A blog on issues affecting Australia's newsagents, media and small business generally. More ...

How some retail landlords are misbehaving in dealing with COVID-19 relief requests from tenants

Here is a list of information requested by some retail tenancy landlords, including some shopping centre landlords where tenants have registered for JobKeeper, advised they qualify for JobKeeper and provided retail turnover data (in the usual format supplied to the landlord) showing declines of between 30% and 75%. Landlords have asked for information prior to opening discussions on rent.

Note: the list is not from the one landlord.

  1. Business bank statements for the last 2 years.
  2. Personal bank statements for the last 2 years for all business owners.
  3. Tax returns for the last 2 years, certified by your accountant.
  4. BAS statements for the last 2 years.
  5. A personal assets list for each owner or shareholder for the business.
  6. A full stock listing showing age and value of all stock.
  7. A list of all other businesses you own.
  8. A list of all other retail tenancies you have.
  9. Details of all state and federal government COVID-19 related funding and or grants you have applied for.

In my view, landlords have no right to this information. The CODE OF CONDUCT agreed by the national cabinet is clear. If a business applies and meets the criteria for JobKeeper, their lease falls within the details of the code.

The only data points that matters are comparative revenue. This can be provided in the form that has been used for years with most landlords. Their request for it in a different form is not part of the done. Indeed, I suggest that any such request is outside the good faith  goals of the code.

I think it is critical that retailers advise state and federal politicians when their landlords seek information outside the code, like any of the information on the above list. At the time of advising politicians, I also suggest advising the office of federal small business and family enterprise ombudsman, the shopping centre council of Australia, the treasurer, prime minister, premier / chief minister, local small business commissioner as well as your local council.

Landlords and tenants have clear obligations under the code. From what I am seeing, too many landlords are misbehaving in their requests for information. I doubt this is due to ignorance. I think it is to create a barrier to providing financial relief to tenants. If it continues, more retail businesses will close for good.

6 likes
Ethics

Magazine subscriptions up

Mediaweek is reporting a bump in magazine subscriptions:

Magazine subscriptions surge: isubscribe reports record uplift in sales
This week, magazine subscription retailer isubscribe is reporting a 29% uplift in sales for March 2020 and is on track to achieve an increase of over 50% in April. Those figures are just for print magazine subscriptions.

Digital subscriptions, typically a much smaller proportion of the overall magazine subscription market, have jumped 134% in volume for March and over 400% in volume as at 15th April. Health titles are experiencing the strongest growth, particularly Women’s Health magazine. The brand is still a Pacific Magazines publication given the impasse between Seven and Bauer over the sale of their magazine titles.

“It’s been a strong end to the first quarter and start of the second, due to the dramatic changes in community and consumer behaviour.” said Hunter Drinan (pictured), managing director, isubscribe.

“Together with additional media spend, particularly TV, there’s increased awareness of our products at a time when customers are wanting to keep their minds and bodies engaged, and they want support and inspiration for the projects they haven’t had time for until now.”

The magazine categories experiencing the strongest uplift on isubscribe are home and garden, kids, lifestyle and health and wellbeing magazines.

“We’ve seen a massive 60-150% increase in sales across those categories in April. The stand out performance has been our puzzle magazine category. While starting from a lower base than the major categories, it’s experienced an almost 300% increase in total sales for March and an over 1400% increase to date for April,” said Drinan.

“Working from home and home schooling also means more screen time in the house. People are seeking more traditional, ‘offline’ forms of entertainment such as reading books and magazines, walking or bike riding in the park.

“We’ve actually seen this trend building in recent years, particularly in relation to kids magazines. Big players are coming into the market to create educational, fun magazine products for kids. National Geographic launched National Geographic Kids in 2016 and it’s been the number one title across our business for over two years.”

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magazine subscriptions

Adjustments in WA on lotteries

This announcement from the premier has details:

  • Laws to protect retailers, players and the community during and after COVID-19

  • Temporary powers to enable Lotterywest to provide additional grants and fund other worthy grant programs

  • Prize payout period extended and claims made easier as part of social distancing measures and minimises retailers contact during COVID-19

  • Players to be able claim prizes regardless of travel restrictions, community isolation or due to temporary closure of retail outlets

  • New laws to further support the $159 million community COVID-19 Relief Fund

This information was sent to retailers:

Today, Wednesday 15 April 2020, Premier Mark McGowan announced some temporary changes, giving players more options to claim their prize. This is currently subject to legislative approval.

These changes include temporarily extending the prize claim period on selected valid winning tickets from 12 to 24 months, and also introducing the option for Lotterywest to receive prize claims from players via email, as well as claiming their prizes in-store or via post. You can read the Premier’s full media statement here.

The health and wellbeing of Lotterywest retailers and players is important to us. Due to COVID-19, health guidelines have encouraged cashless payments. We’re making these temporary changes in response to health concerns, and to support those who are not comfortable handling cash.

We’ll send you an email and terminal message confirming all the details once legislation has been approved. We expect this will be in the coming weeks.

3 likes
Lotteries

Why the national cabinet position is not sufficient help for retailers – SME retailers need a 100% rent subsidy for 3 months

While the decision of the national cabinet over a week ago on a mandatory code for retail tenancies of small to medium enterprises is welcome, it gets nowhere near addressing the urgent and dire financial challenges facing many small business retailers.

Having talked with many retailers in a range of channels since the adoption of the code, the biggest challenges are being faced by those in larger centres. Whereas many, not all but many, high street and independent landlords are agreeing deals that are usually considerably better than forecast in the code, shopping centre landlords are slow to negotiate and demonstrating no willingness to go beyond the code.

The code allows for a rent reduction based on the quantum of reduction in revenue. In one business I know of with base rent at $16,000 a month, turnover is down 50%. The code suggests a rent reduction of 50% on the basis of the revenue decline, with half of the reduction being waiver and half being a deferral.

The retailer in my example could expect a waiver of $4,000 a month and a deferral, to be paid later, of $4,000 a month. That is if their landlord is fair in their approach.

The decline hit the retailer from early March. The landlord says the code will not apply until April.

Prior to COVID-19, the business had annual revenue of $1,130,000. It’s average GP% then was 35%. Out of the $395,500 GP it paid $192,000 in rent, $143,000 in wages and $42,000 in overheads, leaving $18,000 in profit – in broad terms.

Revenue is now down 50% and is likely to fall further. In addition to the decline in revenue has been a shift in what shoppers purchase. The average GP% has fallen to 29%.

Here is what an average month looks like. This example does not allow for retail peaks and troughs, like winter. Revenue: $47,500. GP: $13,775. Rent: $8,000. Wages: $5,000 with hours significantly cut. Overheads: $2,800 with all possible cuts made. The business is in the hole for $2,025 a month. However, in the rent number in this example, I have not factored that half of the reduction, $4,000 is deferred, not waived. This makes the hole worse.

The owners are at maximum borrowings. They have no fixed assets against which to borrow.

The question the owners have is – do we continue to trade and lose $2,025 a month plus the $4,000 a month deferral and in six months and be at least $36,150 worse off? … knowing that realistically, the loss will be closer to $80,000 based on the current trajectory.

Talking to the owners their position is the government regulations on social distancing are what have stopped people shopping. They created the situation where our business is now no longer viable. While we support what they have done, they have left us with a financial obligation that we are considering not accepting. We think going into administration now is the best option for us, to not extend our personal exposure.

This scenario is not uncommon. It demonstrates the inadequacy of the SME retail tenancy code of conduct.

I accept it is a complex issue to address. I think that state and federal governments need to immediately agree to themselves fund 100% of occupancy costs, rent, outgoings, marketing, for 3 months from April, with a goal of a better plan being developed prior to the end of June.

That move would keep landlords and retail businesses afloat. The downstream benefit would be cash in the economy, people in jobs, fewer businesses collapsing and, I suspect, lives saved.

Note: this example is not one of my businesses and is not a newsXpress business.

18 likes
Retail tenancy

ACM closes non daily newspapers

ACM has announced that its non daily titles will close for the moment. These titles include: The Mercury, Gloucester Advocate, Lake Mail, Cessnock Advertiser, Singleton Argus, Dungog Chronicle, Muswellbrook Chronicle, Scone Advocate, Hunter Valley News and Newcastle Star.

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Newspapers

Today: free Zoom meeting for all newsagents

I’m hosting a free Zoom meeting today at 10am for any newsagents who want to join in. Let’s talk about business, coronavirus, opportunities, challenges and the future.

Topic: Newsagencies, corona and the future
Time: Apr 15, 2020 10:00 AM Melbourne time.

Join Zoom Meeting
https://zoom.us/j/92683339453?pwd=dHFBRzVPOUp5eDZUNk5HZVVLWDhGdz09

Meeting ID: 926 8333 9453 Password: 978756

Raise any topics you like. Ideally, come along to chat. Wile listeners are welcome, these meetings work well when more contribute.

1 likes
Newsagency management

People looking for Australian product

It is interesting seeing shoppers keen for Australian product. There has been an increase in interest since the coronavirus pandemic kicked off earlier this year. At first, interest was there, but infrequent. Today, it is common, with more customers asking where products are made.

Maybe an outcome of the coronavirus pandemic is that locals get a better understanding of what shopping local means. For that to work, tho9ugh, retailers themselves need to do more local shopping.

0 likes
Social responsibility

Zoom meeting: let’s talk business, corona and the future

I’m hosting a free Zoom meeting tomorrow, Wednesday, at 10am for any newsagents who want to join in. Let’s talk about business, coronavirus, opportunities, challenges and the future.

Here are the details to tap into this discussion:

Topic: Newsagencies, corona and the future
Time: Apr 15, 2020 10:00 AM Melbourne time.

Join Zoom Meeting
https://zoom.us/j/92683339453?pwd=dHFBRzVPOUp5eDZUNk5HZVVLWDhGdz09

Meeting ID: 926 8333 9453
Password: 978756

Raise any topics you like. Ideally, come along to chat. Wile listeners are welcome, these meetings work well when more contribute.

4 likes
newsagency of the future

Some retail landlords are ignoring the national cabinet’s code of conduct

It is disappointing seeing some landlords ignoring the code of conduct agreed by the national cabinet. I have seen information requests from individual landlords and big business landlords asking retail tenants for all manner of information outside what is covered in then national code.

  • One claimed that the tenant was not a small business, even though it clearly is.
  • One asked for accountant certified P&L.
  • Another asked for details of all state and federal support received by the business before they would even enhtertain a discussion.
  • One asked for personal financial details.
  • One asked for the details of every employee and the JobKeeper amount the business would receive by employee.

These are some examples of what landlords are asking for.

The code: NATIONAL CABINET MANDATORY CODE OF CONDUCT – SME COMMERCIAL LEASING PRINCIPLES DURING COVID-19 is very simple. The obligation on tenants and landlords straightforward.

It is frustrating seeing landlords abuse the process by seeking information that is not relevant, not any of their business.

2 likes
Ethics

Overseas magazines advertising for Australian subscribers

Social media feeds of Australians are being flooded with more subscription offers than I have ever seen from overseas publications like Wired, The Economist, The New Yorker and others. The deals for digital as well as home delivered subscriptions are sure to attract sign-ups. They are at prices retailers have no hope of matching.

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magazines

Mediaweek interview

I am grateful to James Manning of Mediaweek for the interview published earlier this week. It was terrific to catch up and talk about the magazine category in our businesses:

Retailer’s message to Bauer: ‘Australians still love magazines’

By James Manning

• What happened to the magazine sector and is there a future?

“Australians love magazines and they want Australian stories represented on their pages.” That is the message from Melbourne newsagent Mark Fletcher when Mediaweek asked him about the sector in Australia. And after Bauer Media closed its New Zealand operation, which Fletcher said stunned not only him, but people he knew in Bauer Media Australia, we asked about Bauer’s future in Australia.

“I don’t think that Bauer is looking to exit Australia, but I say that without any special knowledge.”

If anybody has a good understanding of magazine economics in Australia it should be Fletcher. He publishes a daily newsagency blog, owns three retail newsagencies (two in shopping centres, one on the high street), owns newsXpress, a franchised group with 225 stores, in addition to operating Tower Systems which supplies POS software to 1,700 newsagencies. “I have fingers in a few pies!” Fletcher estimates there are roughly 3,000 retail newsagents in Australia.

Magazines remain important for newsagencies, but not as much as they once were. “Magazine sales have been declining over the longer term,” said Fletcher. “They remain an important part of the business, but newsagents now have other traffic drivers in businesses now.”

When asked if keeping people at home in lockdown may be fast tracking where the sector was heading, Fletcher replied: “Within newsagency channels, a lot of the discussion has been about decisions like some publishers pulling back were possibly on the radar. The coronavirus situation is bringing those things forward. We are seeing similar things in newspapers with regional and suburban titles impacted.

“When advertising revenue dries up the directors [of publishers] have to make a decision at what point do they declare the business non-viable. Any assessment of the current situation indicates we are probably in for 6-12 months of significant economic pain. Are publishers prepared to wait that period of time to see if there is something on the other side?

“My take is that the Bauer family are very pragmatic which is why you haven’t seen the Pacific Magazines transaction completed at this stage.”

Fletcher said he wouldn’t be surprised to see Bauer eventually make moves about rationalising its range in Australia.

Newsagents have been disappointed in the past with the way some publishers engaged with the distribution channel.

“Early on Bauer was engaged and active with newsagents. That faded, but now we are in a situation where they are engaging much better with newsagents in the past 12 months.”

Fletcher thinks newsagents have been doing better with magazine titles in the past 12 months because petrol and convenience stores aren’t as strong as they once were. “We remain a destination for many people because of the depth of range we still have. A typical newsagent still might have 700-800 different titles. A shopper looking for diversity is catered for. At present crossword titles, craft and scrapbooking are all doing really well and growing. Your average newsagent is looking at magazine sales being up probably 10 or 11 per cent year-on-year. That has remained the case for much April and May – if our stores remain open.”

One challenge for the industry could be distribution. Ovato, the business formerly known as PMP and its distribution arm Gordon and Gotch, is facing big challenges with shares trading under two cents as it grapples with reduced printing demand which is its main business.

Fletcher wondered if it is an area that News Corp might move into. “They have the infrastructure to get product out there. Could that be an option for them? The Ovato situation is a hot topic for newsagents because at different points in the cycle Ovato owes newsagents money for returned product.”

Fletcher speculated if there was a withdrawal of the major distributor it could take weeks for a replacement to be ready. “Would that be something to push some magazines over the edge? Some newsagents have also said they would not open their doors if that happened because some rely so much on magazine revenue.”

Overall regional and rural newsagents are in good shape, said Fletcher. So good that he doesn’t expect many will meet the criteria of seeing revenue drop 30% or more to qualify for Job Keeper program.

“High street metro newsagencies aren’t doing too badly either. However it is in shopping centres where things are different. We are seeing declines of 60-80% year-on-year. One of the fallouts will probably be less newsagencies in shopping centres.”

As to reasons why the hunger for magazines has declined, there are several, said Fletcher. “As soon a publishers started putting their top performing titles in supermarkets at checkouts it cut down the browsing of magazine aisles. Browsing was key to people picking up multiple titles. The impulse purchase of magazines is really important.

“The long tail that newsagents provide – a broad range of titles in smaller numbers – is really valuable to our channel. The speciality customer is glued to the business and returns regularly to find their niche titles.”

10 likes
magazines

Terrific email from Lotterywest

Lotterywest retailers received an email from the company that included this:

Your first $10,000 payment
Yesterday you received the first $10,000 monthly payment as part of the COVID-19 Retailer Incentive Package. This amount was credited into your nominated bank account and will be reflected on your Recipient Created Tax Invoice (RCTI) week ending Monday 6 April.

What a terrific start to Easter. Well done Lotterywest.

12 likes
Lotteries

Linfox owned Armaguard misrepresents federal cabinet retail leasing code to pressure small business retailers for a rent deal

The massive Armaguard organisation, owned by Linfox, has written to small business retailers demanding they not pay rent for ATMs they have installed in shopfronts for April through September this year. Here is the first page of a letter they sent:

In my opinion, this letter misrepresents the position of state and federal governments.

The federal cabinet’s retail tenancy code of conduct is for SMEs, small to medium enterprises. Linfox does not qualify.

Further, they offer no justification for their claim, there is no evidence of a slow down of use or traffic. The federal cabinet’s code specifically lays out what is needed to support a claim. For example, a claimant needs to qualify for JobKeeper.

I wonder what Lindsey Fox thinks about this attack from his business on small business newsagents.

7 likes
Ethics

Pacific Magazines takes Bauer Media to court

Mumbrella reports…

Pacific Magazines is taking Bauer Media to court over the $40m acquisition of its business which was given the green light last month.

The takeover was scheduled to be completed on Thursday, with Seven West Media’s magazine arm now seeking support from the courts to ensure the deal goes ahead.

…

In an update to the Australian Securities Exchange (ASX) today, Seven advised it has received an email from Bauer’s solicitors saying: “Bauer is aware of its obligations under the Sale of Business Agreement and, as you
know, has been actively engaged since October 2019 in preparing for completion”.

1 likes
magazines

Details of the national cabinet code on SME commercial leasing

There is now a published code of conduct, agreed by the national cabinet. While the states and territories need to legislate to the requirements, there is nothing stopping retailers taking steps now to negotiate with their landlord.

  1. Click here for a copy of the cabinet agreed mandatory code.
  2. Click here for an ABC news link to the story.
  3. Click here to see a letter from Michaelia Cash Minister for Employment, Skills, Small and Family Business

Key to making your case will be data, proving your situation. It will not be enough to say you are down and that you need help.

There are some retail newsagents today not experiencing any downturn. While some of these may be frustrated that they cannot make a case for a rent break right now, their growth today should be celebrated as many are not in that situation.

Given that the code is directly connected to the Job Keeper program, we need to see the detail of that once federal parliament meets today.

1 likes
Newsagency management

Position reached on retail tenancy

The national cabinet has reached agreement on retail tenancy. This, from the ABC:

Prime Minister Scott Morrison has announced new rental waivers and deferrals for commercial tenants hit by the impact of the coronavirus crisis.

Under the scheme, which was announced after a meeting of the National Cabinet on Tuesday, landlords will have to reduce leases in proportion to the reduction in the tenant’s business.

The waivers will have to account for at least 50 per cent of the reduction in business.

Deferrals — rental payments that will need to be made, but can be put off — must be spread over the remaining time on a lease and for no less than 12 months.

That means that if a tenant had three months remaining on a lease, they would still have at least a year to make any deferred rent payment.

The code will apply to any tenancies where the landlord or tenant applies for JobKeeper and where they have a turnover of $50 million or less, Mr Morrison said.

The arrangements will be overseen by binding mediation and a mandatory code will be rolled out in each state and territory.

Mr Morrison said landlords were legally required to speak with tenants about rental arrangements and if they refused they would “forfeit their way out of the lease”.

Click on the link for more on this story.

3 likes
retail leases

Tabcorp stands down 700 people

In an announcement to the ASX this morning, Tabcorp announced it was standing down 700 employees.

The temporary standing down of over 700 Tabcorp employees to 30 June 2020 in businesses of the Group where there is no work as a result of COVID-19 shutdowns. Our focus is on retaining jobs for the long term. During the temporary stand down period, affected employees can access their accrued leave benefits and are expected to resume work when business activity returns to normal levels.

Tabcorp is currently exploring its eligibility for the Federal Government’s Job Keeper Wage Subsidy.

3 likes
Lotteries

Ovato offers little help to small business newsagents in dealing with the AFL trading card problem

Ovato is being inflexible in helping newsagents deal with the supply of AFL trading cards. here is the company’s position:

Team Zone AFL Cards – 85864/210

O/S March 14th

Initial allocation based on 80% of 2019 sale & small agents full carton or below got full supply larger agents received on average just 35% of total supply

Current sales in newsagents are 15% of initial supply after 10 days on-sale and sales are tracking -10% YoY

Returns policy as previous years. Agents need to phone / e-mail the contact centre to confirm how much stock is wanted to be returned. Publisher will send Aus Post return label to agent. Once agent confirms returns have been sent credit is given.

 

Select AFL Cards – 15035/70

O/S March 2nd

Initial distribution was 60% of final sales in 2019.

Current sales in newsagents are 30% of initial supply after 3 weeks on-sale and sales are tracking -10% YoY

Returns policy: Stock can be returned for credit but is full copy return.

For those outside of newsagency businesses – this is stock newsagents did not order. They are forced to carry the financial burden off dealing with this. This is unfair given that there is no reasonable process in place for newsagents to mitigate their financial costs for this product.

The Ovato approach places an unfair burden on small business newsagents.

4 likes
Ethics

Is Ovato imposing an unfair financial burden on small business newsagents because of COVID-19 impact on magazine distribution?

This is a serious question: Is magazine distributor Ovato hitting small business newsagents with an unexpected cost as a result of an impact on its operations due to COOVID-19?

Many newsagents have reported an unexpectedly high magazine charge. For some, the charge is higher than their cashflow supports, they will be unable to pay the bill.

So, I dug deeper. I have found examples of Ovato increasing supply of titles beyond what is reasonable over the last two months, even longer this year. In one instance, for Reader’s Digest, based on a 25% return rate, Ovato increased supply 37.5%. Then, another 10% and a month later another 16.5%. There is no justification whatsoever in the sales data from the store for any increase.

It’s not just Reader’s Digest. There are other titles too.

Ovato has, as I understand it, a requirement in some magazine publisher contracts that they distribute all of what they receive. If my understanding is right and this clause has not been set aside in the current situation, the closure of most transit location retailers will have increased the volume of inventory that Ovato must place elsewhere, thereby increasing the cashflow obligation on newsagents.

Ovato management need to explain how they are dealing with the shutdown of around 25% of their usual mix of retail outlets. They need to ensure that their allocation systems do not unreasonably increasing supply to newsagents. The evidence suggests otherwise though. If this has been the case, they need to fix it right away. If I am wrong, they need to explain why supply increases where the return rate is 25% or more.

I really thought we were behind the problems of serious magazine oversupply. Research over the last week indicates otherwise. I’d be glad to be proven wrong.

If you are a magazine publisher, look at your contract with Ovato, see whether you require them to distribute everything. If it does, propose that this requirement is set aside for the next six months.

Given the data flow from newsagents, there is no need for oversupply. Indeed, any oversupply ought be considered neglect, a cash grab,. And given the parlous state of Ovato, that is the last thing newsagents need to be exposed to right now.

Here is how we are responding to oversupply to my own newsagencies: we have reverted to weekly tight culls of magazine supply, cutting back to what we know we will sell plus a small buffer to allow of the current unique situation where some magazine categories are in growth.

The oversupply has caused us to invest more time on magazine supply and to be ruthless to protect our business.

14 likes
magazine distribution

Zoom meetings keep small business newsagents connected during COVID-19 challenges

For a month now newsXpress has been helping its member community connect with regular Zoom, video conference, meetings. For the last three weeks, these have been daily @ 2pm Monday to Friday with a morning meeting as well on some days and a weekend meeting some Sundar afternoons. A tradition has developed on Fridays with suppliers joining in the meeting.

Conversation is free flowing, with plenty of topics covered. No topics are off the table. People share their stories, how business is going, what is working, what is not working. The meetings often consider issues of collective interest.

newsXpress was on to the landlord challenge close to two months ago so there has been plenty to talk in the Zoom meetings about in terms of how different landlords have responded to the various newsXpress strategies proposed. newsXpress was also onto the jigsaw opportunity early, back in February, and this, too, has been part of the Zoom discussion.

The most significant value of the Zoom meetings has been the opportunity to experience that as a business owner you are not alone in confronting COVID-19, that your fears are fears others share, that there can be comfort from an openly shared experience.

Each Zoom meeting has between 35 and 40 people engaged live with more than 100 watching the recording overnight.

newsXpress also sends a daily email, usually by 7am, with updates on any issues covered in the Zoom meeting the day before as well as news that relates to our channel, links to relevant government resources and details of relevant supplier opportunities.

There have been plenty of stories in the media this week about Zoom meeting fails. These newsXpress meetings have been wonderful and very much appropriate to the times.

Our next one is tomorrow, Sunday, at 3pm. I’ve cast as a more relaxed meeting, with wine (or beer or a cocktail) in hand. Then, on Monday at 2pm, we’re back to weekday business.

Now more than ever we in small business retail need to be connected to each other as we can learn from each other and support each other. That is central to the newsXpress use of Zoom for daily member meetings. Oh, and if you think you don’t have time, people have the meeting on their computer while they get other work done, each lunch or take calls. Multitasking is applauded.

Footnote: I am a director of newsXpress.

12 likes
Newsagency marketing group
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