I have been contacted by many newsagents over the last couple of months concerned that while magazine sales have fallen, the amount they owe to magazine distributors each month has not.
The magazine distribution system in Australia serves, in order of priority, magazine distributors, publishers, consumers and newsagents in that order. We carry a disproportionate rick and financial burden in this chain – a situation which goes back to our beginnings.
While many newsagents complain about magazine distribution, few actually understand the situation in their business. Any decent newsagency software package will provide good tools for understanding the performance of magazines and with which to make a case for fairer treatment.
I’d encourage newsagents to use the tools at their disposal to thoroughly analyse department, category, distributor and individual title performance. Take the results of this work and compare it against the return the newsagency needs to achieve per pocket based on rent, labour and other costs.
The resulting understanding could for the basis of an approach to magazine distributors. It could also form the basis of a claim through appropriate channels for mediation on the magazine supply model as it applies to a specific business.
Here are two tools I recommend newsagents use to analyse the performance of magazine distributors and their products:
Magazine Sell Through Rates Report. This is the most valuable report for a newsagent wanting to assess performance by a magazine distributor as it breaks down sell through rates at the distributor level all the way through to the title level – by MPA categories. You get a sell through percentage at each level – allowing you to assess distributors through to each title they supply. For Network Services, you can separate our ACP titles – this provides a more honest assessment of Network Services scale out decisions.
In running this report, select at least three months, ideally six or twelve months. To narrow focus, set a sell through threshold of 40% the first time you run the report. It will then only lists titles with an average sell through rate of 40% or less. These are titles which need the most significant focus.
The actual sell through rate calculation used in the Tower Systems software was developed some years ago in consultation with magazine distributors. I wanted to ensure that it could be used with confidence by newsagents to make a case for supply adjustments.
Magazine Cash Flow Report. By recording the floor space and labour costs associated with magazines, this report is able to report on the cash flow benefits, or otherwise, by title for a newsagency. The analysis is done across any period you choose. The report can also be packaged by the software for sending to a supplier or any other party for their own analysis.
In March 2006 I published a report: The Cash Flow Impact of magazines In Australina Newsagencies . This report used cash flow data from many newsagencies, data gathered through the cash flow reporting tools mentioned here.
I see cash flow as an important tool for newsagents. Outside of contractual obligations, magazine distributors have an obligation to newsagents under the trade practices act. This cash flow report could provide evidence necessary to support a claim beyond mere over supply.
Imagine what an independent authority, a court, registrar or arbitrator, would make of proof that a supplier relationship is overall cash flow negative if you take out less than 5% of what they supply.
The challenge with these two tools and the other tools in software like the Tower Systems software being used by 1,700 newsagents is that newsagents need to have the stamina to go beyond complaining and genuinely understand the performance of magazines in their businesses.
Many newsagents who do the analysis will find that magazines perform considerably better than they say. Others will discover problems greater than they expected.
While newsagents have complained long and loud about magazine supply, few have actually challenged the model. Solid evidence is the first step in taking such action.
I will happily work with any newsagent to collect and analyse their magazine performance data.
Sales of issue #2 of the Master Chef magazine are excellent in many of the the newsagencies for which I have seen sales data – across several states. I am hearing of 60% and 70% sell through already, just a few days into the on sale. In several stores, sales are well ahead of the same period for issue #1. This is great news as there is usually a dip for issue #2 of a launch.
