The front page of The Australian Financial Review yesterday carried a story headlined Plan to help newsagents. It was about the launch of Hubbed, a new business venture backed by Matt Handbury.

From the opening paragraph, Michael Smith’s report reflects, in my view, sloppy reporting.

Former magazine industry chief turned book publisher Matt Handbury is back with a new venture he hopes will breathe like back into the struggling local newsagency.

Matt Handbury hopes to turn a profit. Newsagents provide a network that could be useful to him.  He has not invested in Hubbed out of a love for our channel. We serve his need for a retail footprint.

Handbury should tell it like it is and not treat us in such a paternalistic way. We’re more knowing and more independent than back when he last dealt with newsagents.

Smith’s article says there are 4,400 newsagents in Australia. While it is hard to nail an exact figure, I’d put the total number at no more than 3,800.

Smith quotes Handbury about Hubbed:

I thought ‘wow, I like that because it is going to keep the newsagents going’.

If Handbury really thought that then Hubbed must be set to generate $50K or more gross profit a year for each newsagency involved. I don’t see that happening. The numbers quoted in the article don’t make sense.

The article is built around the notion of Handbury saving the channel. More sloppy work by Smith and the AFR.  The article says the plan is to install Hubbed in hundreds of newsagencies – even on my numbers it’s a fraction of the overall channel. How will he save the rest? The article has no balance.

Smith makes out that the Hubbed offering is unique.  The reality is that more than 1,500 newsagents today offer parcel collection services and have done for close to a year. We also offer gift cards – hundreds of corporate branded cards if we want to carry them.  Some of us also offer financial services.  And, yes, some of us offer magazine subscriptions.

My point is that Hubbed is not as unique as the AFR article would have us believe.

A Hubbed kiosk will need around one square metre of space including access areas.  In a shopping centre, a newsagent will be looking for somewhere between $8,000 and $10,000 a year GP without considering labour, operating and opportunity costs.  In a high street and regional situation the return could be less. My estimates blow out the moment a newsagent has to spend any time on Hubbed.

There is also the question of what this looks like to shoppers? Is it at the front of the store? If so, the opportunity cost would be significantly higher.

My other concern is whether Hubbed is a net traffic generator. Will it bring in new traffic or will it rely on our existing traffic. If the latter then it is off less value to newsagents. The last thing we need is a product or service that relies on our existing traffic.

I know from my benchmark studies that there are newsagents doing very well, creating new models, building strong and profitable businesses. Hubbed will not be for them as they have moved away from the agent model on which Hubbed appears to rely.

Now for my back story on Hubbed…

I was approached by them in January this year. They wanted to meet and present the idea.  I get approaches like this all the time and have developed some barriers / bullshit metres to stop my time being wasted.

Through a series of emails over five days, they wanted me to sign a confidentiality agreement. I refused. I could see no reason for it.  It came across like they wanted some form of support or endorsement from me.

We never met because I refused to sign the confidentiality agreement. In one of the emails they said they were launching this with the ANF.  I asked if they had a commercial relationship with the ANF? They refused to answer the question.  All communication ceased.

The ANF question is important to me. Associations have no place being involved in commercial enterprises. The ANF track record on due diligence is poor – look at Bill Express … they did no due diligence at all, aggressively promoted it and it cost newsagents tens of millions of dollars.

If there is a commercial relationship between the ANF and Hubbed it needs to be declared from the outset. Also, the ANF would need to be transparent with newsagents on the due diligence it undertook in relation to Hubbed. Has the business plan been professionally reviewed by the ANF for example?

For the record, I don’t have any product or service that competes with Hubbed.

Hubbed could be excellent, only time will tell. Right now there is too much smoke in the way to know.  The sloppy AFR article only adds to this. My advice to interested newsagents – approach it with your eyes open. Do your research.