The announcement from Starbucks was drenched in the harsh reality of business. Sixty one underperforming Australian stores will close within a week. Tenancies vacated, employees (partners) let go, supplier relationships terminated.
This is how corporates act. They put up with poor numbers for so long and then make the decision which has to be made.
While I didn’t care for their coffee – how could you in a country blessed with so many exceptional independent coffee houses – I admire the business model. Margins are good, better than newsagencies. They controlled their brand and most of what they sold. Rent and labour would be key challenges.
If Starbucks can reach this decision with key factors – range, margin and buying power – working for them, what is the situation newsagents face? How many in our channel are looking at their businesses as the suits at Starbucks have done over the last few weeks? If these same suits controlled our channel, how many would they close on the numbers?
A key challenge we face is the percentage of our sales over which we have no margin control and over which we exert no margin leverage. This must change, especially for circulation product. While some newsagents do already, more of us must diversify and offer a broader, good margin, product range. Newspapers, magazines, lotteries, transport tickets and low margin confectionery will be part of the mix but they do not contribute enough to the bottom line for you to use these as springboards for th level of growth we need to stay in the game. (Read me earlier post this morning about the Daily Telegraph to understand this point.) These products, by the very nature of the controls around them, restrict what we can achieve. Our future lies in leveraging the traffic of these regulated products into sales of other, more profitable, lines.
The alternative is that more in the newsagency channel face tough decisions like those faces at Starbucks recently.
Yes, Mark, one of the keys for us as newsagents is to diversify, especially ones like us – small shop (but fortunately with a large and worthwhile delivery territory). We have a ‘captured’ customer base as people come in to pay their accounts and look forward to very personalised service. They end up spending more than what they had planned as we attempt to have well placed products that are attractive but reasonably priced. Are you able to give us all a list of some of your gift and stationery suppliers (other than GNS) which we may be able to order from in smaller quantities. We need to keep our range different and revolving. Customers are getting frustrated at some of the ‘same old, same old’ stores in each of the larger shopping centres and want something a little different but still at a price that will force an impromptu sale. Hoping you can steer us in the right direction..thanks.
Liz
we are very much like yourself a good size territory but with a small store. We are finding it hard to find companies that are willing to supply gift ware etc in smaller quantities. It would be also great to find some interesting!!/different stationery items that do not cost the earth. It would be good to hear if Mark has any contacts.
IT JUST SHOWS YOU THAT SOME PEOPLE REALLY DO KNOW GOOD COFFEE FROM RUBBISHGLORIA JEANS IS ONLY GOING BECAUSE IT IS PROPPED UP BY THE CHURCH-OTHERWISE IT WOULD BE CLOSING BRANCHES AS WELL.
ALSO I GUESS PEOPLE DO NOT WANT TO PAY $6.00 FOR ACUP OF COFFEE EITHER.
Liz, Debbie, On gifts, you need to approach this carefully. Visit gift shops, go to trade shows – Melbourne is on this weekend – and talk to suppliers. Start small near your card area, see what works and build on that. I’ll try and post a more comprehensive guide in the next few days.
mark