The Wall Street Journal reports on circulation numbers to for released this week. The numbers continue bad news for US newspaper publishers and therefore the supply chain.

While the fall is concerning it is not unexpected. One only has to look at clean circulation and readership data from the last 10 years. (I say clean because clean data from US publishers is challenging to find.)

I reckon that here in Australia we’re between two and four years behind the US in terms of the impact of online, wireless and the collapse of the 18 – 34 newspaper market. Some of our major newspapers are reporting what is (relatively) considerable growth in a tough marketplace. Consumer patterns are different here as is the newspaper supply chain. Another reason for slower impact here is the newsagent retail network. The US and Europe have nothing like it.

So, we’re behind in the in the fall in newspaper circulation. That will change. If we are smart we will use being behind to our advantage. We, publishers and newsagents, will work out nuts off co-operatively to win every customer we can – based on the product and not these crazy competitions and giveaways – publishers will resist putting their product everywhere and therefore encourage greater support from newsagents.

We have a window of opportunity – ever the optimist – and we should seize that every day. What we do over the next six months will be crucial.

The falling circulation numbers in the US will divert more advertising away and bring publishers and their distribution network closer to the tipping point at which they will quickly contract/retreat. We should learn from their experiences and see the danger before it is too late.

Here is a list of Australia Post branded product. Much of this has been added recently.

Gel Wrist Rest Mouse Pad

Scrolling Mouse

Optical Mouse

Internet Keyboard

CD-R Pack 10

CD-R Spindle – Pack 25

Diskettes

DVD-R

Supplies DVD-R

A4 Copy Paper

Facsimile Rolls

CD wallet

I’ve left off envelopes, pads and postage related product.

One wonders how far this Post branding will go and what the commercial arrangements are. The Australian Government Competitive Neutrality Complaints Office is charged with ensuring that Government ownership is not abused by any government commercial enterprise. I’d suggest that Australia Post putting their monopoly postal service brand on stationery is an abuse of government ownership.

This story is about threats to Australia Post jobs because of reported downgrading of regional mail centres.

The story not running in the press is the jobs which will be lost in independently owned small business as the government owned Australia Post competes more aggressively and takes more business from newsagents and others.

Newsagents have been struggling in partnership with Network Services for two years in the development of a magazine subscription distribution service.

Poor IT links between Network and Newsagents is costing newsagencies like mine more than $800 a month in product sorting costs, thereby eliminating profit from the venture.

Newsagents have been a late entry into this space, Australia Post having dominated magazine subscription delivery for decades. The Australia Post advantage is control of the network from warehouse to letterbox which in turn allows it to impose more discipline on publishers.

Newsagents, at the end of the food chain in their fledgling partnership with Network Services are making too little from a technically and (currently) organisationally challenged service.

Newsagents want the distribution program to work since it connects well with their magazine retail business and keeps them in the supply chain loop so to speak.

My sense is that unless there are major infrastructure improvements from the network end in the next three months the service will fail and subscription deliveries will be lost to newsagents.

Paragraphs 14 through 16 of Division 1 or Part 2 of the Australian Postal Corporation Act 1989 document the functions of The Australian Postal Corporation, better known as Australia Post:

14 Functions—the principal function
The principal function of Australia Post is to supply postal services
within Australia and between Australia and places outside Australia.

15 Functions—subsidiary function
A subsidiary function of Australia Post is to carry on, outside Australia, any business or activity relating to postal services.

16 Functions—incidental businesses and activities
(1) The functions of Australia Post include the carrying on, within or
outside Australia, of any business or activity that is incidental to:
(a) the supplying of postal services under section 14; or
(b) the carrying on of any business or activity under section 15.
(2) Without limiting subsection (1), the functions of Australia Post
include the carrying on, within or outside Australia, of any
business or activity that is capable of being conveniently carried
on:
(a) by the use of resources that are not immediately required in
carrying out Australia Post’s principal or subsidiary function;
or
(b) in the course of:
(i) supplying postal services under section 14; or
(ii) carrying on any business or activity under section 15.

I am curious how Australia Post’s aggressive move into the retailing of office products, greeting cards, telco recharge, Western Union money transfer and bill payment fits into the functions provided for under the Act. The only means I can see is if they are using resources “not immediately required in carrying out Australia Post’s principal or subsidiary function”.

This is a Corporation created by the Government to regulate the manufacture, distribution and retail of postal services. Selling office products is not incidental to the provision of postal services. Nor the sale of greeting cards etc. Not by any reasonable definition of incidental.

The recent move by Australia Post to licence its brand name for use or to have manufactured goods under its brand name is even further from being incidental to the provision of postal services.

I am no lawyer but it seems to me that Australia Post is operating considerably outside the provisions of the Act. It is doing this to the detriment of, primarily, independently owned small businesses.

I would like to see a public inquiry into Australia Post and all of its non postal service operations. Australia Post needs to be accountable for the extent of its commercial dealings as does the government which has overseen its massive corporatisation and expansion.

In writing about Australia Post I run the risk of alienating the many newsagents who operate Licenced Post Offices. I have no quarrel with them since they run broader businesses of which their Post Office counter is part. No, my quarrel is the Australia Post corporate stores and their direct competition with retail newsagencies like mine at Forest Hill in Victoria.

etravelblackboard is reporting that (former government owned) Qantas owned Jetstar airlines and Government owned Australia Post are seeking to gain approval for Australia Post to sell Jetstar tickets.

While this story does not directly relate to newsagents it demonstrates the development of Australia Post well beyond the brief it was created to serve. When will the government realise how conflicted they in owning this retail and commercial giant? How many small businesses have to suffer before the government reins in Australia Post and directs management to re-read the Act?

I appreciate that many newsagents run Licenced Post Offices. I have no quarrel with them. My quarrel is with the 863 government owned retail outlets.

Here are the opening paragraphs of the story at etravelblackboard:

AFTA has revealed Australia Post has requested to be exempt from licensing regimes in Australia, including TCF membership, to allow the sale of Jetstar domestic tickets from its corporate outlets (Post Offices) and licensed post offices (Post Shops) and has urged travel agents across Australia to take action against the proposal immediately.

A letter sent to AFTA by the Department of Justice (Consumer Affairs) in Victoria acting on behalf of the Standing Committee of Consumer Affairs (SCOCA) advised the request from Australia Post for the proposed arrangement with Jetstar, and subsequently SCOCA is now investigating whether an exemption was consistent with national competition policy and the objectives of the present regulatory regime.

Australia Post in conjunction with Jetstar has proposed a service for booking and payment in real time, and if any exemption is granted, it would also be open to travel agents selling on the same basis. It is also further envisaged that any exemptions offered would also be extended to other airlines where the same arrangements are in place according to AFTA.

Here’s some data from a study I am doing across 120 newsagencies, looking at sales of each product category on each day of the week. These numbers reflect basket penetration for the day.

The strength of Sundays for newspapers compared to other days is a surprise and a danger for newsagents when you consider that in most cases 60% of newspapers are sold alone.

The risk to the channel of loss of newspapers is huge. Newsagents need to reduce single item sales of newspapers but to do this they need publishers to allow old rules to be set aside.

The Age on Saturday carried a piece, Newspapers’ dog days – getting on with online. The article provides a good summary of the situation and provides context for newsroom cuts. I’d like to see consideration of implications for the supply chain. Newsagents rely on newspaper traffic for consumer relevance. A fall in newspaper sales puts that at risk. Indeed, coupled with a fall in lottery sales (as they move online) newsagents need to reinvest elsewhere to create a strong future. So, it’s not just newsrooms, the impact of the shift of advertising from print to online will affect many businesses and employees.

So, Amazon has announced plans to sell books by the page. Interesting. What next? Magazine articles and not the whole magazine? Newspaper articles for sale and not the whole product? I wonder. I could spend $5.00 on all Julia Roberts stories or a few cents on a good fad diet story in a particular title. The move by Amazon will have repercussions for all publishers, not just book publishers – as analysts have considered the move today.

If Amazon can stop us thinking of a book and start thinking of a page why not the same for magazines and newspapers? There is a middleman business opportunity here.

It will happen.

Hmmm, the newspaper, magazine and book supply chain just got turned on its head. Interesting times. Challenging for retailers. That’s okay though because out of this will emerge new models and that’s part of the fun of business.

I have a fax from The Age advising of a trial whereby they are promoting The Age to cafe owners for reading copies of the newspaper for their patrons. I have a couple of problems with this: it will convert some existing full price newsagent customers into discount customers (with newsagents making 33% less on the transaction); and, it will lose some sales since customers purchase a newspaper to browse in a cafe.

I appreciate that Fairfax needs to experiment in an effort to boost readership but to do so without consultation with its distribution partners (newsagents) and to the detriment of its existing retail partners is, in my view , poor form.

Fairfax continues to ignore excellent opportunities for increasing sales in newsagencies. Better posters; traffic area product displays; reward for sales growth and removing retail newsagent rules would each do more for sales and readership than this cafe campaign.

Here’s the impact of tomorrow’s lottery superdraw on sales as at 5pm today. What is usually a blended balance of business cross newspapers. Lotteries, magazines and greeting cards, we’re significantly skewed in lottery sales. That’s good! However, it demonstrates the risk to the retail network if lottery sales move online. We need this traffic and these boosts to drive sales elsewhere.

The sales kick last week as a result of Princess Mary covers on all three major Women’s magazines ended up being between 5% and 30% depending on the newsagency demographic. We found Mary works well as an upsell product. Ask and enough people take the bait and purchase.

This from an Oct. 31 Senate Estimates Committee Hearing where they were discussing the Australia Post advertising of franchising opportunities:

Mr McCloskey—We have had a number of trials under way—pilots—for a number of years now and we have concluded that really that the franchise model as an additional, complementary model to the other parts of our network—we have a corporate network and we have a licensed network. We have come to the conclusion that where Post shops are concerned there is benefit to be had in having a niche within our network of franchised outlets that allow us to control the offer, control the presentation, and it would operate quite differently to the existing licensed part of the network.

By control the offer I suspect that they are talking about Post branded product. Am I alone on this? It seems ludicrous to me that what was established as a national postal service is now another Coles Myer: buying product in huge volume, taking a percentage and passing it on to the retail network for sale as Post branded. 4,000+ outlets selling their branded product in direct competition with independent small business and a raft of big businesses. The government has no role owning a business like this. Especially since they are doing it all under the guise of an essential service like postage.

This isn’t about postage folks!

Maybe the government should establish another airline or another telco or a network of pharmacies or a supermarket chain? What is happening is ridiculous.

The full transcript is here.

The government owned Australia Post increased its dividend this year to its sole shareholder from 60% of profits to 75%. This increase came about after a request from the government ministers. The details can be found in this transcript of the Environment, Communications, Information technology and the Arts Legislation Committee.

It would take more resources than I have but one could determine the amount of this profit earned at the cost to small businesses where Australia Post directly competes for stationery, greeting card and other business.