasionally fractious relationship, the support by newsagents for newspapers and vice versa has been extraordinary and a key reason, in my view, why newspaper sales have remained relatively strong in Australia while they have fallen elsewhere around the world.

The people at the Adelaide Advertiser have made a decision to ignore newsagents this weekend with their Star Wars DVD give away. The over the counter promotion is being run exclusively through BP retail outlets. The promotion will be supported in the press and on radio.

This promotion sends the wrong message to consumers if you want a strong newsagency channel. It undermines newsagents as the destination point for newspapers and boosts BP instead. It undermines independently owned small businesses and boosts a multi national brand. It dilutes the relevance of newsagents to other suppliers – magazine publishers and distributors and other newspaper publishers will note the News action and possibly follow.

Newsagents have helped Rupert Murdoch achieve an incredible worldwide footprint. It is disappointing to see News forget those who helped make the company great.

According to CNet’s news.com: “Microsoft is developing a free online service that will let people list items for sale, events and other classifieds-type of information that can be shared either with groups of friends or anyone over the Internet, the company said Tuesday.”

While this new offering from Microsoft seems to be quite different to the recently launched Google Base, that it is playing in the same space of classifieds is significant but not that unexpected blow to print media. It’s integration with MSN in particular takes the idea of classifieds to a new place and makes them more appealing to the IM generation.

The Pew Internet & American Life Project has just published a report claiming that more than 26.3 million people visited one of the top 15 US classified sites in September. This is an 80 percent increase from the 14.6 million people in September of 2004, according to the report. The total Internet population grew by just 7 percent in that same period. Craigslist, which offers classifieds worldwide (including Australia), experienced the highest growth with around 8.8 million visitors in September – 156% higher than 3.4 million last year.

Given that newsagents rely on products which feed off classifieds the US trend needs to be understood and responded to.

Newsagents I talk with are bemoaning tough trading times in all major categories since September. Many tell me sales are down significantly in most categories compared to last year. In some instances I have been fortunate to look at their sales data and one product category is bucking the trend and delivering unit sales growth of often 50% or more – discount paperbacks. Most newsagents carry them as a side item – placed on a table close to the front of the shop. In some cases this table is the most profitable square metre of real-estate in the shop.

More newsagents have come out of the woodwork over the last week reporting the collapse of calendar sales in their shops. Based on data from 30 newsagencies this year seems like it will be between 30% and 50% down on previous years if sales trends for November 2005 compared to 2004 play out through December. To counter the calendar red ink, sales for diaries are up, on average, 12%.

In another part of my life I work with newsagencies doing it tough. Today there are more newsagencies on this ‘wtach list’ than ever. They in difficulty because of a combination of poor decisions; rising costs; and over / under supply. Wereas in the 1990s and before newsagents had almost guaranteed traffic and therefore a capacity to weatrher speed bumps, today they have no such capacity. Even the slightest challenge can be too much. Tougher and unequal competition, out of date supply/accounting practices and consumer relevance are the the challenges to be addressed and while nature can be left to take its course, those who value the newsagent channel would do well to hold crisis talks to understand the scope of the problem and consider whether they could influence a brighter future.

At the Reader’s Digest website you can sign up for a year long subscription to their magazine for $39.99 for the year. Seems like a good deal at 30% off the cover price.

Some newsagents have been supplied subscription packs to sell. They have been sent stock for their shelves and an invoice which will have to be paid by the end of December. The stock is to remain on the shelf until the end of March when unsold stock is returned for a credit in April or May. This means newsagents will carry the price of the unordered stock for four or five months.

Given the size of the packaging, newsagents will need to allocate at least two and probably four pockets to display the product. This amount of space and the attendant labour will cost a shopping centre newsagent around $15.00 per month.

Some newsagents I have spoken with are angry as the subscription packs represent the sale of an item which guarantees the loss of repeat business. The publisher and distributor would comment that they see it as an opportunity for newsagents to get some revenue as opposed to none had they not used the newsagent channel to sell the subscription product. It’s a challenging issue but if I were to adjudicate I’d say don’t sell subscription product in newsagencies as they are retail specialists and they (we) need repeat business to ensure our survival/growth so why push an alternative channel?

The photo at the top of this entry is of a Reader’s Digest subscription pack which I bought while in the UK a few weeks ago. It seems that the UK has a retail subscription model which is fairer for the newsagent. There, stock is provided free of charge as it’s an empty packed effectively. At the sales counter an activation label is attacked and it is this which is sent off with the form in the pack to start the subscription. So, UK newsagents are ahead as they pay the distributor/publisher when they sell the product. Australian newsagents pre pay. This means they carry the cost of shrinkage, the cost of the cash for five months and the cost of returns.

It seems to me that aside from whether newsagents should sell subscriptions there is a more fundamental operational issue here which Reader’s Digest and their distributor, NDD, have not thought through from a newsagent perspective.

Newsagencies are small businesses. It is unfair to experiment with something like Reader’s Digest. I’ve seen one newsagency with an invoice for $550.00 in subscription pack stock. They’d be lucky to sell 20% of that and such a sales volume would not even cover their costs of having the product in store.

I’d like to see Reader’s Digest and NDD recast their subscription package strategy immediately and in a way which is respectful of the cash flow challenges in newsagencies.

This is a good example of the cost of deregulation on newsagencies. No other retail outlet now selling magazines in competition with newsagencies – supermarkets; convenience stores; petrol outlets – will take Reader’s Digest. Newsagents take it because it is sent to them. The trading terms for relatively low volume magazines like Reader’s Digest need to be reconsidered to take into account real-estate, labour, cash flow and opportunity cost.

Footnote: I’m curious about this text at the Reader’s Digest website, especially the sentence I have italicised: Send for a 12-month trial subscription for only $39.99, plus 83c copy postage & handling – saving you 30% off the regular cover price of $71.88. You’ll be under no obligation to continue your subscription. But just like a newsagent who receives an order, we guarantee to continue sending it until you tell us to stop which you can do any time. The comment about newsagents seems to be out of context.

An employee at my shop was confronted by a customer complaining about a problem with the newspaper delivery to their home. This customer, a teacher, was not happy with a straight up apology and rectification action. He made a threat of harm to the employee who was trying to assist him. I wonder how this bloke copes with stress in the classroom?

Australia Post has been blitzing the airwaves in Victoria (and I assume elsewhere) touting its Christmas gifts. So I reread sections 14 through 16 of the Australian Postal Corporation Act (1989) to remind myself of the functions Australia Post is charged by the Act with carrying on and went shopping in a Post Shop – a government owned outlet.

The range for Christmas is even broader than I had seen just over a week ago. Now I find I can buy cuddly dogs; teddy bears; carol bears; a thermos set; games; electronic things; radios; books; tool sets; maps; wine openers; blankets; key rings… the list goes on for 12 pages in their catalogue. No wonder they’re making a lot of noise in their radio campaign.

The reach of this government owned retail network grows by the week. With every sale of these items they, the government, are taking business from private enterprise and they are doing it with an unfair advantage – the ever present line of poor folks who have to line up in the middle of their stores, in the middle of the valley of impulse temptation, to do the postal things over which Australia Post has a monopoly.

Every day these PostShops trade with their vast and growing range of newsagent related and other merchandise is another day the government thumbs its nose at small business. Unfortunately, no one in the government is prepared to even discuss the situation.

I hate hearing the ads on radio because I know that Australia Post will have used the power of their postal brand to extract a better deal than small business could negotiate; because they are promoting products I sell in my independently owned store; because they use the might of their postal brand to buy better; and, because they have customers who are prisoners to the Australia Post monopoly.

At my gym they’re giving away current issues of New Idea and That’s Life. They’re sitting in a stack at the counter with a note saying “take one”. No story, no apparent reason for the give away and while the gym has a retail area, they do not sell magazines. I asked the counter staff about the offer and they said they didn’t know anything about it.

While I can understand the need for promotion of titles to attract new readers, this type of promotion does not make sense to me. It devalues the title and disconnects with the traditional retail outlet.

I would have thought that a promotion supported by retail outlets selling New Idea and That’s Life would have made sense. For example, If I received 100 copies of each I could sell them as part of a promotion over the weekend – at the end of their on sale period – and achieve a more commercially valuable outcome for Pacific Magazines. By provide the stock without cost to me I could afford to bundle an offer which I’d hire a spruiker to tout to people passing the store. It worked last month for two titles so I’m sure it would work for New Idea and That’s Life.

Message to magazine publishers: work with your established channel! Growth can be achieved through the existing channel – especially newsagents – with the right offering. Campaigns like that I saw at my gym will not work as well, if at all.

I’d be interested to know how they account for these give away copies in the audit.