I am hearing of more newsagents selling their home delivery runs to concentrate on retail.
My own experience is that the separation of two different and competing businesses is good for both. They have different labour and capital demands and separation allows for more appropriate allocation. Retail has less regulation whereas home delivery is highly regulated. Retail can pull revenue from a broad range of categories whereas home delivery is challenged in this area.
The separation of home delivery from retail continuesd to be the most significant structural change in our channel. It is great that newsagents are achieving this for themselves.
Retaining customer traffic in retail after selling the run is easy with good PayPoint technology which lets the retailer act as if they are the distribution newsagent when it comes to payments, stops and starts.
We sold our delivery run in 07 and have been refining our retail offering ever since. After we did all the math about profits verses wages and time we are about $50k a yr better off now. We have a great relationship with the delivery newsagent we sold our runs to and he says that now he has a larger customer base his side of things are also profitable, so I think it all about volume. If you have a large customer base then deliveries are worth it but if you were like us with a small run then it just costs money.
We kick ourselves that we went so many yrs doing it tuff when now we work less hours for more money.
Mark and Scott,
I don’t know where the info is coming from however I would first do a count on the delivery and see if it is profitable be I jumped The banks are now starting to NOT lend against the newsagency if there are no contracts with the publishers.
Graeme,
You retain contracts with all the magazine publishers if the paper run goes.
We retained most of our contracts, we only lost fairfax and nationwide, but no great loss there. I agree that people should have a close look before they commit to selling off runs but I know our bank is reluctant to lend on newsagencies period not just those without delivery runs. They will lend on strong businesses regardless of delivery or not as I have been told by our bank, they are a bit gun shy now because of the sale of lotto.
Brett,
There is only one magazine contract with newsagents, Network and to Banks that means Zip they only want newspaper publishers and NSW Lottery contracts. This is only if the newsagency is to be taken as mainstream security n the loan otherwise good ole real estate is the alternative.
Luke,
Country NSW where you come from have never been greatly influenced by the Sydney Dailys. Your local papers have never been and are still not big in home subscription copies subsidised by the publisher. The common bond for 20 years 1980-2001 was the communal Newsagency Council of NSW & ACT. now extinct.
Bnaks are moving forward I am not relaying info from my locak Bank but form the result of loan applications as recent as yesterday. I am merely making people aware of current thought patterns.
These, like everything else will change from time to time.
It should be noted that the newsagency system is slipping in the loan approval rating and we need as an industry to shore “up” our collective worth.
There needs to be much more promoting (there is none) of our industry and its positives in a general and specific sense. There will always be individual cases using their own actions as an example to others.
This is great and should be encouraged for we live and progress by example however one should remember “one man’s meat is another man’s poison” .
I am pleased that everything worked out well for you even if it was a bit rough to say the least at first.
Settle down Graham, I am giving people my opinion based on my experience from selling my runs and going retail only. I am not commenting on the industry as a whole as like you state I can only go off my experience. If you want to comment for the entire industry then go ahead mate be my guest. I know your point of view regarding newspapers and delivery runs being the be all and end all of newsagencies and how the rest of us that do not deliver should stop calling ourselves newsagents as you have stated here before. I have improved my business since unloading the runs and stopping the bleed of cash that went along with it and am now better off without it.
Can someone tell me if I sell my delivery run or hand it back to the publisher do I lose my margin for shop sales? i.e does my margin drop from 25% to 12.5%.
This would have to be a large consideration when deciding to get rid of a delivery run.
Yes, I think the margin does drop – probably in line with subby margin.
And when we applied for finance for this business, a territory meant diddly squat.
Bob, It depends what you sell. In our case, we sold the whole round and are now a sub agent for newspapers. But better than 12.5%. I have heard of newsagents who have kept a tiny round to keep their shop stock at 25% but publishers are pushing back on this.
We got rid of our delivery run two years ago and never looked back. Decreased working hours as well as unnecessary delivery expenses as it was not profitable (actually running at a loss). We’ve put our energies into marketing our business as a Retail store and have increased our GP considerably by participating with our Marketing group’s promotions throughout the year.
So what have we acheived?
1. Decreased working hours as Retail only store.
2. Increased Gross Profit
3. Lifestyle – doing 62 hrs Retail as to 80 hrs with delivery run.
4. Increased out bottom line
5. Have more energy put into your Retail operation (in terms of hours)
6. Diversified our product range.(increased sales)
We have become a Sub Agent for QNP and Fairfax only but have Contracts with the rest. APN has maintained us on 25% commission, so at the end of the day we are acheiving +-16% GP on newspapers.
Manni
Sunshine Coast
can anybody tell me if you sell your area off is there a formula to try and work off to know roughly what it is worth?
In general discussion I had with others in my group at our conference we discussed the value of no run. 2 in our discussion have handed back their runs. Both stores are now on top of their game in terms if delivering a great retail offer to customers.
One additional point we looked at is could your business survive without exclusive lotto and mags under the current system.
Selling our rounds has been extremely positive. Retail and distribution are a terrible mix, and the future will reward those that specialise. Our business is in a metro. area and we rely less on paper sales every year – and we’re growing. I think the power of contracts will diminish – and I don’t expect the big co.s to be too sentimental.
Brad, some newsagents (myself included) are already pursuing businesses without lotteries. data I have seen shows a model more under control of the newsagent. More consistent growth too. Yes, we can survive!
Agreed we have seen that with new lines people are changing attitudes towards our business. It is no longer where is your womans day it is what else do you stock here.
If banks would not lend onthe basis of there being no contracts, it would stand to reason that they are not lending on most other retail businesses. Very few industries have contracts with their suppliers.
Aren’t we also missing that fact that retail-only contracts also exist (with 12.5% margin).
Small business loans through banks are now usually backed by property security. The last 15 years in our channel and the last year worldwide has shown them that nothing is certain.
Jarryd,
That is right. However we enjoy more Goodwill because of the availability of more funds through the extra facility of obtaining a “lean” on the business. Bill of Sale or EMA Equitable Mortage over Assets.
I am not promoting keeping or selling one’s home delivey, mthat’s an individual choice, a commercial decision however should take in all facets of that decision.
These are the facts.
By the way in risk minimisation lkending at the moment in order of high to low risk are 1.Hotels(pubs)2.Pharmacies 3. Franchises and newsagents 4.
Pharmacies and Franchises would be about par.
I could go into why we are revered ahead of the pack however it changes rather quickly and announcements such as lotto come into the picture.
The Banks have boxes to tick and just because all the ticks aren’t there doesn’t mean a loan won’t be approved..it may at a cost.
Retail only contracts that have been Grandfathered are still at 25% therefore enjoy prefernce with Banks as far as security goes.
Brad,
There is no doubt that the industry will ploarise into different types of outlets in the futures. Graduation of outlets towards distribution and retail combined will consolidate smaller agencies in the immediate-then that will progress to rounds only depots. The retail connected to those outlets will become subagencies to the depot. (what will hyappen to magazine subs is another long answer)
Specialist retailing will evolve with far less reliance on Lotteries and other contracted principal and agent agreements for sales will not be enacted upon as fee based service rather than a customer demand avilability and service based convenience performance.
This type of store will need a concept and an image(maybe a franchise)to get distinct recognition as model worthy of lending money to.
It will evolve, and with forward thinking people sooner than later.
The concept may not include “NEWS” as we know it at all.
Hi Graeme Can you tell me what a newsagent will be selling.If news & mags are not there, will we be just another gift store with a range of cards odd mag, also my papers sales are still growing.Seems to be a lot of chatter about what! or am i missing some thing
DR we are seeing that people still come to us as a destination for Mags, papers and lotto but the core to the problem is that as rents, wages and other over heads increase we have no room to move on margin. I could not for instance charge $5.50 for a womans day even though I could. i just wouldn’t sell any. Most of the information that you see here and in other blogs looks at what may help you increase margin both $ and % to combat the rise in costs.
I saw a presentation by the ‘Gadget Guy’ last week and he looked at a transparent film that may one day replace newspapers. If that was to take even 10% of mag and paper sales I would have to re-issue space allocation away from papers and mags and replace with ?. The electronic newspaper would only require a booth to up load. Buck Rogers stuff but we should all look for threats and turn them to opportunities.
D R
What I am saying here is that it’s apparent that one solution does not fit all circumstances. There are clear divisions forming. Brad makes the very good point that we are not keeping pace with the rent increases. He says our margingins are too low in our core product another aspect is that some shops have extremely high looto sales-this requires more wages and in propoertion shop sales are lower therefore the rent per sq mtr sales in store does not cover the MAT that shopping centres attribute to Specialty Stores. This in turn goes back to the previous post re the newsagency shop size in centres being too big or is it the oproduct mix needs upgrading or better displaying?
I have worked on the figures for years and found by combiming the knowldge of individual product mix applied to display area per sq mtr in turn compared with Specialty Retail MAT I can determine wher the problem is. Wheteher is is centre management Rent is too high or wether the reailer is underperforming. Once established it gives good argument for either rent adjustment per sq mtr. or shop downsizing or new product lines.
Mark’s valid point is developing better margins through products that sell. In other words make your floor space work.
Future buyers are going to look at product mix more tyhan ever now that Lotteries have been put on notice (in their eyes anyway) We need to get the best out of what we have and the look at additional lines.
If you drop me an mail with details I will send you a booklet on the subject illustrating a “live” case scenario.
Grahame,
Sorry .. MAT??
Moving Annual Turnover
mark or anyone,can anybody tell me if you sell your area off is there a formula to try and work off to know roughly what it is worth?
Graeme,
Is that another term for Stockturn?
Rgds
Manni
There is an easy formula to work out what a run/area is worth. It is worth…. NOTHING. Irrespective of how much income or foot traffic it generates. If you dont want to do it you can either give it away or hand it back at the contract end date. If you are really lucky your neighour may give you a token amount,if it holds some strategic value to them but realistically, if you dont want it, you give it back and the publisher will give it to your neighbour anyway…. for FREE!! Why would they pay for something that they could get for nothing. Of course there are always exceptions and if anyone reading this has sold their runs for real money I would say they were quite fortunate.
DAVID That comment is either emotional or B.S.
Runs largley depend on net income some are very worthwile soem do not warrant mention they are losses. Each avlue in business depends onthe earn.
David, I know of many newsagents who have sold their runs. I did three years ago. I understand that in rural areas this is a cahllenge but in the suburbe, in Victoria at least, it’s achievable.
I am a bit with David on this one – in a rural area, any run delivering less than 600-700 papers daily is a loss maker – in terms of saleability it is worth nothing! The best you can hope for is for a neighboring agent to stuff up the calculations, take on the run thus appeasing the Gods of Southbank and hope to Christ he doesn’t lob a hand grenade through your front window within 6 months as he realises that there is no strategic value in aggregating loss-making runs.
To find out how much your run is wortyh to your business just simply take off the income earned from it and add back the expenses and there you have it.
No argument it’s all over.
TOTAL EXPENCES $489.03
TOTAL INCOME $329.33
LOSS WEEK $(159.70)
LOSS PER DAY $(22.81)
Your right Graeme it is all over! Dose anyone want to buy my round in a rural area any offer considered? Cant wait for the golden goose in the next conrtact!
Neil,
You better off getting rid of it and save yourself +-$8500 p/a,
I gave mine away and better for it!
Just yesterday I offered my run to the Newsagents in the next town (only 5 kms away) and he laughed his guts up and politely said no thank you.
For free I might add 🙂
Manni I have been that track all the publisher can say is that I have a contract with them & it’s my obligation to fulfill their agreement! So there will be no new contract with this newsagent when it expires in January next year! Don’t worry I’m counting the $’s already!
Once you do your homework the rest is academic.
You then know what you have to do.
What towns are you in so that someone can open in opposition? The new distribution agent comes to mind.
Cheap price for a new newsagency. Na! just kidding..go for it, the bottom line is what counts. The big picture is unnatainable anyway.
I am looking to buy a distribution. but after reading you guys’ Comments, i don’t think i can do it.
daily ave home deliver
300 papers,
sub agent profit stated by broker $400/week about 12 sub agents.
in 3km^2 suburb.
wages $600 for 3, 7 days drivers.
do you think me and my wife can take over those 3 drivers/wrapers ?
do you pros have any ideas about if the business i am looking at is earning at all?
Lee, It is all about the numbers. Do your research on the revenue and real costs for the business. Only you can assess if this works for you.
Lee, have a good look at the numbers. It seems a stretch that 3 employees would work 7 days for $600 between them. Also you need to add fuel, wrap, expenses for running a car, rent for the shop/shed you are in plus expenses. But after all this you think you can make a profit and then work 7 days a week 365 days a year then have a go at it.
Lee your key to this will be sub agents. If they are service stations there is always a threat that they can close, change to nationals or get direct supply. Anyway you look at it it will impact on your profit.
The other thing to consider is that contracts for delivery are coming up for renewal. You may inherit other areas if you are doing the job well or you may have the lot taken away. Long story short research potential threats and opportunities some of the guys on this thread had handed runs back, but they also have bigger retail outlets.
thank you guys, i will research further into it, i don’t understand why they need 3 “full time” driver for only around 300-400 paper including sub agents. i guess the running round is widely spread. and the broker is not willing to show me the past financial statements – he said it is not relevant to this business as the statement is including shop sales . also there are only 3 deliveries for sale in my area, one is under offer, another is too expensive for me, this little one is the only one i can afford.
Lee,
Providing it does not cross professional interference I would be only too happy to send you a template to work out the home delivery or you can send the figures to me. Won’t take long and it’s accurate. We call it Business Performance Analysis
You have my eamial adress.
I am thinking of getting rid of my run as well, but my question is if i get rid of my run will the magazine companies still give me a direct drop and do i become a sub-agent for the magazines as well.
Usually Jatt, you will need to ask them the question.
What about the other way around?
The magazine contract is a separate issue to the paper contract. I offloaded my paper run but maintain my magazine subs.
I’m hoping that also applies in the reverse… just quietly LOL