Rob Lake, writing at Business Spectator, joins in the discussion about the possibility of free newspapers.
Many newsagents believe they make dollars from selling papers in their shops. In reality, the average profit is around $25 per week. The cash cow is distribution, currently heavily subsidised by the newspapers and dominated by the tabloids. A new pricing model may see this income stream damaged for newsagents.
I think his numbers are off. Newspapers remain a profitable product for retail newsagencies. Home delivery, for many, is loss making.
Assume weekly retail sales of 1,500 newspapers at a gross profit of 25% from an average cover price of $1.10 (yes this is low but it is an average). The GP for the week from newspapers would be $412.50. Over a year this is $21,450. The total space allocation is less than one square metre and in most major centres this would cost under $1,500 a year.
If it is a retail-only newsagency then the return will be around half that because retail-only newsagents generally do not have a direct newspaper publisher account. Even in this scenario, newspapers generate more gross profit per square metre of retail real-estate than most other products in a newsagency.
I know from my basket analysis of sales data from many newsagencies that newspapers sell alone around 70% of the time in the city and 50% of the time in rural areas – that is, there is nothing in the shopping basket but a newspaper. While this appears to be inefficient, discussions with counter staff and my own experience support a view that today’s newspaper customer is tomorrow’s stationery or lottery customer.
Newspapers are crucial to the habit based trek to the local newsagency – for the paper, magazines, lottery products, greeting cards and home and office stationery. This is where the free model is a risk for us – it could break the habit connection.
If a publisher did go free and asked newsagents to be the collection point for the free newspaper, I suspect that many newsagents would agree – because they would want to maintain their current newspaper traffic as long as possible.
I love how people still think deliveries are a cash cow. Get out and have a look at the increase in cost ie fuel, car repairs, rego and insurance,wages and then the increase in commission which is bugger all. I think poor Rob is so far out of touch that it is funny. Do people still think like this no wonder they think we are whingers
All true, I think – not being privy to exact numbers. The real challenge is then to acquire the skills in:
– merchandising
– product selection
– promotion
– CRM etc
to actually convert the ‘free traffic’ to paying customers. Now it seems “hope for the best” is the preferred strategy in many outlets?
Agreed- I am sure I would continue with papers if Newspaper Publishers decide to go in another direction, it still gets people into the shop and as Dennis said hope for the best.
While waiting it is our responsibility to reinvent our shops and skills today.
FYI I thought $25 was a little low, for my little shop I make about GP $125.00, just shows you my turnover compared to the big Newsagencies average of $412.00
you might like to check out crickey.com today under tips and rumours eg adelaide advertiser
Hayley, that is the worst rumour ever at Crickey.com, it should not even be necessary to comment on. (Ok, so I left a comment there!).