The speculation about the possibility of News Ltd moving to a free newspaper model sent me back to data gathered for the Q1 2009 Newsagent Sales Benchmark Study last week. I wanted to check in with how important newspapers were to the average newsagency – from a gtraffic and a financial perspective.
Across all participating newsagencies, newspaper sales account for between 3% and 27% of retail (non agency -lotteries etc) revenue. The difference between newsagencies is considerable.
Newsagencies with 15% or more revenue coming from newspapers, would be most concerned at the prospect of newspapers moving to a free model or pushing their product into more retail outlets. Typically, these are newsagencies which are not being managed for change. I am not critical of these newsagents, just concerned for them – that they are yet to embrace change.
For years, newspaper publishers have been saying it is business as usual. Retail sales and home delivery activity suggests this is true. That said, publisher financial performance tells a different story. Plunging ad revenue, higher distribution costs and alternative distribution platforms mean that change is inevitable – at some point in the next couple of years.
Smart newsagents are running their businesses as if the model has changed today. These are the newsagents with newspaper revenue accounting for less than 10% of retail sales.
Considering the data I have analysed, my view is that newspaper revenue ought to be below 10% of overall newsagency retail revenue. This would mean that the business is relying on higher margin lines such as gifts, stationery, greeting cards and service – over most of which the business owner has more control on range, merchandising and other business decisions.
Diversifying in this way need not negatively impact newspaper sales. It is a matter of adjusting the business away from the traditional approach to newspapers and, most likely, magazines so that it has scope to play in the newer (for newsagents) categories of gifts and related areas.
There are some in the newsagency channel who say that I am preaching doom and gloom when I write about these challenges or deliver a speech at a conference on similar themes. That would be true if all I did was talk about this in a negative way. I see many positives ahead, certainly many opportunities.
I see the changes coming in the newspaper distribution model as an opportunity for entrepreneurial newsagents to reinvent their businesses, to become more relevant for today’s circumstances. This is what many of the newsagents with a lower reliance on newspaper revenue are doing. It is what I have seen in the latest benchmark study – where newsagents have gone from deriving 20% and more of their revenue from newspapers to 15% without cutting actual newspaper revenue.
I believe there are many concerns if newspapers do become free. We can prepare for this change, but how consumers react is something we cannot predict. The key challenge is making sure free newspapers aren’t available to every store.
This has been one of the reasons free local newspapers haven’t been available in our store. They apparently never have been, and we’re in no hurry to bring them in. Having said that, should things change to the extent that we’d be not selling any papers as above, then we would hope our store would be set up well enough to do without the commission, as well as making far better use of the space. Unless they’re willing to make their use, of what would then be well and truly our space, worthwhile.
It would totally revolutionise the use and context of “newsagency” as a business model, as well as a concept in its own right. It would be very challenging for some, whose core business is ‘news’. It would affect us in terms of livery, should our core business become something else. That is, should we stop seeing ourselves as newsagents completely. As it is, we are a newsagency, however we are as much a convenience store. About half/half. Then again, papers are the cheapest items we sell. What would worry me is whether our remaining magazine suppliers would continue to sell to us. While we can do without the grief of papers, we rather like the mag side of things, despite the challenges!
Y & G I am sure the Mag distributors would still love to have you on board.
It sounds as these changes may come quicker than have been guestimated as previously shared on this blog.
I have no hesitation in saying I am concerned regarding the customer of the future. Today’s customer may by a paper, put lotto on, buy a drink, by a magazine, buy a gift etc.
Will tommorrow’s customer depend on what happens with the future direction of Newspapers?
Their is good news for Newsagents because of the continued diversification by business people, buying power from marketing groups, Marketing their shop better, Merchandising their shop better, the list must go on.
The most crucial aspect of this is that we understand that change is coming and embrace it. If we stand still, the wave will swamp us.
Mark thank you for such a thoughtful piece about newspapers and newsagencies. While not many have commented on this, I think what you have written is an excellent contribution to the debate we need to have as newsagents about the role of current hero products and how we transition to future hero projects. Keep this up. Many of us are reading and thinking. For now in my business, newspapers have me because I have been lazy in looking for other income sources.