I noticed reports that JB Hi Fi announced that it will open around 50 smaller format stores. This is an interesting move.
Newsagents face a challenge around size, especially in shopping centres where landlords tend to want us to take 250 square metres and more. If we take that size of space we need a broad offering attracting considerable traffic. With little of what we sell (today) unique to us, 250 square metres of retail space is a lot for a small business to maintain at the edge of competitiveness.
My view is that we are better off with smaller format newsagencies in shopping centres, between 100 and 150 square metres, and more narrow and specialised in focus.
A smaller format newsagency is more likely to have a genuinely unique selling proposition – with less space to manage, the challenge to harness this is easier. Also, with less space from which to achieve a return, newsagents are likely work this more efficiently than in a larger format store.
I’ve heard of one retail Newsagent halving his store from 200 to 100 and has actually done better profit than before.
It can work when thought out, it seems.
WE cut down from 203 to 125 around 12years a go best thing i ever did.Just put more stock in less space . Much easier to run , it realy runs it self . A lot of our fitting are on wheels so in season times we move the fitting around to suit. In Qld now there is quite a few newsagent cutting back the size of their shops .If you are a buyer why would pay a large amount for a store e g 500,000.00 just for the stock ,my take up to 7to 8 years to get your purchase price back,so less stock 3to 4 years makes sense to me Just do it
This could be a good Newsagency Strategy for shopping centres, the rent per metre system must put so much pressure on the business.
Exactly you may still have the range and you have a lot less money tied up in stock and overheads. Food for thought.
At around 200 sq. metres floor space in a regional shopping centre you would want around $4,800 per sq metre per annum Gross Profit return on product sales (that is product that sells with a commission G.P. of over 12.5%.
It is not uncommon for the Gross Rent to be around $1,500-$1,600. per sq metre
AT this time we are getting around 11 turns of stock, the centre is getting larger and think i could go up to 14 to 16 turns and still do it easy , the rent is 9% of turnover which includes lotto comm.Would not have been still going if we had not cut the floor space.Out of interest how do our % rent of turnover plus stock turns go againts other newsagents
Hi 5 D R Interesting question, Your 14-16 turns largely depends on what’s inclusive and what’s not (looks like at those turns all is inclusive including newspapers) Your occupancy cost of 9% is very reasonable however I tend to look at gross profit for results for it is the G.P. that pays the bills and turnover that creates the cash low. Newspapers cloud the stock turn issue immensly as they are sold out daily and are sale or return hence NO stock.
Graeme, In 2004, the ANF Board passed several resolutions which, if acted upon, would have achieved just that. They had the advice, structure and a plan developed by professional advisors. I know because I voted for the plan.
I tend to agree that smaller shop space is looking more likely. I am in a Colonial centre and have just over 200 squares. Our turn over to rent is above 16% and further moves by the centre to charge for outside trading is only going to push that up.
many of our stores, if in the ‘big business world’ would almost be operating insolvent. Once stock has reached 90 days it should begin a process of being written down. Harris Scarfe department stores had this issue in early 2000. Smaller format around the 125-150 will still give the range but needs to be shop fitted differently from now.
Thanks Graeme .Will look at my gross and post. Brad Newsagents do i think need to look at shops fits, but it can be done. Do you need 40 thousand
card, Mags up wall and so on, 16% is to high
DR main issue is that previous owner signed a lease that was at best destructive. My estimate was that they were on about 18%. We have introduced many new 50 plus margin departments. Our issue now is to bring them to maturity as quickly as possible. Also our core departments we have worked on and grown Cards from Dec 06 at 25k, to 07 44k and 08 51k. We may not have been able to do so in a 125 square store.
Brad
Kind of interesting that JB is doing this considering Dick Smith is just about to phase out its small format brand (Tandy) in favour of larger stores above 300sqm. Wonder if it will just be regional areas that JBs do it in, and what sort of range that it will carry considering how much they’ve branched out.
I think there are two situations to look at. Shopping centres come in many different shapes and sizes.
Larger shopping centres that have a number of specialty shops competing directly with newsagents in areas such as stationery, art, cards, giftware, ink and books (and may also have multiple newsagencies) are probably better off with smaller format shops. In this situation having a more specialised focus is likely to help that newsagent position themselves better against such competition.
In smaller shopping centres however, ones with very little specialised direct competition (and only one newsagency), a larger store may provide the newsagent with the opportunity to provide a bigger/more diverse offer in lieu of that competition.
DR If you’re interested I will send you a booklet on space allocation and return of sales and Pfit per sq mtre especially prepared for newsagencies F.O.C. Please supply name and address.
Graeme 02 9715 7252
Graeme, Thanks for your contributions on this. We do need to think outside the traditional when looking at footprint. We need to be ruled by numbers and not our hearts.
Mark, Of recent I have been investigating different products for newsagents. Products that take up from 5 sq meteres to 30 sq meteres. Products that are, Multi genaration in need and repetive in usage. (nothing replaces the Daily Newspaper)
As most products are out there there is nothing “new” however I am in these times trying to influence new products by selling our “real estate” openeing ours, small business enterprise (this needs discipline) product compatability, space and competition within the given area.
I am getting some interesting results and especially some intersting reactions, for some industries have never looked at us like “this”
‘This” is that we are entrepenerial enough to go outside our given domain. That we would want to participate in the 21st Century and become “professional Retailers”
Yes, we do have the position of recognition. Yes we do have the traffic flow and yes we do have the opening hours, howver we do have to overcome our attitude to adapt.
I guess the choice is very much individual and dependant on the type of operation owned and run. One formula does not fit all.
If we want to an can progress into a new growth then we will need to adapt.
Is this something that the Associations should be looking at instead of reviewing the past and competing with each other as to who has the best rearvision mirror?
Graeme, We all need to investigate product / service opportunities. I see this as something to be done through marketing groups and other commercail collectives and not associations.
Mark,
Yes, Marketing Groups such as yours (newsXpress) play a part but in kind there are 3,200 newsagents that don’t belong to , nor can a lot of them belong to newsXpress. Hello Associations help me or what is you real function ?
Hi Graeme.
Need to get your experience while your here (you can email me if you like).
Regarding the sale of Newsagency- In your view is the Goodwill or the purchase price still worth the same as when the person who bought the Newsagency say 10 years ago and now wants to sell reclaiming their return on investment back, however the Newsagency has not begun the Transition/change/diversification process as often spoken about on this blog.
I was fortunate to participate in a meeting with three retail designers who work with newsagents in a disucssion organised by newsXpress. The several hour discussion was enlightening for all parties. The result will be further dialogue about more flexible shop fits and smaller format businesses.
MARK, you are on the right track here, we have fitting that can be moved around but much better it you could change them .We have had to at times small amounts of shopfitting toajust oour store The trouble some fitters know it all and most agents just go with it