Here is proof of how newsagents are disadvantaged by the broken magazine distribution system.
On October 11, 2006 we received 16 copies of PC World’s Small Business Technology magazine at my newsagency. Up to yesterday we sold two copies. If we do what NDD, the distributor, wants, we’ll hold the title for another month. The credit for returned copies will not reach us until a month after that, leaving us more than $100 out of pocket for several months. On top of this cash-flow ‘loss’ I’d add that the title, over its shelf life, will have cost us $14.00 in real estate and labour providing a trading loss to us, on the basis of two copies sold, $9.00.
I didn’t order this title and it’s cost me $9.00. How nuts is a magazine distribution system which can cause a loss for me and not offer me any control over the loss?
How unfair is a magazine distribution system which does not value, at all, my real estate and my labour?
Every day in newsagencies across Australia we’re seeing unconscionable conduct such as with Small Business Technology magazine by magazine publishers and distributors.
I did not order this magazine. I had no input into the quantity supplied. Sales data at NDD would suggest that a scale out of no more than six copies for my store would be appropriate. However, since NDD has a contract with the publisher which, I suspect, requires scale out of all copies supplied by the publisher, they shift their obligation to newsagents like me. This makes us the banker for several months. NDD uses our cash to fund a broken magazine distribution system. The publisher gets paid, NDD is financially protected and newsagents carry the risk.
This magazine should never have been published. The information is out of date. It’s mainly advertising designed for browsing and newsagents provide this service.
I doubt that newsagent competitors in the magazine category – supermarkets, petrol outlets, convenience stores – have this title. They control what they receive. Newsagents do not.
Titles like this and scale our decisions such as that made by NDD for this title are killing newsagencies. This is one outcome of the Government driven deregulation of our channel – that we have been left with a magazine distribution model which makes us financially uncompetitive.
The only action I can take is to return the title early but that’s time consuming of itself and often leads to arguments with the distributor.
The magazine supply problem will get worse for newsagents in 2007 as the gulf between the successful titles (around 250) and the unsuccessful titles (about 2,000) widens. Newsagents must organise and take collective action, they must boycott under performing titles. They must refuse to pay for under performing stock and force their suppliers to fix the problem.
In your blogs you regularly refer to deregulation being a major cause of newsagent problems. Could you explain? My recollection is that newspapers and magazines have been available in a wide range of outlets for as long as I can remember.
Why is your national federation not fighting for you all on this issue? Every member would be in the same boat. Are they just too busy fighting each other? I hate the thought of what size overdraft the average newsagent needs to have. When a newsagency is purchased is this revealed to the incoming owner?
Ted: Newsagents used to control the distribution as they had geographic territories. This enabled them to pass on these types of titles. Since 1999 and the removal of the territorial system newsagents have had far less control. Indeed, with the Coles and Woolworths fuel outlets they have lost this ‘sub-agent’ arrangement altogether. Bigger publishers have to understand the knock on impact of them getting the direct relationship they want.
Clem: I’d say that an average newsagency capital commitment to funding the magazine supply model overdraft is in the order of $30,000. Some will fund this through overdraft and others through capital. Either way there is a cost.
Newsagents must take control of this problem in 2007. Sure we will see fewer magazine available. They;re losing money anyone so no loss.
Mark
I thought newsagents still had territories. I was told I couldn’t get my newspaper home delivered by a different newsagent.
Great post Mark, The bigger the newsagent, the bigger the magazine allotment of under performing titles. Because I am not a member of the ANF or any other Newsagent body I dont get the feedback on what is happenning regarding the distributors and underperforming titles and what the ANf have done, can you share any information?
NDD is the current leader in my opinion of under performing titles and it is very frustrating and financially draining on a business to pay up front, Newsagents should be able to pay after the magazines are recalled and reconciled.
Mark you & your business associates should perservere and be consistant when oversupplied or when you receive non ordered magazines that wont sell and return them immediately, its a pain, time negative and followup is required however this is the boycott I would use daily. Your end of month balance will let you know if it is worth it. If you work as a collective like you have suggested it has to work.
Ted: They used to have authorised territories administered by the ACCC. Now they have contracted territories which can and are taken from them with little notice. I am all for competition. However, to lose the exclusive without compensation by the Government is unfair. But that’s yesterday’s news. Newsagents have bigger challenges today like the inefficient and expensive magazine model which is holding them back.
Derek: Thanks. I know the ANF is working on several fronts on this. One with government, another with suppliers. I know, too, that Gotch has improved considerably inn2006 and that Network is already making considerable changes for 2007. So things are changing. I see this work as being essential for the ANF and above everything else they could be working on.
The key to me seems to be that we have to first value our labour and real-estate for if we do not these assets will continue to be abused.
Speaking commercially for a moment, we have built into the Tower Systems software for newsagents to ability to cut such underperforming titles and to backup the cut request with evidence. Unfortunately, this (even though it works) is reactive – hence the need for structural change within the suppliers.
mark
I have done a costing on NDD and come up with the result that after all sales profits and cost of early returns real estate etc. I make a loss from my dealing with NDD and am seriously considering terminating all trading with them. If enough of us did that to NDD do you think the other two companies would have a little more incentive to get their supply models accurate.
I have terminated my NDD account exactly because of the reasons that Peter Stubbs had stated.
Of course the risk involved is the loss of customers, mainly people who wanted the Trading Post, the other risk I am taking is if NDD managed to get the distribution rights for New Idea or any of the other top selling weekly mags.
The benifit for my business is CASH & CASH FLOW, very simple.
Of course I am not a Major Newsagent and I completely understand what may go through a business owners mind contemplating terminating an account such as NDD.
Instead of terminating an account like NDD I would suggest from a business point of view Major Newsagents must as a collective send back immediately oversupply etc as I shared in a previous post in this thread. Maybe some one has a more subtle way of addressing this ongoing issue of oversupply & non performing magazines.
To be commercial for a moment – our Tower Systems software has excellent tools for cutting underperforming titles. Unfortunately many do not use these. They’re easy to use – we use them in my newsagency with success but we don’t do enough. We have a magazine sell through rates report (by distributor), magazine cash flow report and action toolset (by distributor) and magazine performance report (by title).
I am confident that if we target small publishers we will have success and demonstrate how serious we are about controlling our assets.
mark
Hi Mark,
We went through the exercise earlier this year and hghlighted over 100 titles out of 330 that fell into the catagory of poor performing. I had a meeting with NDD and we deleted these titles from our business. Unfortunately these titles have started to appear once more and my patience with NDD is growing wafer thin. We also have a standard letter that we send to any publisher that wishes to put a longer than 3 month on sale date (as listed on previous blog). I CC a copy of the letter to The ANF & VANA to ensure they are kept in the loop. I know it is time consuming having to send off these emails to the publishers, however if all Newsagents took a collective stand and sent each publisher a similar letter each time this happens, i feel thing would quickly change. I don’t think cancelling your contract will help matters in the future.
Gordon & Gotch have cetainly improved over the past year and Network i rarely have issues with.
It is all about control, however if Newsagents don’t make the stand required i fear little will change in the future.
Vaughan Lawrence
Beechworth Newsagency
Australian Newsagency of the Year 2006
Vaughan I agree that canceling the contract is not appropriate. Newsagents need to agree on titles to target and to pursue them aggressively and together. The sooner we achieve progress the better. mark
A few comments on some of your statements.
In the 2nd paragraph you wrote: “If we do what NDD, the distributor, wants, we’ll hold the title for another month.”
How do you know what NDD wants? Are you instructed to hold on to titles? Verbally or in writing?
In the 4th paragraph you wrote: “How unfair is a magazine distribution system which does not value, at all, my real estate and my labour?”
How fair indeed is a distribution system that does not value the publisher’s substantial production costs and labour that are expended to provide what their readers want?
In the 6th paragraph you wrote:
“However, since NDD has a contract with the publisher which, I suspect, requires scale out of all copies supplied by the publisher, they shift their obligation to newsagents like me. This makes us the banker for several months. NDD uses our cash to fund a broken magazine distribution system. The publisher gets paid, NDD is financially protected and newsagents carry the risk.”
Your assumptions are all wrong, and a little research would have shown:
1. The distributors control how many copies of titles are sent to newsagents. If you need proof, it’s on p17 of PMP Limited’s 2004 Annual Report (Gordon and Gotch’s parent company) at http://www.pmplimited.com.au/pdf/AR2004.pdf which states:
“The company decides how many of each title to send to each outlet …”
That situation remains unchanged in 2007, despite Magazine Publishers screaming to be allowed to have intelligent control over how many copies individual newsagents receive and, in fact, which newsagents should receive any copies at all.
2. Newsagents are paid BEFORE Magazine Publishers, especially publishers of monthly titles who are not paid one cent for up to 5 calendar months (Gotch) or are not paid in full for 3.5 calendar months (Network and NDD), so how does that make Newsagents the bankers?
3. The fact is magazine distributors have unfettered access to money that rightfully belongs to BOTH Magazine Publishers AND Newsagents for up to 5 calendar months. Why is this so? What does the distributor do with the money during that time? Are distributors required to have “trust accounts” similar to the real estate and legal professions? If not, why not?
4. Magazine Publishers and Newsagents are the only ones who think the distribution system is “broken”. Some distributors might think it is working perfectly.
5. For all the above reasons, it is clear that BOTH the Magazine Publishers AND the Newsagents are carrying the risk. The distributor may be justifying the situation on the basis of needing financial protection, however the real reason could be something entirely different.
In your final paragraph you wrote: “Newsagents must organise and take collective action …”
I agree that collective action must be organised, however the correct target is not under-performing titles. Newsagents are not the only ones being disadvantaged. Many serious Magazine Publishers are also experiencing just as many, or even more, difficulties with some of the magazine distributors.
Clearly the situation warrants invoking the ‘United we stand, divided we fall’ rule. The combined power of Magazine Publishers AND Newsagents working together is the only way they will each be able to re-claim the control that rightfully should be theirs.
Anything less will only be wasted words and wasted time.
Michelle,
I have publishers who claim distributors are the problem. I have distributors who claim publishers are the problem. I have been told by two senior executives within distributor businesses that faulty contracts with publishers require them to distruibute far more than they could ever sell and that for the titles involved this is why newsagents are oversupplied.
This is a newsagency blog. I am a newsagent. I call the proiblem as I see it from my perspective.
The current system is not working for newsagents with so many underperforming titles sloshing around the network. You would find newsagents willing to try any new approach which seeks to fix the problem.
Mark
Mark
I know you are running a newsagency blog, but when you comment on magazines you are acknowledging the supply chain of Magazine Publisher to Distributor to Newsagent to Customer. Selling magazines is a Four Stage process.
You wrote: “I have been told by two senior executives within distributor businesses that faulty contracts with publishers require them to distruibute far more than they could ever sell and that for the titles involved this is why newsagents are oversupplied.”
1. Faulty contracts, what a joke. Who draws up the alleged faulty contracts? The Distributor’s lawyers, of
course, and they protect every aspect of the Distributor’s business operation and not much of the Magazine Publisher’s business operation. You obviously don’t know that during initial discussions one of the first questions the Distributor asks the Magazine Publisher is “how many copies are to be distributed?”
2. Were the “2 senior execs” from the same Distributor that employs “analysts” to calculate the fine details of national scale-out?
With regard to: “The current system is not working for newsagents with so many underperforming titles sloshing around the network. You would find newsagents willing to try any new approach which seeks to fix the problem.”
Easy peasy. All Newsagents who are supplied with too many copies of a title should contact the Magazine Publisher and ask them to decrease or restrict entirely the future supply of that title. The opposite also applies – if a Newsagent requires an increase in the number of copies supplied, pick up the phone and call the Magazine Publisher. I suspect this facility is being grossly under-used.
I am obviously not a Newsagent, but I have rounded out my perspective by making sure I have a detailed understanding of the functions of both Distributors and Newsagents, while maintaining a deep respect for Customers, of course. Surely, that’s what all parties involved in the magazine selling process should do.
Michele,
I am not party to the contracts and only know what I have been told. As a newsagent my only interest is in the economic viability of my newsagency and those owned by by colleague newsagents.
Newsagents are told by distributors to go through them. Indeed they are the companies we have agreements and terms with. If publishers want to crate an alternative distribution channel to newsagent then maybe they ought to put a proposal to newsagents so we can assess its viability for our businesses.
Mark
I did not suggest you or any Newsagent break the contracts you have with Distributors. Nor did I suggest the creation of an “alternative distribution channel”.
What I DID suggest was: IF Newsagents are unhappy about the number of copies of a title they receive – and they are concerned about asking the Distributor to vary that number, because of what the Distributor may or may not do to the number of copies of other titles – why don’t Newsagents utilise the existing, legal facility that is available to them to vary the number of copies of titles they receive by contacting the Magazine Publisher who has the existing, legal facility to do that.
Michele if it is that simple why not write to all newsagents and suggest that to them and copy the distributors. I and many newsagents have been told we are to only go through the distributors. Mark
Mark, the Distributors scale-out (i.e. supply) titles. They have not forbidden Newsagents to contact Magazine Publishers. No letter needs to be written.
The reason I am commenting on your blog is because I simply want to make all the Newsagents who read it aware of just how helpful individual Magazine Publishers could be to Newsagents, so that each Newsagent achieves the title mix and scale-out they want.
Michele, As a newsagent I am telling you that distributors have explicitly told newsagents to make supply adjustments only through them. I know individual publishers would like to help and will, but distributors bitch about it when they find out. Mark
What’s to find out? Publishers all want to achieve the highest possible sell-through rates and the sensible ones keep a close eye on their sales and make necessary changes to the Distributor’s suggested next allocation (i.e. scale-out).
There’s a variety of reasons why Publishers make such changes, starting with Customers who want to buy a particular title from their favourite Newsagents ranging all the way up to Publishers striving to maintain a healthy balance between scale-out and sales. It’s all about numbers and Distributors simply do not need to know why.