We were offered some product from China, really cheap stuff. Some items a little off the usual newsagency range. and others a good fit. After months of saying no we took the plunge. In just two weeks we have all but sold out. With a GP of 80% and a sell out in two weeks it makes one wonder about whether worrying whether products fit my view of a newsagency matters. Of course, the temptation is to take the China product drug again and again after that. But where does one stop? I suspect when it is too late. My feeling is that I will resist the temptation to turn my newsagency in to a $2 shop and use this imported product at selected times in the year to lure new customers and reward regulars with a good deal.

Many newsagents would not agree with me. They are pursuing more and more cheap product from China. This dilutes what newsagencies are and devalues the network.

If too many front their shops with cheap product from China we will nose interest to suppliers as the premium channel we are today for greeting cards, magazines, newspapers and lotteries. Suppliers like us for our focus and an addiction to cheap imported product puts that at risk.

When asked, Tattersalls says that pursuing online lotteries sales is not a key focus. They tell their Accredited Representatives that their bricks and mortar network is their key focus. This email from Tattersalls last week to registered online players suggests otherwise. It illustrates their preference for promoting online purchase over the local Tattersall’s Outlet.

I accept that Tattersalls needs to promote the purchase model which best suits their share price. I would prefer more open disclosure to their outlets so that they, too, may plan their business development accordingly.

Consider this for a business practice. A magazine title is distributed to newsagents and copies not sold are returned for a credit. Some weeks or months later, the same copies which were returned (or new copies printed) are reissued, even if the sales of the original issue were low. This happens regularly to newsagents. Occasionally sales are such that a reissue is warranted. Usually this is not the case. Reissue titles cost newsagents cash, real-estate and time. They are another barrier to newsagents spending time on the growth titles in their businesses. I saw an example of a reissue today where the newsagents initially received 20 of a title and returned 15. Now, a few months later, the same issue is back with 25 copies. Where is the logic in that?

Our online classified start up, Find It, has been attracting strong interest from newsagents with many already agreements in advance of our launch later this year. Many more have booked for launch events commencing next week. Newsagents are important to our business model as we see an opportunity to leverage their footprint to extend the reach of an online business.

Two or three of the 100+ calls from newsagents have concerned me. They say that every supplier is out to rip them off at some point so we must be no different. Our pitch is that they can become a Find It newsagent for no cost and they can opt out at any time. They see this easy approach as demanding a catch. While this response is in the minority, I had not expected it at all. One person I spoke with today says they prefer the sale or return over supply under supply tough trading terms approach of a magazine distributor because it’s what they have grown up with. They worry about Find It because “you want me to take initiative, at least with magazines I just put them there and if they sell they sell”.

While I am confident that Find It will deliver to newsagents new traffic and new revenue from a unique online classifieds model, the launch process is uncovering some newsagents who have lost the enthusiasm for building a business.

I own Tower Systems, software provider to over 1,300 newsagents. I also own one of those newsagencies. For more than 20 years my company, and other major IT companies in the industry, have been consulted about newspaper delivery fee changes well in advance of any change – to ensure newsagents can cope with the change. For the first time in almost 20 years Fairfax has released new delivery fees without consultation. The new fee structure operates outside the agreed IT standards. Either the software companies have to change their software to accommodate the Fairfax surprise or newsagents have to significantly bend their systems to cope. However, by bending their systems it means they use the system in a way that other data flowing from those systems back to Fairfax is unusable.

We are changing our software and providing an update without cost to our newsagent clients. We have taken developers off other work to do this. The total cost to us will be between $5,000 and $10,000. Given the lack of contact from Fairfax on this I see no point in asking for a contribution toward the expense they have imposed upon us.

The Australian Newsagents’ Federation announced the Fairfax delivery fee changes as they were involved in consultation about the matter for some time prior. It is a pity that they, too, did not consider that any newspaper home delivery fee change needs to work with well established IT standards.

If this were a change being imposed by Fairfax on a major trading partner then Fairfax would have approached the matter differently. It is disappointing that Fairfax and the ANF have been ignorant of the operational needs of newsagents.

It is worth noting that the folks at News are well organised when it comes to interfacing with newsagent software systems. Just a few months ago they took us into their confidence on changes before they were announced to ensure that existing systems work. This is how such changes should be handled.

Tattersalls is a regular advertiser on the Herald Sun website. If you click on the Tattersalls ad you are taken to their lotteries online service. Newspapers and lotteries are by far the biggest traffic generators for newsagents and newsagents have returned the favour with more than 100 years of faithful low cost service. Tattersalls grew in Victoria on the back of newspaper driven traffic to newsagencies. Newspapers are repeating history in redirecting offline lottery sales to the Tattersalls online business.

Gordon and Gotch has surprised many newsagents with a letter this week advising that they need to pay Gotch by the 20th of the month.

Historically, Gotch has been flexible when it comes to payment, acknowledging the challenges of cash flow for newsagents who have to pay for all stock received even though often half or more received and paid for by newsagents does not sell and is sent back the next month for a credit. Newsagents have been grateful for this consideration.

The letter from Gotch this week represents a change to the terms implied by Gotch’s own trading practices. Many newsagents will see this as an attempt to alter accepted business terms.

When you remove the popular Pacific Magazine titles (New Idea, That’s Life, Famous and Better Homes and Gardens) delivered by Gotch, the Gotch returns rate jumps to above 60%. We know from the magazine cash flow research that Gotch supplied (non Pacific Magazines) product is cash flow negative in 50% of newsagencies. Given this, it is unreasonable that Gotch takes away payment flexibility it has offered newsagents for years since it would force newsagents to pay for product they will loose money on.

At least Gotch ought to have approached the change to terms with greater sensitivity and at best they should not change their practices.

Newsagents make 25% from magazines. They lose around 3% in theft, 11% in wages and between 8% and 11% in rent. The numbers do not add up. This is why the pain of any change in trading terms will be significant.

Several newsagents have commenced a trial this week selling Sports Acumen betting account recharge. Sports Acumen is an ACT licenced betting agency offering Fixed Odds and Spread Betting markets for Aussie Rules, Rugby Union, Premier League Soccer, Horse Racing, American Football, Baseball, Basketball, Boxing, Cricket and more. Newsagents facilitate account top up. They are not actually involved in providing betting services. They are a natural retail partner for Sports Acumen because of their traffic and well established lottery connection. Newsagents attempted to get involved in this space in 2004 with Betcard and have been looking for a new partner ever since that fell apart. With Australia Post involved with the soon to launch Betfair, newsagents are expected to embrace Sports Acumen once the trial is over.

The call from the police Saturday morning was a reminder of the hidden cost of the current magazine supply model. The police had executed a search warrant at the home of a suspect and, along the way, found around $800 worth of magazines – around half from my shop going back over the last year. The frustration is that the titles were outside the top 200. Magazine distributors scale out based on return data and not over the counter sales. This means that the theft will be seen by my suppliers as sales and most likely have lead to increased supply.

Managing theft of magazines in a newsagency is challenging since electronic tagging costs between 10 and 15 cents per copy and is labour intensive to implement. We know we lose around $200 a week. It’s a cost of business. My frustration is the knock on effects.

Having just done over newsagents by slashing commission on recharge product down to 5% (while maintaining Coles at 16%), I’ve heard that Vodafone is preparing an offer for newsagents based around SIM card sale. If what I have heard is right, they will be offering above average commission and other benefits in return for premium counter space. The only way Vodafone can fix the problem they have created with newsagents is to lift commission to something close to what they pay Coles.

Tattersalls mystery shops its outlets and provides feedback on each visit. In the latest feedback we’ve slipped behind our previously average position. The measurement points include: whether the employee serving has a uniform; whether they wear a name badge; whether an up sell is offered; whether they ask if you have a Tatts card. There are plenty more. It is a good process and keeps business owners focused on making sure these things are covered.

In the same period as this last mystery shop we increased our Tattersalls sales by 17%. The Tattersalls rating is based on one visit while our sales growth is over the whole period. Without wanting to dismiss the Tattersalls rating approach, I’d prefer the sales success we have achieved even it means we’re below average on the rating.

Some in Tattersalls would have me believe that my poor rating means I am not a good representative. Smarter ones would say, ignore the ratings, 17% growth is well above average. Keep doing what you are doing.

Asking customers about an up sell is not that important for every sale – employees need the flexibility to be spontaneous. Just go to a Coles petrol outlet and see what happens when you are forced to offer cheap candy to every customer. It’s reverse evolution in action. Humans have become monkeys.