Author: Mark Fletcher

I’ve observed here several times about the challenges of retailing Calendars with many retailers discounting in this category from November. They are ruining what was a good (fair) margin business. An employee of mine grabbed some of our remaining calendars when we cut their price to $2.00 to move the last 300 or so we had last week. He bought the stock and has started listing them on eBay. These mostly $19.95 calendars have been discounted from New Year’s Day by 25% then 50% then 75% and finally to $2.00. The first eBay auction ended last night and the results are:

Jude Law – no sale

Tom Jones – no sale

Teri Hatcher – 99 cents

Teenage Mutant Ninja Turtles – 99 cents

Audrey Hepburn – $2.25

Usher – $4.25

Natalie Portman – $7.00

Kylie Minogue – $9.50

Charmed – $10.50

Buffy – $16.02

His $20.00 of purchases from my shop resulted in $51.50 in sales. The eBay fees will take around $10.00 of that so it is still a nice margin. It makes me wonder if I would have been better off not discounting at my shop and using eBay to quit the slow moving stock.

Footnote: Poor Tom Jones and Jude Law. What does a no sale in an eBay auction say about their appeal? To be beaten by the teenage Mutant Ninja Turtles would be humiliating for anyone.

The Australian Government has decided to protect Qantas from competition by continuing to shut Singapore Airlines out of the on the lucrative US route. The is the same Government which has approved greater competition by Australia Post against small business newsagents.

So, while one Government minister lectures newsagents about the importance of competition for the economy (and the government’s shareholding in Australia Post) another government minister is extolling the virtues of blocking competition in the skies.

My newsagency is directly opposite a government owned Australia Post outlet. Their range of stationery continues to grow – especially the products they import from China and brand as Australia Post products. I’m told this is good because it keeps my business on its toes.

The reality is that my business and the businesses of my colleague newsagents are not as well connected with Prime Minister Howard as Margaret Jackson and the team at Qantas.

I have commented here in the past about the Sensis (Telstra) owned Trading Post and falling sales. It seems that no matter what promotions are built around the product, sales are flat at best (in some outlets) and falling significantly (in others). in The real numbers behind the Sensis hype published at crikey.com.au, Mike Houghton provides some analysis of the Trading Post situation including this:

The re-branding of Trading Post nationally has failed to grow circulation. If the decline in circulation continues, the entire Trading Post business model could implode requiring a massive restructuring of the business and forcing Sensis to admit it paid too much and potentially forcing a revaluation.

2004-2006 Trading Post sales:
Sydney 65 to 43
Melbourne 95 to 68
Brisbane 65 to 45
Adelaide 35 to 27

It seems to me that the Trading Post newspaper is crucial to keeping their brand top of mind as they focus most of their attention into building their online model. While that may be appropriate for Sensis, it does not respect the investment by newsagents in real-estate and time propping in a stagnant or even decaying retail product. There will be a tipping point with sales where just to keep the product in store newsagents will need to receive some form of retail display allowance since it would not make sense to provide real-estate and labour when you’re not making enough gross profit to cover your costs.

I’ve been researching the cash flow implications of magazines in Australian newsagencies for several months. After considering data from many businesses, I am now focusing on six case studies. What is interesting is the monthly labour and real-estate costs for magazines in these stores as shown on this table.

It clearly demonstrates the cost differential between a rural newsagency, #4 and a major shopping centre newsagency, #2. It stands to reason that shopping centre newsagents have more cash flow negative titles and that they will be the first to pull out of carrying the traditional newsagency range of magazines – that is unless the magazine supply model changes to create more economical circumstances for such newsagents.

With newsagent competitors able to easily choose the titles they carry (and thereby focusing on the top 50 of 100 titles), newsagents face the need to signifcantly alter their business model to stay in the game. It can be done as some are demonstrating already. It takes stength in dealing with suppliers and focus on sale and return data.

I received a six page market research survey from Australia Post – the Australian Lifestyle Survey – in the mail at my home last week. Checking around the office just about everyone received the same survey. By completing the survey and returning this to Australia Post by June 1 I can be in the running to win a Sony home theatre system and some other prices. The total prize pool is worth over $30,000.00.

The survey is also available online.

Australia Post wants this information so it can use the data to sell its direct mail services. Nothing wrong with that except that Australia Post is government owned. Anything it does is seen be many consumers as government endorsed, even encouraged. This provides the an imprimatur no other business can leverage. This is Australia Post abusing its government ownership.

Remember, this is the organisation which has entered the general retail space aggressively over the last ten or so years. The 863 government owned Australia Post stores take greeting card, stationery, computer supplies and other business from small business newsagents like mine. They do so behind the Australia Post shingle and leveraging the government endorsement. That my government does this to me and newsagents like me is appalling.

This survey which I received in the mail is another step in Australia Post’s pursuit of record profit and record shareholder return – to their one shareholder, the Australian Government.

Government owned Australia Post is, in my view, operating way outside the functions permitted under the Act which governs its operations.

I hope complete the survey with useless data.

I have now received a copy of the full report from the UK Parliament All Party Small Shops Group report released yesterday. Download the report here.

The recommendations include:

• ENCOURAGE THE TRANSFORMATION AND INNOVATION OF THE POST OFFICE NETWORK
The Government should directly support and expand the specific services offered by the sub
post office network.

Comparing British retailing to Australia this could reasonably be translated as a call to the government to support newsagents. In Australia our government competes with newsagents through the government owned Post Offices.

This report is important reading for small businesses and legislators alike. It’s as relevant here as it is in the UK.

A report by the UK Parliament All-Party Small Shops Group released yesterday called for the creation of an independent retail regulator to stem the power of supermarket giants. The report says supermarkets are driving small shopkeepers to financial ruin. According to Reuters:

The fiercely competitive 120 billion pound grocery market is dominated by four acquisitive companies; Tesco, Asda, part of Wal-Mart, Sainsbury and Wm Morrison.

These companies, along with smaller rivals like Marks & Spencer threaten the livelihoods of those running Britain’s 278,630 small retail outlets.

The small shops report singled out convenience stores, newsagents, off licenses and specialist retailers as most vulnerable to the power of large retailers.

“Evidence from contributors illustrates that large retailers will compete using ‘conventional’ means such as competitive pricing strategies on key footfall generators.”

The report, called “High Street Britain: 2015” said poor performance of a large retailers could be considered anti-competitive if compared with smaller retailers competing in the same catchment area.

In 1999 the Senate held an enquiry into retail matters which touched on similar ground. sadly nothing has come of their report, despite the efforts of committee members such as Senator Andrew Murray of the Australian democrats.

That newsagents have been named in the UK report as among the most vulnerable is no surprise. I’d expect a similar situation here. One only has to look at how Coles and Woolworths have used their might to take the cream of magazines and newspaper business from newsagents. Look at the Vodafone scandal – Vodafone gives Coles 16% commission while newsagents get 5% for the same work. Look at iTunes. Apple did a deal with Coles and cut out newsagents.

The sooner the government gets serious about small business the better for the Australian community.

I receive emails regularly from people reading this blog who ask just what it is an Australian Newsagency sells. In addition to news, information and dreams, we also sell emotions. Greeting cards are a key part of our business, especially at seasonal times like Valentine’s Day. Go into any of Australia’s 4,600 retail newsagencies today and you’ll find the best range of Valentine’s Day greeting cards. It’s this seasonal point of difference when newsagencies shine. It’s like church at Christmas, you kow, when the priests ought to pounce on the once or twice a year church goers and make hay while the sun shines. At seasonal times people think of newsagencies because of the range of cards and because it’s a ‘safe’ place to buy cards. You don’t see many blokes buying cards in a supermarket. So, seasons like Valentine’s Day give newsagents an opportunity to restate their point of difference and to remind suppliers about our unique position on the retail landscape. We use the Valentine’s Day traffic to promote our range of magazines, art supply specials and stationery. Here’s what part of my store looks like for Valentine’s Day:

The day is far from over but already at my place we’re up more than 100% on last year. Love is in the air.