Don’t believe what they say, size matters, it matters a lot when you have to pay the rent off the back of an old retail model built back when small was beautiful.
Landlords like big newsagencies – 250 square metres and above. The size isn’t a problem if a margin model can be built which supports the cost base.
Where newsagencies struggle is with margin for the lottery, magazine, newspaper and some confectionery categories. 25% or less does not cut it today. These products are usually supplied with a model which leaves the newsagent with less control over key business levers.
The 25% GP on newspapers and magazines was set decades ago, before the rents and sizes of today.
The only answer is for newsagents in these larger format businesses to devote less space to the 25% and less margin products and more to the products which provide opportunity and reward for entrepreneurial effort.
If landlords want these larger format traditional newsagencies and 25% and lower GP suppliers want to be represented in these spaces then something has to give otherwise we will see newsagents reject the opportunities.
I am aware of a couple of situations at the moment where the landlord wants a “traditional newsagency” and some suppliers will only permit their top selling products if a broader offer (read less successful products) is included in the mix. While smart newsagents use a lease consultant to navigate such challenges with the landlord, many do not and end up with a lease which does not work for the traditional model.
The market will ultimately decide how this plays out. The result will be a smaller hybrid newsagency with less of the traditional newsagency range. There will be pain for some who do not work the sums of occupancy cost.
When it comes to shopping centres inn Australia, size does matter for small business.
Hi Mark We have gone to a 130 metrie from 277. Only run mags ,stationrey ,cards ,books lotto. Phone cards Best thing i have done .gettng good growth . 55% of sales are mags.stationery sells 2.5 times our cards books sell 60%of cards .Turn stock 9 times could go as high as 12 to13 in same space .We Still look like a NEWSAGENT .Do enjoy your blog david
Mark
A rare disagreement. But looking at margin alone does not give the full picture. You would have to look at GMROI and the productivity of the physical space. Papers give 25% GM (almost) per day on a relatively small space for small dollar investment.
Dennis, you;re right I should have qualified the comment re the 25% product. If the volume is there it’s okay. When writing I was thin king more of the 25% product where the volume is not there. However, having said that, we’ve had one newspaper price rise in 11 years so the return from newspapers has diminished in real terms.
Mark
However, having said that, we’ve had on newspaper price rise in 11 years so the return from newspapers has diminished in real terms.
Mark what do you mean by this??
Is it one or no price rise.
Clem
Sorry Clem, fixed it now – one increase.
Arn’t you getting 25% of the cover price?
and hasn’t the cover price increased in the last 11 years?
if so then you have had price rises???
yes, 25%. One price increase in 11 years.