In the 1990s Australian newsagents made, on average, 26% of the cover price per home delivered newspaper. This includes delivery fees. Today, based on data from a sample of newsagents in four states, the average gross profit has fallen to 21%. This has come about because home delivery relationships have moved from being between newsagent and consumer to publisher and consumer with the newsagent a hired delivery service provider.
While some newsagents have altered their businesses to cope with the revenue squeeze, many have not. In one state we are seeing GP as low as 11% on some newspaper offers. This does not cover the costs of managing, wrapping and delivering the product. There is no doubt that GP per titles delivered will fall further this year.
In a flat (decaying?) market, GP and therefore cost pressure will increase significantly. One way newsagents can make the relationship more profitable is to take it beyond newspaper home delivery. Successful newsagents regularly market to their home delivery customers and through this achieve good stationery and other sales; they are visible in providing the service – well branded vehicles and employees; they promote to acquire their own home delivery customers outside of what the publishers do; they focus on their own costs. Unsuccessful newsagents deliver the newspaper and that’s it. This is where decay in newspaper sales will hit the hardest.