Considering a full year of data from six representative case study newsagencies I have been researching, on average, 31% of all titles supplied over the year analysed were found to be cash-flow positive, 1% are cash-flow neutral and 68% cash are flow negative.
The following table breaks down this data by each of the case study newsagencies and indicates the associated cash-flow (operational profit and/or loss). The difference between most of the stores, in percentage terms, is not as great as one might have expected.
An immediate question is why would newsagents tolerate such a situation? The data suggests that concentrating only on the top performing titles would be the most logical course of action. Of course, this is common practice in supermarkets, petrol outlets, convenience stores and other retail outlets selling newspapers. They do not take anything more than 10% of the range of magazines in a newsagency and focus only on the cash-flow positive titles.
These non-newsagency magazine outlets usurp profits from top performing titles without sharing the burden of the bottom performing titles, thereby reducing a newsagent’s ability to offset the cost of loss-making titles. This leaves successful departments of newsagencies to cover the losses incurred in the magazine department.
I doubt that any newsagent has calculated the full cash-flow impact of magazines, certainly not to the extent of this study. For the first time, my research includes the cost of real-estate and the cost of magazine-specific labour to reach an accurate cash-flow impact position for each title.
So, the answer to the question why would newsagents tolerate such a situation is: because they never knew the extent of the cash-flow problem for their magazine department as it has always been hidden by other successful departments and by the complexity of the magazine supply model.
Newsagents cannot sustain the current magazine supply arrangements for titles outside the top performers.