What is it with the majors? Some are already promoting 25% off Christmas cards and wrap. It’s bad enough that they have trashed the calendar marketplace to a point where no one sells at full price. It’s not even December and they’re all over TV and in the press touting their 25% discounts. This is nuts.
While this story is from my shop I am sure that every one of Australia’s 4,600 retail newsagents would have similar stories.
Take 5 is a successful magazine. Sales in my shop are up year on year by 40% – mainly due to our aggressive magazine promotion strategies. Our sell through rate bounces between 70% and 90% with the average at 80%.
Take 5 customers tend to miss the magazine unless there is a reasonable display. My guess is that they know they’ll find it elsewhere.
This week my supply has been cut by 30%, probably because of the bouncing return rate, possibly because of out of date sales data at the publisher end. The cut, however, is so deep that it is lower than my lowest sell through rate for the last three months except for one week. This cut will mean less sales. I’ll still return one or two copies because many customers don’t like to buy when there are only one or two copies left. These returns will be a further cut thus making the 30% cut this week a self fulfilling prophecy – the returns will prove to the scale our ‘system’ that the cut it made was appropriate. Such a conclusion would be wrong!
I understand the need for publishers to scale out to maximise profit and minimise wastage. However, cuts like those inflicted on my business this week with Take 5 starve me of sales and customers and diminish the value of small business magazine specialists.
A more intelligent review of my Take 5 sales data and a review based on the notion of partnership between my business and the publisher would have led to a cut of 5% with a further review in four weeks. My sales data goes back daily so there is current data available for such an analysis and quick reaction. The scale out algorithm needs to use current sales data and to take into account overall growth/decline to determine a weighting for any proposed supply change.
In fact, better reaction from the publisher would have been an automatically generated email saying, “hey, we plan to cut you by 5% for these reasons please let us know if you can justify any change and we’ll listenâ€. Asking for too much? Not if my business and businesses like mine is worth anything.
I’d like publishers to review their scale out algorithms so that they can cope with bumpy sell through rates and consider the overall growth a business achieves. This will respect the effort my team invests in growing the magazine category. The current big stick approach does not respect my efforts and will only lead to sales falls elsewhere.
Having said all that about Take 5 , I’d note that we called for more stock and it arrived this morning. (To do that took too long on the phone and still left us short for a day.)
Take 5 is not the only title I and others experience such cuts for, I use it here as an example.
While 99% of the rumors I hear don’t get coverage hear I’ll make an exception this time because the impact of the rumor, if true, could be widespread. It’s been suggested to me that Australia Post is working on a new weekly consumer magazine to be launched exclusively through the Australia Post retail network.
Craigslist has wrecked havoc on newspaper classified business in the US over the last five years. What started as a small San Francisco email among friends has grown into a giant killer by making online classifieds free. (Craigslist is yet to make an impact in Australia even though it has coverage in the capital cities.) Now, this report from Editor & Publisher reports that Craigslist founder, Craig Newmark, is close to launching “a major online journalism project within the next few months that will copy the successful ‘wisdom of the masses’ approach to classified advertising and apply it to journalism”.
Citizen journalism is developing well in the US and Europe. Craig Newmark entering this and allied spaces would dramatically lift the profile and bring traffic.
In the E&P interview Newmark makes comments about journalists which the folks at Fairfax might find interesting given their editorial redundancies.
If you listen to the radio, the 50 plus market is hot in the real-estate sector. It seems that in every ad break we hear about retirement living or empty nester living. Insurance companies chase this group as do car makers, tourism businesses, vitamin makers and fashion outlets.
The 50 plus age group is important in newsagencies, particularly in the magazine, newspaper and greeting card categories, yet I feel we are missing the opportunity. In the magazine space, for example, we display by and that makes sense. I wonder if we could ‘help’ this age group find new titles by creating a separate area with a selection of titles for them. This approach could lead them into purchasing titles they have not shopped before. At the very least I’d expect it to increasing browsing beyond the weekly magazine pick up.
While supermarket, petrol and convenience outlets offer magazines to leech of other purpose traffic, newsagents could, with a 50 plus strategy, rebuild a top of mind position as a magazine destination. It’s an age group we have to get closer to.
Space would be a key challenge in creating a 50m plus area followed by selecting the right titles and creating an appealing and appropriate story.
I always like it when a new magazine launches so I’m happy to see Star arrive today. It will be interesting to see how it travels. There are several challenges: gaining retail space (existing high volume product already fights to get pockets in newsagencies, supermarkets, petrol and convenience); it’s Wednesday on sale date is contrary to consumer habits (Wednesday is hump day, it’s a light Lotto night etc etc); Wednesday is guilty pleasure magazine day (that’s what I call it at least) – That’s Life and Take 5; confusion about where to place it – I’d say next to NW but as I said that’s prime position and there are no spare pockets; what’s the value proposition – especially for the newsagency customer?
Star is a very different product to Real Living, Notebook, Madison and OK! – the recent major new releases I can recall. It looks and feels like a supermarket magazine from the US or the UK. Based on what I saw in the UK a few weeks ago I’d expect more magazines in the Star genre. This genre presents more of a challenge for newsagents than supermarkets. While celebrity is separate to the Woman’s Day / New Idea space, it’s close yet the product looks and feels very different. In fact so different that it may be appropriate to identify the celebrity category some way – away from the others. I could be completely wrong on this and my thoughts are only half baked at present.
I’m a but frustrated with supply quantity – it’s low for an established magazine in this category. When OK! launched we received plenty of stock and could create a good retail story. With Star we can fill a few pockets but that’s it.
All that said, it’s great to have a new title and the opportunity to work with the title to find sales.
The Digital Magazine Forum in New York, Dec. 1, is an event I’d like to attend. The growth of digital magazines has been considerable this year, especially in some niche areas. To me, the best way to develop a strategy to address a challenger is to fully understand the challenger. In some cases digital magazines grow readership. In other cases they reduce retail sales. My sense is that too many retailers will discover digital magazines when the impact is already being felt.
One point of difference between newsagencies and supermarkets (and other magazine/news outlets) is the range of new stock we receive every day. Beyond daily newspapers we receive hundreds of new issues a week and several new titles. As well as a poster or a music shop like list of new product we’re looking at a different colour T-Shirt for each day of the week for a month – to underscore the difference each day. Our Fresh Today campaign will be for a limited period and hopefully run with the support of some suppliers who benefit from consumers connect up to date product with newsagencies.
I was talking with a employee of a newsagency yesterday about newspapers and they said they didn’t read any in the shop, not even on a break. I was surprised. So I asked where they found out what was happening in the world and they said MX, TV news occasionally, radio news. MX is Melbourne’s free daily commuter newspaper. It’s a good product for what it is – and don’t take that as a put down. I’m not a free paper person, I prefer more analysis in my news.
My informer is 21. They like MX because it was more” their style”, it told them “what they wanted to know” and was “easier” than the bigger traditional newspapers. They said it was “fun”. Their daily MX read is more about passing time and relaxing. She said she’d pay for it if she had to, up to 50 cents and compared that to an Australian Idol vote.
My shop is 30 minutes from Melbourne and MX does not reach out that far. But I wonder, if I could get stock and the publisher agreed to a small cover price, whether it would sell to the demographic not buying newspapers in my area. Is there a retail market for a trimmed down newspaper, a product designed more for entertainment than reporting? I know there are products like this in Europe. If my informer is anything to go by it would be worth trying.
It’s something I’d like to trial if possible. Anything to build a newspaper connect with consumers not buying one today.
Last Sunday the Herald Sun came with a Kath and Kim DVD. If your purchase point had run out of stock or didn’t do such giveaways well (like supermarkets) the newspaper directed you to a newsagent. In my own store almost half our stock was given away to people who had purchased elsewhere. It seems to me that this traffic directed to newsagents was an opportunity for publishers to push the relationship further. Maybe they could have created an over the counter loyalty offer – i.e. coupons offering a discount if you buy a certain number of Herald Suns over consecutive days; or, an over the counter subscription offer; or, even, a home delivery offer.
As it was, these folks came in, gave us their coupon from the paper for the Kath and Kim DVD and left with it. The Herald Sun could have had a second crack at more business. It’s worth considering next time.
In a retail sense our learning is that we will try for the additional business ourselves. However, it would be more helpful if the publisher developed a strategy based around the traffic generating offer.
AFTERTHOUGHT: I have been reminded that the Herald Sun price rose recently and that this DVD promotion is a way of buffering for any impact from the price rise. To that end it’s a good strategy. And I like the price rise
Yesterday’s Mediaweek industry newsletter carried a story reporting comments of New Idea outselling Woman’s Day on several weeks recently. There is no doubt that New Idea is the big improved in circulation in 2005. This is based on the newsagent sales data I am privileged to see. It is also true that, for the stores I look at, on two weeks New Idea passed Woman’s Day – mainly due to it’s Princess Mary and earlier Bec Cartwright coverage. Looking at issues published over the last, say, six weeks, you can see Woman’s Day fighting back – better covers, more focus on celebrity. In newsagencies around 50% of the time both magazines are purchased together; between 60% and 85% of all sales are on a Monday – the day of issue.
The more active battle for circulation between the two this year is great. More please!
The October 2005 issue of Circulation Management, a US journal for Circulation Managers, carries a story about the battle for checkout space in US supermarkets. The article discusses three main trends: shrinking rack space, the rising cost of checkout fees and an influx of new titles and categories.
The most interesting point in the article is what publishers pay supermarkets per pocket for premium checkout space. Annual fees per pocket are made up of: $25 to rent the pocket, $50 per quarter Retail Display Allowance, $100 for a one time introductory placement offer (IPO) and 20 percent of the cover price – usually paid based on scanned sales (not supply and return as handled here in Australia). So, for one title in one pocket at a checkout, the retailer gets $325.00 plus 20% of the cover price for each copy sold.
Now, the IPO is an introductory fee so in year two the figure will drop to $225.00. However, supermarket leverage being what it is, only very successful titles will remain at the checkout unless additional fees are paid to maintain position.
Australian newsagents receive no fees beyond 25% off cover price for net sales. This is calculated as supply quantity less return quantity. Newsagents carry the cost of shrinkage which is, on average, 3% of supply quantity. They also pay for everything supplied and receive a credit for returns once processed by the distributor and this can be several months after supply. This is why we need a scanned based trading model in Australia – it is the only fair model for payment of magazines sold in newsagencies. SBT holds distributors accountable for their actions whereas the current model does not.
We can see from the data presented in Circulation Management the US numbers and can only assume that Australian supermarkets will have negotiated along similar lines.
The argument, of course, by supermarkets and publishers will be the higher volume of traffic in supermarkets, consistent compliance and negotiating power. I agree with these points. Many newsagents, however, deliver compliance, we have excellent traffic and we have the best depth of range in the magazine category. More important than anything else is that we have less capacity to carry the operational costs associated with magazines then supermarkets. Those least able to pay are the ones actually paying.
If newsagents received the US style fees it would add, on average and based on more reasonable charges, $100,000 a year to their bottom line. Such fees would put our stores on a more level playing field with supermarkets and others selling magazines.
Back when only newsagents sold magazines such fees were not appropriate. Now that almost 50% of all magazines are sold outside newsagencies it is appropriate and socially responsible for publishers to pay newsagents following a structure similar to that provided to supermarkets.
Publishers could argue that newsagents get 25% here compared to the 20% supermarkets receive in the US. However, the additional 5% accounts for considerably different accounting practices and a supply paradigm in less successful titles which means a loss situation for around 40% of magazines carried in any given newsagency.
With many new titles expected to be launched in 2006, newsagents could consider introducing fee structures along the lines of US supermarkets. This would value their real estate, their time and the traffic their store already pulls in supporting the entry of new product in an already well served marketplace.
One Australian company, InSite, compensates newsagents for space. However, their roster of titles is not high volume enough at this point in time to compensate for the additional real estate their promotions require. Further, their fee structure is nothing like the US fees paid to supermarkets.
Newsagents and publishers would do well to discuss these US figures and consider appropriate action on both side to arrest the falling net return from the total magazine category for newsagents.
Maybe it’s just my shop but the number of blokes browsing the range of soccer magazines has grown considerably since Australia won its match against Uruguay last week. I’m pleased because with computer magazine sales in the toilet I wanted a growth category I could position into recently reclaimed display space.
We carry between 15 and 20 soccer titles, depending on the time of year. Now is a great opportunity for newsagents to strut their stuff as they are the only retailers who will have range.
The Age today came with a free calendar by the brilliant cartoonist Michael Leunig. The calendar is good quality and packages Leunig’s talents. It’s a good connect with the newspaper because of his years working with them. The Age put in extra effort chasing sales by providing a spruiker for our retail outlets for four hours. They provided spruikers for other newsagents as well. This practical support is welcome and demonstrates a level of engagement with newsagents which I appreciate.
The Herald Sun today came with a DVD of bits from the Kath and Kim TV show. I say bits because that’s what’s on the DVD. Customers were more interested in this than the Leunig calendar and that’s disappointing because the calendar is more valuable. Nevertheless, the DVD is generating the sales kick they would have hoped for.
Both the calendar and DVD are good offerings designed to boost newspaper sales. In a two paper town I wonder about the value of such head t head competition. One will always detract from the other. I appreciate publishers cannot work together on promotions yet I am certain they would be aware of each others plans.
I read issue 2 of Explode magazine this morning. It’s part trash, part froth and a bit of substance. Okay I’m not in their demographic and am therefore unable to reasonably assess the product. As on selling the magazine, however, my assessment is that it’s not a good product. I guess time will tell. At $5.95 it’s a fair price and that seems to be appealing to some I have spoken to. In its present form though it’s a bit all over the place. Boys who want to see girl pics will get a mate to buy them Picture, People, FHM or Ralph. They’d see Explode as tame. Younger kids, early teens, may buy but parents will freak when they look under the covers.
Explode bothers me on another front. The cover price is $5.95. This means I, as a newsagent, make $1.48 from each copy sold. To promote the title I’m providing four display pockets which cost me $9.95 a month in rent. I also have a live six cardboard cit out in store promoting the magazines – taking up $100 worth of real-estate. I’d doing this to promote the new title.
The publishers of Explode are respecting my effort and the effort of 4,600 other newsagents by actively seeking direct subscriptions on page 83. They spruik a 30% discount off cover price if you subscribe. I make 25% and do the work to launch the title in store to existing traffic. They then say to those customers, hey forget the newsagent where you found us and go direct and save 30%.
I appreciate that magazines need subscriptions as part of their reader mix. To offer subscriptions at a 30% off cover price and to absorb considerable shipping costs while giving newsagents just 25% to launch a title is poor form.
Based on just the three display pockets in my store I would need to sell 18 copies of the magazine to cover the real-estate costs. I’ve been given 20. I expect to sell under 10. Explode will be a loss situation for me.
The model of newsagents and other retailers receiving 25% for new titles with a heavily discounted subscription offer is discouraging. Publishers need to be more respectful in their financial arrangements with newsagents. Either that or newsagents should be more demanding of better financial terms from publishers.
The success of any magazine is due, in part, to in store display by newsagents. This space allocation and time commitment needs to be on economically viable terms, title by title.
Found this blog entry by ‘Luke’ about magazine covers. An interesting observation.
Today’s Herald Sun came with a 2006 calendar from the creative pen of cartoonist Mark Knight. It’s been an ideal promotion for the newspaper. Better than other promotions since this one is directly linked to the product. Plus, the circulation department provided excellent counter POS material which boosted interest. Checked in on a couple of petrol outlets and a supermarket and, of course, they did not have the calendar on display. Publishers need to realise that newsagents are the best channel for driving promotion based sales.
I created the magazine club card fourteen months ago to drive magazine sales in my shop. There are now over 70 newsagents running this simple magazine sales promotion tool. It’s like a coffee card but for magazines. Customers love it. In our case we’re still well ahead fourteen months in. The key is how you interact with the customer. Every day we hear customers comment that this card draws them back to our shop to buy their magazines. It is a great loyalty builder and sales driver. And only newsagents would offer such a promotion. I reckon it’s better than any fuel discount offered by the supermarkets. Plus it goes to the heart of the Australian newsagency point of difference – the best range of magazines in the world.
Supplier contracts and rules control more than 80% of what is sold in Australia’s 4,600 independently owned small business newsagencies. While these rules may have been appropriate in a regulated marketplace, they are grossly inappropriate in today’s more competitive marketplace. Indeed many rules place uneconomic terms on newsagents and diminish their competitive ability.
To me it all comes down to real-estate, inventory and labour. These are my investments in the business and I need to be free, as the business owner, to manage these resources as I see fit for the best return for my business and my colleague co-workers in the business.
Newsagents need to be freed from what many see as demotivating, uneconomic and stifling contract terms which too often control stock quantities, stock location and the work processes involved in handling the stock in store – because of accounting systems and practices (from the supplier side) from decades ago.
A co-operative relationship with publishers, magazine distributors, lottery companies and greeting card companies can result in am economic revival of the newsagent channel. In my own case I have four good card company relationships and will launch in December significant in store changes to refocus the business on this growth category. The result will be more efficient use of stationery space and trimming of magazine space. I know that I can cut 20% of my magazine range and increase sales as a result of being better able to display the better selling titles.
Back when newsagents were authorised and had control over the distribution of newspapers and magazines in their territory rules were appropriate. Today they are not.
I am certain that freeing newsagents of some of these rules and updating accounting processes and practices would improve sales as the result would be more business focused newsagents.
From my newsagency I look across at the Australia Post PostShop with envy. This government owned shop has a monopoly on stamps, an exceptional government protected brand behind which their retail business trades and the ability to cut deals like a retail giant. I lost all of that when the government facilitated the loss of regulation in the newsagency marketplace.
As Barnaby Joyce said on October 11 in the Senate:
Newsagents, some of the horticultural producers, pharmacies and a lot of small retail shops in regional towns or in suburbs feel that they are over a barrel. They feel threatened and do not feel that they have the ability to go on in the manner in which their parents or grandparents probably went on before them. Our job in this parliament is not only to say we support that but also to publicly show we support that and to do it in such a forum as this, the elected body in this Senate chamber they have sent us to. Why do we believe in this freedom to go into business? The freedom to go into business is a mechanism that gives us our own personal freedom.
Anyone looking at greeting card sales will see healthy growth in newsagencies. In that category we have as many and maybe more than in the magazine, newspaper and lottery categories. Yet year on year growth is good. I’d say this is because of healthier supplier relationships and fewer rules. The result is a more businesslike workplace. The newsagent feels like he is working for himself rather than a school principal.
It will be a big Sunday this Sunday for newspapers in Melbourne. The Age has the annual (brilliant) Leunig calendar and the Herald Sun has a Kath and Kim DVD give away. Great for sales. Frustrating that they’re competing on the same day for the sales kick. The biggest frustration will be that we run out of DVDs and turn customers away.
I’d like publishers to work with newsagents on title based over the counter loyalty strategies as opposed to giveaway promotions as they stand a better change of building repeat business.
Explode magazine is proving to the problem launch of the year thanks to bad press and what seems to be an ill conceived product. We’ve had more in store complaints about Explode than anything else. I thought Explode was to be the boys’ Girlfriend of Dolly. It’s not. In fact it’s barely a step down from FHM and Ralph and while that’s okay for some, to place it in the teenage section is where we’re getting grief. I could be wrong but I reckon the publishers will either rest the title and regroup or kill it altogether. In its present form sales are not there from what I can see.
I visited the PostShop yesterday at the Westfield Bondi Junction centre in Sydney. This is another of the government owned Australia Post retail outlets. In fact, it’s their showcase store. This is where our postal service struts its stuff and demonstrates its commitment to the provisions of the Australian Postal Corporation Act 1989.
At this PostShop one can purchase, exclusively to Australia Post: the Harry Potter Carry Case and Pencil case; Deadly – a book pack by Paul Jennings and Morris Gleitzman; Wicked – a book pack by Paul Jennings and Morris Gleitzman; Bill Grainger book pack; Ricoh Capilo digital camera; Faber Castel Connector Express marker set. And that is just the first page.
Please, can someone explain to me the justification for the government owned postal service selling these products which many small businesses would love to have access to.
Australia Post is using the mail delivery brand it has established over years of excellent service to take retail sales out of small business. It is leveraging its exclusive postal service traffic into sales of these other items. Thanks to its exclusive postal service traffic the cost of acquiring each visitor to a Post Shop is far lower than the cost for, say, a newsagent.
When newsagents close due to the competition from these government owned PostShops maybe then the mainstream press or a politician may take notice and wonder whether the policy of leaving the Australia Post executives alone all those years without socially responsible policy direction was the best move.
Australia Post ought to be the post office and not some chain of mid size department stores taking revenue from small business and putting people out of work. They do so using an unfair playing field and with the blessing of the government.
I’ve just finished reading John Battelle’s book, The Search. Subtitled How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture. Battelle was a cofounding editor of Wired magazine and founder of The Industry Standard, an Internet-focused magazine that closed with the bursting of the dot.com bubble. Beyond being a good history lesson on the business and technology of search, this book provides a timely analysis of the social implications of search engines, be they the engines operated by Google, Yahoo! or Microsoft. It is compelling reading – even more so for those in the cross hairs of online search such as Australian newsagents and especially now with the release this week of Google Base.
The Search economy as now being practiced by Google will prove to be but a shadow of what is to come and Battelle takes us further on the journey of understanding search and which might come on the search road.
Read this book.
seattlepi.com reports that Newsvine raises US$5 million for their CJ site. This is the most recent of several similar funding arrangements for Citizen Journalism sites. It will be interesting to see if any or any significance spring up in Australia. My sense is that European and Americans are more engaged with news and more frustrated with mainstream outlets and that’s why we’re seeing more activity there.
The thing about Google Base is the ease with which one can list an item. The impact will not only be felt in newspapers, where the process is time consuming, but also with eBay. Some analysts are already predicting a negative impact as this Internet Retailer story reports.
Thousands of stories and blog entries have been published overnight ranging from the expected Google bashing to those offering fulsome support. Regardless of your view, the arrival of Google Base is a landmark which will bring more people online and that has a knock on effect in many places.