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

Landlords continue to change traditional newsagency businesses

Every week I hear from a different landlord (or two, or three)pitching a tenancy, or tenancies, if their centre that would be ideal for a traditional newsagency. When I ask what they think a traditional newsagency sells they almost always say: papers, magazines, lotteries, cigarettes and lollies. Pushed, they will add cards and phone recharge.

Some say they would not permit a newsagency to sell gifts while others say yes to gifts but no to homewares or toys.

Landlords of shopping centres are a problem for our channel. They are living in the dark ages.

These shopping centre landlords do not want newsagencies of 2019 and beyond. No, they want convenience stores offering categories that we either have left behind or managed to a small footprint as we chase new traffic and higher overall GP%. Which is okay. There is a place for those businesses, the businesses that offer papers, magazines, lotteries, cigarettes and lollies as their core.

So, in addition to Australia having more retail space per capital than most other countries and our retail space priced higher than most others, we also have to content with landlords who guide retailers to setup businesses that are focussed on the past more than on the future.

They get people agreeing to this. I heard from someone last week who had just signed a lease for a new 30-shop centre being built in regional Australia, in an economically affluent area. They had agreed to a 150 sq m newsagency that would sell papers, magazines, lotteries, cigarettes and lollies. Oh, and cards and small gifts (under $20).  This would be their first retail business and they wanted help to create it. They thought they were on a winner, based on projections from the landlord.

I suggested they get the projections in writing and ask the landlord for people to speak to, to guide the creation of the business. The landlord refused, saying the projections were guidance only and not  to be relied on. In talking abut how they planned full the shop they figured it as 33% magazines, 20% cards, 25% lotteries and the rest in convenience products and management.

I asked they has created a cashflow projection model for the business. They had not. They referred back to the landlord projection on  how good a newsagency would be.

And landlords wonder why some traditional newsagency businesses go broke.

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Ethics

AFL Footy record a profitable business

Mediaweek yesterday had the story about the results of Pacific Star Network, the sports radio and media business with Craig Hutchison as CEO.

Pacific Star Network reports Crocmedia financials for 2018-19

FY19 revenue of $67.0 million was up 140% and underlying EBITDA of $9.0 million (guidance: $8.75-9.25 million) was up 208% on the prior corresponding period (pcp), respectively.

In the story is a report abut the purchase of the AFL Record business from the AFL.

In July 2018, PNW’s wholly owned subsidiary Crocmedia signed an agreement with the AFL to acquire the AFL Publishing business. The business is responsible for numerous football related publications, including the iconic AFL Record publication, which has been the official match program for more than 100 years.

The AFL Publications business had a purchase price of $8.1 million comprising $5.850 million cash less working capital adjustments of $0.244 million and $2.250 million prepaid advertising to be retained by the AFL. The AFL Record performance was in line with expectations, with revenue of $6.846 million and net profit after tax at $2.269 million.

That is a net profit  33.14%, an extraordinary result.

Now, while most of these publications are not sold in newsagencies, the report does indicate the value that can be achieve from a niche publication with an efficient distribution network.

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magazines

Update on our pre-order pitch in the newsagency

Two weeks ago I wrote briefly about a pre-order pitch we are making. What I did not say is that we were primarily pitching online. Well, today, two weeks on, we have banked more than $9,000 in revenue – for stock the will not arrive for another four weeks.

What makes the experience even more valuable is knowing in advance of stock arriving what the hot sellers will be, what we can feature knowing it will sell two, three and four times faster than other products in the model line. This is invaluable.

The success I am talking about here is from one store, with a niche product category that is also pitched in majors. What we have done is leverage the opportunity in a more flexible way that you won’t see in the majors as operationally it is too challenging for them.

Our spend on advertising so far  – $0.00. We have leveraged an email database that we have built up of people interested in this product category as well as a specialty Facebook page created for the category – again, without spending anything on advertising.

My core point is that success is out there for the taking, not too far away from our shingle, as long as we are opportunistic, back ourselves and are creative at reaching possible shoppers.

What we are doing is not that unique, it is certainly not the first time preorders have been offered in this niche. What is different is that wee started planning a year out, building the email database, growing the social media community and creating a backend engagement approach that enables us to make the most of the pre-sell opportunity.

The reality is that we build an infrastructure like a big business would build, but on a small small business budget of $0 spend.

Retail has fundamentally changed as has businesses under the newsagency shingle as well as suppliers who supply the channel. Further, change is far from done. This is why we have to keep innovating, to play a good game on a moving pitch in rough weather.

It is at the fringes where we have opportunities to make good money.

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Newsagency management

The borders between retail channels are fuzzier than ever

The days of staying in your lane for specialty retailers is long over. Look at almost any specialty retailer and they earn from products outside the specialisation reflected in their single.

I was reminded of this recently when at a large bookshop. They had this massive wall of socks.

I don’t see a connection between books and socks except that people who read books also wear socks. It turns out the wall became free as a result of remodelling and they wanted a single category solution for the wall. Socks happened to fit. I am told the results have been terrific.

The sock wall i9n this awesome book shop was a reminder to not be constrained by the obligations of the shingle.

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Newsagency management

Magazine sales trials boost sales

It is terrific seeing magazine publishers trying different approaches to boost sales.  I am aware of five different title-specific trials being run right now in selected newsagencies. Each is designed to achieve incremental purchases of the target title in the participating store. Each trial is being run in between 5 and 10 newsagencies.

I like the trials as they will provide experience and data soon which decisions can be made. I also like that the trans are different to what we have seen in the past for magazine promotions.

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magazines

ATO warns small businesses on sales suppression software

The ABC has reported the ATO is clamping down on small businesses using sales suppression software to minimise tax.

Ms Jenkins said the ATO was also cracking down on the use of sales suppression software that disguised the transactions within a company’s records.

“There is some really sophisticated software out there that is helping people avoid paying the right amount of tax.

“But whether it is cashless payments or whether it is the use of platforms or apps, it means there is really a trace of your transactions.

“We use merchant data and other sources of information to identify where things just don’t look right. Then we go and have a chat to them and say, ‘Hey, can you explain?’

In the mid 1990s there was sales suppression scam operating in the newsagency channel. I became aware of it because my newsagency software company lost businesses because we refused to offer such a facility.

There was a software program into which the retailer could enter a code and then an amount of cash they wanted to take out of the business unreported. A second set of records was maintained for the ATO and another records for the business owner.

I know because the software was demonstrated to me several times, by someone who had worked for the software company that created the software. They had approached me. I did some more checking with newsagents and discovered the facility in the software was being used.

The matter was reported to the ATO. At their then Box Hill office in Victoria they assembled a task force including representatives from the ATO, Federal Police, Federal Attorney General office. Victorian State Revenue and Victorian Attorney General office. Several of us with knowledge were brought in for a demonstration of the software. There were several follow up meetings with the ATO in Sydney.

Eventually, my software company stopped losing sales because we did not have the tax avoidance facility in our software.

Any retailer deliberately and systematically underreporting their income to avoid tax deserves what they get from the ATO and from any suppliers they impact through their actions.

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Ethics

Nine (Fairfax) disrespects newsagents in latest newspaper pricing move

Nine (Fairfax) has announced a 20 cent (6%) cover price increase for The Sydney Morning Herald yet only a 1 cent, or 1.6% increase in margin for the retailer. In my opinion, this further downgrade of margin for newsagents is disrespectful and offers retail newsagents encouragement to ditch the product category.

Here is the detail of what Nine has announced.

This move offers newsagents an appalling return on the space, labour and capital required to support the sale of newspapers in a newsagency.

I wonder if it is more evidence of a theory that the publishers want to move more retail of their product from newsagents to convenience stores, like 7-Eleven, supermarkets and petrol outlets.

Look at a general retailer. They will get 31.5 cents from a $3.40 item sold. That is 9.26%, down from 9.68% on the current price.

The massive Nine corporation is showing what it thinks of small business newsagents in this move.

What Nine is doing here, in my opinion, is like the federal government move to cut penalty rates. It is shameful, disrespectful and preys on the weak and vulnerable.

The question newsagents have to ask is: Is it worth stocking Fairfax titles or newspapers more broadly? The trajectory of margin is clear. The latest decline in real terms continues the trend.

How much longer will newsagents put up with being screwed over like this? I mean, seriously, how much longer?

Print newspapers, especially dailies, are dying. There is no upside. Newspaper publishers are managing their exit and they are doing this in a way that best suits them. Hence, these moves that disrespect newsagents.

I think the days for accepting their motherhood statements that newsagents are important them are over. If newspaper publishers thought newsagents were important to them they would actually respect them. They are doing the opposite – making more money for themselves while at the same time less for newsagents.

So, the product is dying. It is what it is. I think newsagents need to, for themselves, decide when they will exit the category. They can decide this on their terms, with their timing.

For me, this Nine announcement encourages the decision to quit the category.

Nine will say the papers are losing money and they cannot give newsagents more. Who cares? Not me. I am a newsagent providing a service. Show me some respect or get out.

Oh, and what makes it worse is that newsagents have to pay for shrinkage. One paper stolen will take the sale of nine papers to cover that cost. I suspect supermarkets don’t pay for stolen papers. I suspect they pay only for scanned sales. I say this because I understand some are on this model for magazines.

Footnote: click on the image for a larger version.

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Ethics

Why some bank manager’s don’t understand the value of a newsagency business

The views of bank managers are given too much attention in my view. However, sadly, they are the gatekeepers to business funding. So, they are listened too.

A bank manager recently said to someone why would you buy a newsagency, they are going nowhere. It was a generalisation, not based on any business financials, not considering the transition already achieved in a business. It was ignorant and unhelpful.

Why would you ever listen to a bank manager. They are idiots. Yes, another generalisation, which is equally unhelpful.

The challenge for our channel is that banks have models that are out of date, models based on an assumption that all newsagency businesses are the same – when they are not.

The value of a business flows from its P&L, the business plan and the track record of those seeking the loan. The historic performance of the channel is not relevant today. 

I know of newsagents achieving excellent growth. Most would not identify as newsagents but they have enough elements of a newsagency for them to fall under that retail channel category. While the growth is coming from non traditional categories, it is sustaining legacy aspects of the business, keeping services and products represented in regional and rural locations.

This is why the out of date modelling by the banks as represented by their managers is unhelpful for the transformation many of us in our channel are passing through.

Bankers should understand this as they are transforming their model too. That is why the quote at the start of this post is frustrating. It is ignorant and harmful to all in our channel.

If a bank manager says there is no future in a newsagency consider saying: I agree, there is no future in the traditional newsagency you might be thinking of. But, hey, that type of business has not been our model for years. Yeah, we left it behind and embraced something with new categories, new traffic drivers, better margins and lower operating costs. That’s why your banker model of a newsagency does not apply to our business.

Newsagents who are looking to sell their business should lean into this line of thinking. They should be on the front foot, addressing this issue before it is brought to them.

Bankers are frustrating. I remember a time when their opinions were based on what they saw and who they met outside their office. Today, their opinions are fed from out of date business modelling that is certainly not relevant to what may newsagencies are.

Footnote: in the headline I say some because there are some bank managers who think for themselves. They are a rare breed that we should cherish should we be lucky to find them.

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buying a newsagency

Why a newsagency can be a good business to buy

I am often asked if a newsagency is a good type of business to buy.

Any newsagency is a good business to buy to the right purchaser, the person most suited for that business.

The answer really does come back to the purchaser because they may have skills ideal for a specific business. Equally, they may lack skills essential to a particular business – making them not the right purchaser.

Its also depends on the specific situation of the businesses and the opportunities for it.

The question demands a thoughtful answer and the answer will depend on who is asking, their skills, their resources, their experience, their fitness, their desire and their hopes and plans for the future.

While the business they are asking about is important, I see the answer as relying more on the person themselves. This is why I say any newsagency can be a good business to buy and often is.

I have a lot of confidence in the channel even though what the channel stood for in the past is changing rapidly, faster than ever before, to the extent that the channel is not the channel. But all of that is good in my view for I love change and the opportunities in change.

So what if we are not called newsagents. Our roots are our roots. What we are called tomorrow is of little matter.

There are plenty of good newsagency businesses for sale today with good financials and good upside prospects.

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Newsagency challenges

Tough trading results for Reject Shop

The Reject Shop has had a tough year. Their annual results indicate a sales decline of .8% and a decline in profit from $16M last year to -$16.9M this year. While some of the loss is due to write downs, trading appears to be challenging for the group.

I think any business that pitches low prices on known brands as the key reason to shop with them will always be vulnerable to attack from others playing the same game.

Genuine differentiation is key in retail. The best differentiation is one where you have control, where it is your asset and therefore is not easily copied.

The Reject Shop plays in a range of categories important to newsagents. It is worth taking the time to read their annual report and to look carefully at their businesses. It includes this from the Acting CEO:

The sales decline was compounded by a reduction in our gross margin which reduced through the second half. The reduction in margin was the result of the following factors:

  • ƒ  a response to competitive price pressures which resulted in price roll backs;
  • ƒ  increased markdowns to clear product in support of simplifying the shopping experience; and
  • ƒ  as a result of responding to the shift in elements of the merchandise strategy which resulted in clearance activity.

Additionally, we experienced a significant increase in our shrink results on the prior year. We are progressing through a plan to reduce the impact of shrink.

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Competition

Promoting a raunch title available in some UK newsagents

I noticed this tweet today promoting an R rated title that is available in the UK. Most Australian newsagents I know got out of adult titles years ago.

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magazines

Check that you are backing up your data

Another newsagent this week has to rebuild their business data from scratch because they did not have a back-up and their old computer died. They didn’t have a backup because they couldn’t bothered doing it every day.

Now, their hope of selling the business is at risk because they cannot prove their sales claims.

Not backing up every day is stupid. The cost of cover from this could be thousands in terms of IT expert fees or even more if you are looking to sell your business in the next year and do not have current business performance data on which to set a price.

Oh, and if you are backing up every day, have it checked to make sure you are actually backing up.

By backup I mean taking a copy of data on a USB stick or some other device for safe keeping or, better still, a cloud backup facility whereby a perpetual offsite backup us undertaken.

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Management tip

Afterpay Touch has let newsagents down

The customer service from the team at Afterpay Touch over the last week has been dreadful. While they fell victim to problems caused by updates to windows by Microsoft, the communication from Touch has been slow coming and inadequate in content. This has pushed newsagents to others for help that should have come from the company itself.

Like so many big suppliers to our channel, Afterpay Touch has not provided care small business retailers as it should.

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Customer Service

Father’s Day front of store

We have been rotating product categories through with our Father’s Day card pitch. Our most recent category focus with two of our four bays of Father’s Day cards is jigsaws. What you can see in the photo is on the lease line – with two cards of cards behind.

This particular shop is located in the busiest entrance / exit arm of the shopping centre, making lease line placement critical.

If we don’t see measurable take up in two or three days of a pitch, we replace it.

The jigsaw category is strong net traffic driver for us, hence this placement with Father’s Day cards.

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newsagency marketing

Business guru Mark Bouris: small business retailers will be winners from a retail recession

The opinion piece from Mark Bouris published at news.com.au over the weekend should encourage small business retailers. It is a reminder of what is unique and valuable about small business retailers, local retailers.

Bouris notes the indicators of a coming retail recession and explains why local small businesses should do well from it. He compares the local shopping experience with online:

But contrast that with the last time you popped into your local butcher, for example. The person behind the counter probably knew your name, knew what you wanted, and was in a position to offer you expert advice on what was fresh, what to buy, and how to cook it. That’s the kind of personalised service that goes a long way to convincing a shopper to part with their hard-earned, and it’s the kind of shopping experience that only small retailers can provide.

And it’s not just butchers, of course. I was walking down Glebe Point Rd in Sydney the other day and spotted bookstores, cycle shops, boutiques and antique stores, all staffed by experts in their field, ready and waiting to assist customers in any way they can. And happily, there were plenty of customers, too.

The mistake I most often see small businesses make is trying to compete with the giants of their industry. But it’s actually what sets you apart from the big boys that makes the difference. And that’s more true now than ever.

This goes back to the three questions I asked last week as they relate to differences small businesses can bring and evolve, to differentiate to big businesses as well as online businesses…

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Small Business

Tabcorp reports 39.8% growth in online lottery ticket purchases

The Tabcorp 2018/19 Annual Report will be sobering reading for any lottery retailer for in that year, revenue from online lottery ticket purchases rose 39.8% from the previous year. For reference, online revenue grew 22.6% in the FY17/18 year over the FY16/17 year.

While the company refers to this shift in revenue source as part of its omnichannel, I see it as a migration from in-store purchase to online.

They have sought to support retailers with a modest increase in income, which has complex strings that keep retailers positioned more as servants than partners.

The size of the increase in Tabcorp’s own direct sales does not directly correlate with a decline in sales in-store. However, it is happening from what I can see at some stores. As a lottery customer, the benefits of online and in-app purchases far outweigh the in-store.

For its future, Tabcorp needs to continue to push growth in online purchases as they are, I suspect, more valuable to the company than in-store purchases. With retailers playing such an important part in brand awareness and facilitating access to online, the company needs to keep them in check.

I don’t have lotteries in the newsagency businesses I have today. I did have years ago, but not today.

At some point, decisions will be made by retailers along the lines of decisions some of made many years ago about our home delivery runs. There will be a point when the requirements, price retail space cost and all the hoop jumping is not financially worth it.

What can help retailers today with a decision they may wish to make in the future is success at attracting new shoppers for purposes other than to buy a lottery ticket.

Tabcorp’s latest results are to me a strong call to retailers to relentlessly pursue non lottery new traffic opportunities cities through their businesses. Lottery retailers who do not do this will see their business results perform in line with the results achieved by Tabcorp. If the company continues to successfully grow online purchases and if that is achieved at a cost to in-store purchases then lottery focussed retailers will lose revenue and business value.

To be clear – I am not criticising Tabcorp. If I was a shareholder, which I am not, I would applaud their strategy. My criticism, if there is one, would be at retailers who are not acting already to make their businesses more relevant outside of lotteries. This is mission critical in my view.

Note: the image is from the Tabcorp published investor presentation.

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Lotteries

NT magazine delivery issues

I have heard this morning that magazines are not getting out of the TNT warehouse on Mondays, leaving NT newsagents without key weekly titles. I’ve reported this to Ovato.

UPDATE: 10:15am. There was a unique situation last week that disrupted deliveries. It has been addressed.

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magazines

Leveraging mindfulness in the newsagency

We have given the expanded range of mindfulness magazine titles better positioning and less noise nearby, to make the most of growing interest in this topic.

This move, which we made on the weekend, was a no-brainer given the increase in sales of mindfulness related products. The move also lends itself to social media support, to pitch to folks in the area who may want to check out these titles.

While, for sure, the low margin on magazines is frustrating, a move like this we have done for mindfulness required minimal time and no capital. It’s a small-step reminder that we are relevant magazine specialists, even if our range is less today than a year ago.

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magazines

The power of social media

Social media gives everyone a voice. This is one reason why we retailers need to engage with it, to understand this, to leverage it ourselves and to be aware of hour it is used. Here is one example from the latest Alan Jones scandal. He made an appalling comment about the NZ Prime Minister and some on social media called for people to boycott advertisers on his show. Regardless of where you sit on the issue about which Jones spoke, this tweet is democracy in action.

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Social responsibility

One of the best Father’s Day cards

When you combine dogs and the Star Wars licence franchise you have a winner and that is what we have with this Father’s Day card from Hallmark.

We are featuring it full face for impulse purchase as people need to see the whole card and not just the top 20% as is often the case  with regular card fixturing.

I expect this card to sell out.

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Greeting Cards

The value of pre-orders

We have a pre-order opportunity we are running right now for items that will sell out quite fast. By offering pre-order, we are paid in full weeks before we take delivery and two months before we pay for the goods.

Retail today, in-store and online, is a race to the cash. A well managed pre-order process is key to success with this race.

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Newsagency management
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