Just as today’s new apartment complex is potentially tomorrow’s ‘ghetto’, newsagents carry pockets of what I’ll call ‘ghetto’ magazines. Poor magazines. Magazines at the end of the food chain. In fact, these magazines don’t even make a living. Well not for the newsagents at least.
While other retailers competing with newsagents get to cherry pick what they carry, newsagents carry the range. This can mean anything up to 2,500 titles. My store has 1,700 pockets for magazines. We carry 1,650 different titles at any one time.
Each pocket costs me $2.95 per month. Add to this a reasonable labour cost per pocket per month and I’d estimate a per pocket cost of $5.00. I need to make $5.00 gross profit per month per pocket just to break even.
Now I want to share with you the numbers for two magazines.
Moto Posters. Cover price: $5.95. Distributor: Gordon and Gotch. We usually sell one and until two issues ago used to receive two copies. In their wisdom, Gotch now allocates three copies to us. The one copy we sell generates $1.48 in gross profit for us. This is a loss making magazine. Once we factor in the cost of capital in holding the stock we return for credit the picture becomes worse. The current issue arrived in our shop on June 8, 2005. It has another couple of weeks to run before being returned. We will then wait at least a month and probably longer before we receive a credit for the unsold stock. This means we will carry the cost of the unsold stock for four months. Make Girls Costumes. Cover price: $2.99. Distributor: Retail Distribution service (RDS/NDD). We usually sell one copy, occasionally two. We are sent three of each issue. For each copy we sell we make 74.5 cents gross profit. The current issue arrived in store on May 11. Unsold stock is due to be returned next month leaving us five months to carry the cost of stock which will not sell. Five or six months capital invested for a 74.5 cent return if we are lucky.
There are some who will say these are extreme examples. I would disagree. They are real examples. Live, in my newsagency today. Sure there are other examples I could write about which show good profit generation for my business and efficient use of my pocket real estate. However, it is unreasonable to rely on profit from high volume titles to support ‘ghetto’ magazines.
Each magazine title in a newsagency has to pay its own way.
Supermarkets, Petrol and convenience outlets and others compete with newsagents for magazine sales. However, it is not competition in the true sense of the word. These other retailers competing with newsagents take the cream. I’d estimate that they choose less than 5% of all available titles – these are the titles which generate an estimated 85% of all gross profit earned from the magazine category.
With newsagents finding it challenging to get sufficient stock of the high volume titles and being over supplied with the poor performing product, it is only a matter of time before the magazine category is radically overhauled in newsagencies.
The solution is that magazine publishers and distributors start to respect the real estate and labour investment newsagents make in their speculative titles and supply models each month. It is time for a minimum monthly return per pocket guaranteed to newsagents. The fee could be based on a formula which takes into account the monthly rent.
In my newsagency I want to charge a per pocket servicing fee of $5.00. This is the minimum. I’d want to make at least $7.50 per pocket before I would agree to reducing the publisher paid pocket servicing fee. The alternative is to cut the magazine. However, I don’t control what I receive. If I could cut these under performing titles I could use the space for more successful titles or for other product categories.
I’d be interested to hear what other newsagents, magazine publishers and magazine distributors think about this.
So, while city fathers tear down ghettos to make for a better city, newsagents and their trading partners ought to consider removing ‘ghetto’ magazines from sale since the capital, real estate and labour cost reduces resources available to boost sales of titles which might otherwise have a strong future.
Mark Fletcher
newsXpress Forest Hill