Author: Mark Fletcher

I understand the risk of early predictions and the danger of talking something down but here are my predictions for Christmas 2005 in newsagencies in three core categories and based on early sales data from a small but active selection of newsagencies:

Card sales – up 10% to 15% on last year

Diaries – up 10+% on last year

Calendars – down 25% on last year

The concern is calendars. This category used to be truly valuable for the newsagency channel and now it is patchy at best. While there are some stores where there will be sales growth, for most they will be flat at best or, as I predict, down 15%. With slim margins, high real-estate and labour costs and no real point of difference newsagents will need to consider if this category is appropriate moving forward.

There is no single thing hurting newsagents but when you combine calendar discounting, slashing of phone recharge commissions, newspapers being sold everywhere and lotteries moving more online the challenges of traffic attraction for the channel become clearer.

I received a response yesterday to my letter to the Chairman of Australia Post criticising their franchising moves. The response, from their Corporate Services Group, rejects “any suggestion of unfair competition”. That’s not a surprise. It then covers their obligations under the Act and suggests that their move into franchising delivers on their obligations. It rightly acknowledges their monopoly on the issuing of postage stamps. etc. etc.

The letter neglects to acknowledge that the success of the Australia Post retail network has been built on the postage brand. Without that brand they could not have built the network. This is the unfair competition to which my letter to Australia Post refers. Australians love Australia Post and the Post retail managers have leveraged that love for the postal service into a retail network generating hundreds of millions of dollars in profit for the government.

The letter also says that “in order to meet our community service and commercial obligations, we must protect the integrity and viability of our retail outlets…” Much of what Australia Post sells in its 863 PostShops was not sold in these stores ten or fifteen years ago. Australia Post has entered this space in that time at the expense of independent small businesses. It is flawed government policy which allows this to happen.

The letter discloses that Australia Post, as part of its franchising strategy, will open new PostShop locations. Given that less than 20% of the space in these shops is for postal related product my concerns about unfair competition remain.

While I appreciate a response from Australia Post, this letter does not address the concerns I raised. It’s corporate doublespeak which ignores the damage they are inflicting on independent small business.

Here’s what I wrote to Australia Post on October 25:

Ms L Nicholls
Chairman
Australia Post
321 Exhibition Street
MELBOURNE VIC 3000
Facsimile 03 9663 1160

Dear Ms Nicholls

Australia Post franchise offering

I noted with interest in The Age on the weekend that Australia Post is franchising some of its PostShop retail outlets.

My newsagency at Forest Hill Chase Shopping centre is situated directly opposite an Australia Post owned PostShop.

It has been disappointing to see the PostShop model evolve so considerably over recent years to embrace more products offered by small businesses like mine. You compete with me in the stationery, greeting card, money transfer and phone recharge categories and you do this, in my view, on an unfair basis.

Your PostShop businesses have the benefit of exclusive traffic. My newsagency does not have any categories exclusive to my business or to newsagencies.

Your PostShops receive favourable treatment from the landlord in terms of opening hours, parking and signage. These are evident. I suspect you also receive favourable treatment in terms of rent.

My view is that the government has no business owning a retail network which competes with small businesses like mine. While I am all for competition, I want this to be on a level playing field. The exclusive traffic drawn by your postage products provides an unfair advantage. It means you can enter new categories without the cost of a business like mine. You use the “Post” brand, loved by consumers for an excellent mail delivery service, to leverage stationery and other sales to the detriment of independent small businesses.

I would have preferred that Australia Post offer the PostShop businesses to nearby small businesses like mine to purchase. I could integrate the PostShop operation and my business and create a good small business success story for Australia Post and the government. Instead, we face a franchisee taking on a business and continuing to benefit from government protected monopoly traffic to the detriment of my small business and those who work for me.

I write urging you to reconsider your position on franchising PostShop businesses and engage in direct dialogue with people like myself who face unfair competition from your retail network daily.
Sincerely,

Mark Fletcher
Director

No. Not that I can see. In just five years opportunistic retailers like Calendar Club have ruined calendar margins. This category used to be full price through to Christmas then discount heavily. On that basis it was viable. Now with discounting starting from early November it is not viable for the small businesses like newsagents. We cannot buy at the same price as the majors and so will quit the category altogether. Other newsagents will quit calendar sales as well. It’s no longer worth it.

Speaking last week at a World Association of Newspapers meeting in Madrid was, among others Simon Waldman of digital publishing at Guardian Newspapers. According to this Yahoo News report, Waldman told the conference that within “six to seven years”, the group planned to dedicate 80 percent of its time to digital activities, compared to 20 percent at present.

Australia’s small business newsagents aren’t dedicating anything today to digital activities. We should be. We should be as engaged in a pursuing a digital future as newspaper publishers and we should be doing this from within and not with a supplier.

Tim Porter provides an excellent analysis of the circulation figures released a few days ago in the US. He is predicting that a tipping point t is close to being reached where circulation falls will measurably impact on advertising revenue. His comments about publisher investment in the news room are particularly relevant in relation to the cost cutting at Fairfax.

This post by Tim yesterday referring to a summary at poynter.org on how newspapers are reporting this news is also a must read. The .3% fall for the Minneapolis Star Tribune is interesting as it is smaller than the others and given the considerably work they have done on the content and design of the newspaper.

We hopped into this pot of water when it was cold and too many of us have not noticed that there is a small flame warming the water. The water is already dangerously hot.

I’ve visited several outlets selling newspapers today (Sunday) and continue to be frustrated at the treatment of newsagents by publishers compared to other outlets.

At petrol outlets, supermarkets and convenience stores you see newspaper product stacked next to magazines, away from the high traffic area. No promotional material. No over the counter support.

In newsagencies today you see the newspapers in the highest traffic area, supported by promotional material and promoted across the counter in one way or another. Newsagents rely on newspapers whereas these other retailers do not.

Rather than embracing newsagents publishers pursue other retail outlets such as cafes, cinemas and nurseries. It does not make sense to me that they pursue outlets which will not actively support newspaper product and that they do this to the detriment of the newsagent channel where the bulk of their sought after compliance exists.

If publishers changed the way they engage with newsagents they could increase sales. They need to replace the master/slave relationship with a mutually respectful business relationship which rewards success. Getting the newsagents obey rules does not make for better newsagents and increase sales. All it does is bring good performers down to the level others have climbed to.

I’m breaking rules in my newsagency and on several days this is paying off through increased sales. I’d like to break more rules but I dare not. I’d like to insert flyers for my shop in the newspapers I sell to draw people back but I’m not allowed. I’d like to move newspapers further into the store and create a kick ass display but I’m not allowed. I’d like to offer an over the counter discount package for loyal customers but I am not allowed.

Publishers should control the distraction by Craigslist, Google, Yahoo and other online plays and work with the retail channel. This could soften the impact of these and other disruptive influences. Being smart and co-operative right now could mean the difference between surviving the tsunami of change or not.

Here are all the Australia Post branded products I purchased yesterday. Nice packaging. Attractive looking products. I’m still srtuggling to see the Act under which Australia Post allows for this type of activity.

Does the government own the national postal service of a stationery wholesaler and retailer? How far are they planning to go with this brand move? How does the government feel about taking food from the families running small businesses competing with Australia Post?

Data I am seeing from over 100 newsagencies indicates that magazine sales in the computer category, covering around 200 titles, are down 25% year on year. This drop is bigger than I am seeing for other magazine categories and reflects the increasing use of the Internet for information previously sourced from magazines. While not unexpected, the sales drop, if accurately reflecting a national trend, is concerning for publishers and newsagents alike. Computer titles used to be a strong traffic and sales contributor to newsagents and to lose that will cause significant pain.

Independent news professional outlet crikey.com.au is carrying some of my material about Australia Post. It will be interesting to see if this attracts some traction.

I went shopping at an Australia Post PostShop today and bought these thumb tacks (Made in China).

I am curious as to what the government postal service is doing branding thumb tacks. Where’s the link with postal products? Are we not well enough served with thumb tacks already? Why does this government owned business feel the need to bring out its own brand of thumb tacks? Can I post these without breaking local and international postal rules?

In my shop today I spoke with several customers browsing the women’s magazine area. They were each over 60 and looking for People’s Friend and anything similar we had. Two, shopping together, said they had outgrown “the trash”. Another said she liked the “comfort” of People’s Friend. Another said that the English Women’s Weekly “made her week”.

While not considered that advertiser interesting, this demographic is less likely to be lured by online offerings; they’re loyal; they are happy to pay around $3.00 for a thinner content focused weekly. Look at People’s Friend. It’s around 20% of the size of the major weeklies yet two thirds the price.

If I were a publisher I’d be playing in this space rather than leaving it to English publishers as happens now.

I wrote to the ACCC on October 28 asking it to investigate the arrangement whereby a national supermarket chain receives 16% commission from Vodafone and 30 day trading terms for remitting monies collected for Vodafone product while newsagents get 5% commission and remit monies every night.

The ACCC responded to me yesterday saying that it does not consider the matter warrants further consideration.

Newsagents use the same technology provider to issue the over the counter recharge product and therefore offer the same level of compliance; newsagents offer the service in around 1,000 more outlets; newsagents sell, I suggest; around 20% more product than the supermarket.

I don’t know whether the supermarket group, Vodafone and/or the third party technology provider have done anything unconscionable or in contravention of any other provisions of the Trade Practices Act. I would have thought that based on the significant commission and terms of trade difference the ACCC would have at least investigated the matter. I offered evidence and they did not pursue it.

Small business needs organisations like the ACCC to be vigilant in ensuring that big business mates don’t do deals which are grossly unfair to small business and/or deals which are funded by poor deals for small business. We do not have the financial or organizational resources to protect ourselves. This is the job of the ACCC.

The 16% commission being paid to this supermarket chain is offensive compared to the 5% paid to newsagents.

Does anyone care?

The Wall Street Journal reports on circulation numbers to for released this week. The numbers continue bad news for US newspaper publishers and therefore the supply chain.

While the fall is concerning it is not unexpected. One only has to look at clean circulation and readership data from the last 10 years. (I say clean because clean data from US publishers is challenging to find.)

I reckon that here in Australia we’re between two and four years behind the US in terms of the impact of online, wireless and the collapse of the 18 – 34 newspaper market. Some of our major newspapers are reporting what is (relatively) considerable growth in a tough marketplace. Consumer patterns are different here as is the newspaper supply chain. Another reason for slower impact here is the newsagent retail network. The US and Europe have nothing like it.

So, we’re behind in the in the fall in newspaper circulation. That will change. If we are smart we will use being behind to our advantage. We, publishers and newsagents, will work out nuts off co-operatively to win every customer we can – based on the product and not these crazy competitions and giveaways – publishers will resist putting their product everywhere and therefore encourage greater support from newsagents.

We have a window of opportunity – ever the optimist – and we should seize that every day. What we do over the next six months will be crucial.

The falling circulation numbers in the US will divert more advertising away and bring publishers and their distribution network closer to the tipping point at which they will quickly contract/retreat. We should learn from their experiences and see the danger before it is too late.

Here is a list of Australia Post branded product. Much of this has been added recently.

Gel Wrist Rest Mouse Pad

Scrolling Mouse

Optical Mouse

Internet Keyboard

CD-R Pack 10

CD-R Spindle – Pack 25

Diskettes

DVD-R

Supplies DVD-R

A4 Copy Paper

Facsimile Rolls

CD wallet

I’ve left off envelopes, pads and postage related product.

One wonders how far this Post branding will go and what the commercial arrangements are. The Australian Government Competitive Neutrality Complaints Office is charged with ensuring that Government ownership is not abused by any government commercial enterprise. I’d suggest that Australia Post putting their monopoly postal service brand on stationery is an abuse of government ownership.

This story is about threats to Australia Post jobs because of reported downgrading of regional mail centres.

The story not running in the press is the jobs which will be lost in independently owned small business as the government owned Australia Post competes more aggressively and takes more business from newsagents and others.

Newsagents have been struggling in partnership with Network Services for two years in the development of a magazine subscription distribution service.

Poor IT links between Network and Newsagents is costing newsagencies like mine more than $800 a month in product sorting costs, thereby eliminating profit from the venture.

Newsagents have been a late entry into this space, Australia Post having dominated magazine subscription delivery for decades. The Australia Post advantage is control of the network from warehouse to letterbox which in turn allows it to impose more discipline on publishers.

Newsagents, at the end of the food chain in their fledgling partnership with Network Services are making too little from a technically and (currently) organisationally challenged service.

Newsagents want the distribution program to work since it connects well with their magazine retail business and keeps them in the supply chain loop so to speak.

My sense is that unless there are major infrastructure improvements from the network end in the next three months the service will fail and subscription deliveries will be lost to newsagents.